UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





Form
10-Q


(Mark
one)


x QUARTERLY REPORT UNDER
SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE


ACT
OF 1934





For the
quarterly period ended March 31, 2009


OR


o TRANSITION REPORT UNDER
SECTION 13 OR 15 (d) OF THE EXCHANGE ACT





For the
transition period from ____________ to _____________





Commission
file number 0-23532





SANSWIRE
CORP.


(formerly
Globetel Communications Corp.)





(Exact
name of small business issuer as specified in its charter)





Delaware
                  
                  88-0292161(State
      or other jurisdiction
                    of
      incorporation or organization)
                  
                  (IRS
      Employer Identification
No.)





101 NE
3rd
Ave, Suite 1500,


Fort
Lauderdale, Florida 33301


(Address
of principal executive offices)





(954)
332-3759


(Issuer's
telephone number)





Indicate
by check mark whether registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x No
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).


Yes x                                           No  o





Indicated
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filter and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):





Large
      accelerated filero
            Accelerated
      fileroNon-accelerated
      filer      o
            Smaller
      reporting companyx





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)       Yes o No x





As of May
6, 2009, there were 205,114,989 shares of the issuer's common stock issued and
outstanding.





Transitional
Small Business Disclosure Format (Check one): Yes o No x











TABLE OF
CONTENTS





PagePART
      I - FINANCIAL INFORMATIONItem
      1.  Financial Statements.
                              3Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of Operations.
                              19Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk.
                              22Item
      4.  Controls and Procedures.
                              22PART
      II - OTHER INFORMATIONItem
      1.  Legal Proceedings.
                              23Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds.
                              25Item
      3.  Defaults Upon Senior Securities.
                              25Item
      4.  Submission of Matters to a Vote of Security
      Holders.
                              25Item
      5.  Other Information.
                              25Item
      6.  Exhibits.
                              26





2





PART
I - FINANCIAL INFORMATION





Item 1. Financial
Statements.





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED BALANCE SHEETS




MARCH
      31,
                                                      2009
                                                    
                                                    
                                                    DECEMBER
      31,
                                                      2008(Unaudited)ASSETSCURRENT
      ASSETSCash
      and cash equivalents
                                                    
                                                    $
                                                    103,585
                                                    
                                                    
                                                    $
                                                    4,809Current
      assets from discontinued operations
                                                    
                                                    
                                                    6,406
                                                    
                                                    
                                                    
                                                    6,406TOTAL
      CURRENT ASSETS
                                                    
                                                    
                                                    109,991
                                                    
                                                    
                                                    
                                                    11,215Investment
      in joint venture
                                                    
                                                    
                                                    3,229,000
                                                    
                                                    
                                                    
                                                    3,229,000TOTAL
      NONCURRENT ASSETS
                                                    
                                                    
                                                    3,229,000
                                                    
                                                    
                                                    
                                                    3,229,000TOTAL
      ASSETS
                                                    
                                                    $
                                                    3,338,991
                                                    
                                                    
                                                    $
                                                    3,240,215LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCURRENT
      LIABILITIESAccounts
      payable
                                                    
                                                    $
                                                    3,824,753
                                                    
                                                    
                                                    $
                                                    3,802,777Notes
      and convertible notes payable, net of discount of $303,056 and
      $134,423
                                                    
                                                    
                                                    9,300,573
                                                    
                                                    
                                                    
                                                    9,264,732Accrued
      expenses and other liabilities
                                                    
                                                    
                                                    3,556,196
                                                    
                                                    
                                                    
                                                    3,489,210Fair
      value of warrants and embedded conversion feature
                                                    
                                                    
                                                    677,825
                                                    
                                                    
                                                    
                                                    —Current
      liabilities from discontinued operations
                                                    
                                                    
                                                    1,387,407
                                                    
                                                    
                                                    
                                                    1,387,406TOTAL
      LIABILITIES
                                                    
                                                    
                                                    18,746,754
                                                    
                                                    
                                                    
                                                    17,944,125COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      DEFICITSeries
      A Preferred stock, $.001 par value, 250,000 shares
    authorized;no
      shares issued and outstanding:
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —Series
      B Preferred stock, $.001 par value, 500,000 shares
    authorized;no
      shares issued and outstanding:
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —Series
      C Preferred stock, $.001 par value, 5,000 shares
    authorized;no
      shares issued and outstanding:
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —Series
      D Preferred stock, $.001 par value, 5,000 shares
    authorized;no
      shares issued and outstanding:
                                                    
                                                    
                                                    —
                                                    
                                                    
                                                    
                                                    —Common
      stock, $.00001 par value, 250,000,000 shares authorized;189,324,242
      and 184,704,015 shares issued and outstanding
                                                    
                                                    
                                                    1,894
                                                    
                                                    
                                                    
                                                    1,848Additional
      paid-in capital
                                                    
                                                    
                                                    111,294,864
                                                    
                                                    
                                                    
                                                    111,128,580Accumulated
      deficit
                                                    
                                                    
                                                    (126,704,521
                                                    )
                                                    
                                                    
                                                    (125,834,338
                                                    )TOTAL
      STOCKHOLDERS' DEFICIT
                                                    
                                                    
                                                    (15,407,763
                                                    )
                                                    
                                                    
                                                    (14,703,910
                                                    )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                                                    
                                                    $
                                                    3,338,991
                                                    
                                                    
                                                    $
                                                    3,240,215


See
accompanying notes to condensed consolidated financial
statements





3





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


FOR THE THREE MONTHS ENDED MARCH
31,





2009
                                    
                                    
                                    2008(Unaudited)
                                    
                                    
                                    (Unaudited)REVENUES
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    —COST
      OF REVENUES
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —GROSS
      MARGIN
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —EXPENSESPayroll
      and related taxes
                                    
                                    
                                    117,434
                                    
                                    
                                    
                                    372,371Consulting
      fees
                                    
                                    
                                    93,159
                                    
                                    
                                    
                                    130,730Noncash
      officers' and directors' compensation
                                    
                                    
                                    —
                                    
                                    
                                    
                                    285,000General
      and administrative
                                    
                                    
                                    121,491
                                    
                                    
                                    
                                    109,792TOTAL
      EXPENSES
                                    
                                    
                                    332,084
                                    
                                    
                                    
                                    897,893LOSS
      FROM OPERATIONS
                                    
                                    
                                    (332,084
                                    )
                                    
                                    
                                    (897,893
                                    )OTHER
      INCOME (EXPENSE)Loss/Gain
      on extinguishment of debt
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (1,096,650
                                    )Interest
      expense, net
                                    
                                    
                                    (391,688
                                    )
                                    
                                    
                                    (209,536
                                    )Change
      in fair value of warrants and embedded conversion feature
                                    
                                    
                                    70,419
                                    
                                    
                                    
                                    (168,918
                                    )NET
      OTHER INCOME (EXPENSE)
                                    
                                    
                                    (321,269
                                    )
                                    
                                    
                                    (1,475,104
                                    )LOSS
      FROM CONTINUING OPERATIONS
                                    
                                    
                                    (653,353
                                    )
                                    
                                    
                                    (2,372,997
                                    )LOSS
      FROM DISCONTINUED OPERATIONS
                                    
                                    
                                    —
                                    
                                    
                                    
                                    (244
                                    )NET
      LOSS
                                    
                                    $
                                    (653,353
                                    )
                                    
                                    $
                                    (2,373,241
                                    )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDINGBASIC
      and DILUTED
                                    
                                    
                                    185,472,412
                                    
                                    
                                    
                                    136,208,846LOSS
      PER SHARE FROM CONTINUING OPERATIONSBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.00
                                    )
                                    
                                    $
                                    (
      0.02
                                    )LOSS
      PER SHARE FROM DISCONTINUED OPERATIONSBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.00
                                    )
                                    
                                    $
                                    (
      0.00
                                    )NET
      LOSS PER SHAREBASIC
      and DILUTED
                                    
                                    $
                                    (
      0.00
                                    )
                                    
                                    $
                                    (
      0.02
                                    )




See
accompanying notes to condensed consolidated financial statements





4





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31,




2009
                                
                                
                                2008(Unaudited)
                                
                                
                                (Unaudited)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                                
                                $
                                (653,353
                                )
                                
                                $
                                (2,373,241
                                )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Amortization
      of debt discount
                                
                                
                                240,007
                                
                                
                                
                                66,647Gain
      on extinguishment of debt
                                
                                
                                —
                                
                                
                                
                                1,096,650Stock
      based compensation
                                
                                
                                84,500
                                
                                
                                
                                115,000Fair
      value of vested options
                                
                                
                                —
                                
                                
                                
                                244,831Interest
      expense on convertible notes payable
                                
                                
                                139,912
                                
                                
                                
                                142,767Change
      in fair value of warrants and embedded conversion feature
                                
                                
                                (70,419
                                )
                                
                                
                                168,918Decrease
      in assets:Decrease
      in assets relating to discontinued operations
                                
                                
                                —
                                
                                
                                
                                11,956Increase
      in liabilities:Accounts
      payable
                                
                                
                                21,976
                                
                                
                                
                                47,189Accrued
      expenses and other liabilities
                                
                                
                                96,153
                                
                                
                                
                                253,165Increase
      in liabilities relating to discontinued operations
                                
                                
                                —
                                
                                
                                
                                25NET
      CASH USED BY OPERATING ACTIVITIES
                                
                                
                                (141,224
                                )
                                
                                
                                (226,093
                                )CASH
      FLOWS FROM INVESTING ACTIVITIESNET
      CASH USED BY INVESTING ACTIVITIES
                                
                                
                                —
                                
                                
                                
                                —CASH
      FLOWS FROM FINANCING ACTIVITIESPayments
      on notes payable
                                
                                
                                —
                                
                                
                                
                                (25,139
                                )Proceeds
      from notes and loans payable
                                
                                
                                140,000
                                
                                
                                
                                356,278Proceeds
      from sale of common stock
                                
                                
                                100,000
                                
                                
                                
                                —NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                
                                
                                240,000
                                
                                
                                
                                331,139NET
      INCREASE IN CASH AND EQUIVALENTS
                                
                                
                                98,776
                                
                                
                                
                                105,046CASH
      AND EQUIVALENTS – BEGINNING OF PERIOD
                                
                                
                                4,809
                                
                                
                                
                                32,278CASH
      AND EQUIVALENTS – ENDING OF PERIOD
                                
                                $
                                103,585
                                
                                
                                $
                                137,324SUPPLEMENTAL
      DISCLOSURESCash
      paid during the period for:Interest
                                
                                $
                                122
                                
                                
                                $
                                122NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Shares
      issued for joint venture
                                
                                
                                —
                                
                                
                                
                                268,000Shares
      for accrued expenses
                                
                                
                                29,167
                                
                                
                                
                                61,470Conversion
      of notes payable to common stock
                                
                                
                                75,438
                                
                                
                                
                                281,320Non-cash
      equity-warrant valuation and intrinsic value of beneficial conversion
      associated with convertible notes
                                
                                
                                84,601
                                
                                
                                
                                129,918Cumulative
      effect of change in accounting principle on convertible notes and
      warrants
                                
                                
                                216,829
                                
                                
                                
                                —





See
accompanying notes to condensed consolidated financial statements





5





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





NOTE
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES





NATURE OF
OPERATIONS





From 2002
to 2007 Sanswire Corp. (formerly known as GlobeTel Communications Corp.)
("Sanswire") (the “Company”) was involved in the following business sectors:
stored value card services; wholesale telecommunications services; voice over
IP; wireless broadband; and high altitude airships. These business units
operated through various subsidiaries. The Company has discontinued operations
in all but the high altitude airship sector.





On
September 22, 2008 the Company filed a Certificate of Merger with the Secretary
of State of the State of Delaware pursuant to which the wholly owned subsidiary,
Sanswire Corp., a Delaware corporation, was merged into the Company. As a result
of the filing of the Certificate of Merger, the corporate name was changed from
GlobeTel Communications Corp. to Sanswire Corp. The opportunities associated
with Sanswire are related to the Lighter Than Air (LTA) Unmanned Aerial Vehicle
(UAV) market. Sanswire seeks to build and run a UAV business that includes low-,
mid- and high-altitude, lighter-than-air vehicles. Sanswire intends to provide
customers seamless wireless broadband capabilities and surveillance sensor
suites utilizing its High Altitude Airship technology.





Sanswire’s
main products are airships, which provide a platform to transmit wireless
capabilities from air to ground.





The High
Altitude class of prospective airships are generally referred to as HAAs
(High Altitude Airships) but have also been called HAPs and HALEs (High Altitude
Platforms, High Altitude Long Endurance). They have been designed to be able to
keep a station in one location in the Stratosphere, at approximately 65,000 ft
for durations of 30 days or more.





ORGANIZATION
AND CAPITALIZATION





The
Company was organized in July 2002, under the laws of the State of
Delaware.





BASIS OF
PRESENTATION





The
condensed consolidated financial statements of the Company include the accounts
of its subsidiaries. These unaudited condensed consolidated financial statements
have been prepared by management in accordance with accounting principles
generally accepted in the United States and with the instructions to Form 10-Q
and Article 10 of Regulation S-X.





In the
opinion of management, the unaudited condensed consolidated financial statements
reflect all adjustments considered necessary for a fair statement of the
Company’s financial position as of March 31, 2009 and the results of operations
for the three months ended March 31, 2009 and 2008, and cash flows for the three
month periods ended March 31, 2009 and 2008, consisting only of normal and
recurring adjustments. All significant intercompany transactions have been
eliminated in consolidation. Operating results for the three months ended March
31, 2009 are not necessarily indicative of the results that may be expected for
the fiscal year ending December 31, 2009. The interim condensed consolidated
financial statements do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. For further information, refer to the Company’s
consolidated financial statements and footnotes thereto for the year ended
December 31, 2008 filed on Form 10-K filed on April 9, 2009.





6





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





GOING
CONCERN





The
accompanying condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. As
reflected in the accompanying condensed consolidated financial statements, the
Company had a net loss of $653,353 and a negative cash flow from operations of
$141,224 for the three months ended March 31, 2009, and had a working capital
deficiency of $18,636,763 and a stockholders’ deficit of $15,407,763 at March
31, 2009.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent upon the Company’s ability to raise additional
funds and implement its business plan. The condensed consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. The Company anticipates that a net
loss will continue for fiscal 2009.





Additional
cash will still be needed to support operations. Management believes it can
continue to raise capital from various funding sources, which when added to
budgeted sales and current working capital, will be sufficient to sustain
operations at its current level through December 31, 2009. However, if
budgeted sales levels are not achieved and/or if significant unanticipated
expenditures occur, or if it is unable to obtain the necessary funding, the
Company may have to modify its business plan, reduce or discontinue some of its
operations or seek a buyer for all or part of its assets to continue as a going
concern. As of the date of this report the Company has continued to raise
capital to sustain its current operations which have been reduced since January
1, 2008.  The Company will need to periodically seek investment to provide
cash for operations until such time that operations provide sufficient cash flow
to cover expenditures. (see also next paragraph)





On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
GlobeTel Communications Corp. (the “Company”) and three former officers of the
Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.  The SEC alleges that the
Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933,
as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20,
13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a
permanent injunction, civil penalties, and disgorgement with prejudgment
interest. The Company intends to vigorously defend itself in this action. The
Staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act. (also see Note 5)





CASH AND
CASH EQUIVALENTS





The
Company considers all highly liquid debt instruments with an original maturity
of three months or less at the date of purchase to be cash
equivalents.





BANK
OVERDRAFT





The
Company records any negative balances in its bank accounts as a bank
overdraft.





REGISTRATION
RIGHTS





In
connection with the sale of debt or equity instruments, the Company may enter
into Registration Rights Agreements. Generally, these Agreements require the
Company to file registration statements with the Securities and Exchange
Commission to register common shares that may be issued on conversion of debt or
preferred stock, to permit re-sale of common shares previously sold under an
exemption from registration or to register common shares that may be issued on
exercise of outstanding options or warrants.





7





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008




These
Agreements usually require the Company to pay penalties for any time delay in
filing the required registration statements, or in the registration statements
becoming effective, beyond dates specified in the Agreement. These penalties are
usually expressed as a fixed percentage, per month, of the original amount the
Company received on issuance of the debt or preferred stock, common shares,
options or warrants. The Company account for these penalties when it is probable
that a penalty will be incurred. At March 31, 2009 the Company has no
registration rights agreement requiring penalties to be recorded.




INCOME
TAXES





Income
taxes are computed under the provisions of the Financial Accounting Standards
Board (FASB) Statement No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109
is an asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of the
difference in events that have been recognized in the Company's financial
statements compared to the tax returns.





VALUATION
HIERARCHY





FAS 157
establishes a valuation hierarchy for disclosure of the inputs to valuation used
to measure fair value. This hierarchy prioritizes the inputs into three broad
levels as follows.  Level 1 inputs are quoted prices
(unadjusted) in active markets for identical assets or
liabilities.  Level 2 inputs are quoted prices for similar assets and
liabilities in active markets or inputs that are observable for the asset or
liability, either directly or indirectly through market corroboration, for
substantially the full term of the financial instrument.  Level 3
inputs are unobservable inputs based on the Company’s own assumptions used to
measure assets and liabilities at fair value.  A financial asset or
liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.





The
following table provides the assets and liabilities carried at fair value
measured on a recurring basis as of March 31, 2009:





Fair
      Value Measurements at March 31, 2009Total
      Carrying
                  Value
      at
                  March
      31, 2009
                
                
                (Level
      1)
                
                
                (Level
      2)
                
                
                (Level
      3)Derivative
      liabilities
                
                $
                677,825
                
                
                $
                —
                
                
                $
                —
                
                
                $
                677,825





The
derivative liabilities are measured at fair value using quoted market prices and
estimated volatility factors, and are classified within Level 3 of the
valuation hierarchy. There were no changes in the valuation techniques during
the three months ended March 31, 2009.





FAIR
VALUE OF FINANCIAL INSTRUMENTS





Financial
instruments, including cash, accounts payable, accrued expenses and notes
payable are carried at amounts which reasonably approximate their fair value due
to the short-term nature of these amounts or due to variable rates of interest
which are consistent with market rates.





USE OF
ESTIMATES





The
process of preparing financial statements in conformity with generally accepted
accounting principles in the United States requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues, and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.





8





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008


BASIC AND
DILUTED NET LOSS PER COMMON SHARE


Basic and
diluted net loss per common share has been computed based upon the weighted
average number of shares of common stock outstanding during each period. The
basic and diluted net loss is computed by dividing the net loss by the weighted
average number of common shares outstanding during each period. In periods where
losses are reported, the weighted average number of common shares outstanding
excludes common stock equivalents because their inclusion would be
anti-dilutive. If all outstanding options, warrants and convertible shares were
to be converted or exercised as of March 31, 2009, the shares outstanding would
be 246,440,958.





IMPAIRMENT
OF LONG-LIVED ASSETS





The
Company follows FASB Statement No. 144 (SFAS 144), "Accounting for the
Impairment of Long-Lived Assets." SFAS 144 requires that long-lived assets to be
held and used are reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
When required, impairment losses on assets to be held and used are recognized
based on the fair value of the asset. Long-lived assets to be disposed of, if
any, are reported at the lower of carrying amount or fair value less cost to
sell.





DERIVATIVE
FINANCIAL INSTRUMENTS





The
Company does not use derivative instruments to hedge exposures to cash flow,
market or foreign currency risks.  The Company evaluates all of its
financial instruments to determine if such instruments are derivatives or
contain features that qualify as embedded derivatives.  For derivative
financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the condensed
consolidated statements of operations.  For stock-based derivative
financial instruments, the Company uses the Black-Scholes option pricing model
to value the derivative instruments at inception and on subsequent valuation
dates.  The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is
evaluated at the end of each reporting period.  Derivative instrument
liabilities are classified in the balance sheet as current or non-current based
on whether or not net-cash settlement of the derivative instrument could be
required within 12 months of the balance sheet date.




STOCK-BASED
COMPENSATION





The
Company periodically issues stock options and warrants to employees and
non-employees in non-capital raising transactions for services and for financing
costs. The Company accounts for stock option and warrant grants issued and
vesting to employees using SFAS No. 123R effective January 1, 2006, and for all
share-based payments granted based on the requirements of SFAS No. 123R. The
Company accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with EITF No. 96-18: "Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” and EITF 00-18 “Accounting
Recognition for Certain Transactions involving Equity Instruments Granted to
Other Than Employees” whereas the value of the stock compensation is based upon
the measurement date as determined at either a) the date at which a performance
commitment is reached, or b) at the date at which the necessary performance to
earn the equity instruments is complete.





RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS




SFAS No.
159,The Fair Value Option of Financial
Assets and Financial Liabilities




In
February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial
Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159
provides an option to report selected financial assets and financial liabilities
using fair value. The standard establishes required presentation and disclosures
to facilitate comparisons with companies that use different measurements for
similar assets and liabilities. The Company has adopted this standard effective
January 1, 2009 and the Company’s adoption of this EITF did not have a material
impact on its condensed consolidated financial statements.





9





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





SFAS No. 141 (R),Business
Combinationsand SFAS
No. 160, Non-controlling
Interests in Consolidated Financial Statements




In
December 2007, the FASB issued SFAS No. 141R, Business Combinations, and SFAS
No. 160, Non-controlling Interests in Consolidated Financial Statements.
SFAS No. 141R requires an acquirer to measure the identifiable assets acquired,
the liabilities assumed, and any non-controlling interest in the acquiree at
their fair values on the acquisition date, with goodwill being the excess value
over the net identifiable assets acquired. SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statement. The calculation of earnings per share will
continue to be based on income amounts attributable to the parent. SFAS
No. 141R and SFAS No. 160 are effective for financial statements
issued for fiscal years beginning after December 15, 2008. Early adoption is
prohibited. The Company has adopted this standard effective January 1, 2009 and
the Company’s adoption of this EITF did not have a material impact on its
condensed consolidated financial statements.





SFAS
No. 161,Disclosures about
Derivative Instruments and Hedging Activities





In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008. The Company has adopted this standard effective January
1, 2009 and the Company’s adoption of this EITF did not have a material impact
on its condensed consolidated financial statements.





FSP
FAS No. 115-2 and FAS No. 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments





In April
2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. This FSP amends the
other-than-temporary impairment guidance for debt securities to make the
guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments in the financial statements. The most
significant change the FSP brings is a revision to the amount of
other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2
and FAS 124-2 is effective for interim and annual reporting periods ending after
June 15, 2009. The Company does not believe that the implementation of this
standard will have a material impact on its condensed consolidated financial
statements.




FSP FAS No. 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly





In April
2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. This FSP
provides additional guidance for estimating fair value in accordance with FASB
Statement No. 157, Fair Value
Measurements, when the volume and level of activity for the asset or
liability have significantly decreased. This FSP also includes guidance on
identifying circumstances that indicate a transaction is not orderly. This FSP
emphasizes that even if there has been a significant decrease in the volume and
level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions. FSP FAS 157-4 is effective for interim and
annual reporting periods ending after June 15, 2009, and is applied
prospectively. The Company does not believe that the implementation of this
standard will have a material impact on its condensed consolidated financial
statements.





10





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008




FAS No. 107-1 and APB No. 28-1,Interim
Disclosures about Fair Value of Financial
Instruments


In April
2009, the FASB issued FSP FAS FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No.
28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. FSP FAS 107-1 and APB 28-1 is
effective for interim and annual reporting periods ending after June 15, 2009.
The Company does not believe that the implementation of this standard will have
a material impact on its condensed consolidated financial
statements.





NOTE
2. DISCONTINUED OPERATIONS





The
Company decided to close several of its operations during 2007 and has presented
certain activities as discontinued operations as of and for the periods ended
March 31, 2009 and December 31, 2008.





During
2007, the Company discontinued two components of its business which constituted
discontinued operations – Telecom and Globetel Wireless Corp.  The
loss on the Company’s condensed consolidated statements of operations for the
periods ended March 31, 2009 and 2008 is summarized as follows:





Telecom
                      
                      2009
                      
                      
                      2008Loss
      from discontinued operations
                      
                      $
                      —
                      
                      
                      $
                      (244
                      )GlobeTel
      WirelessLoss
      from discontinued operations
                      
                      
                      —
                      
                      
                      
                      —Total
      loss from discontinued operations
                      
                      $
                      —
                      
                      
                      $
                      (244
                      )





The
Company incurred the following losses from discontinued operations for the
periods ended March 31, 2009 and 2008:





MARCH
      31, 2009 (Unaudited)
                
                Telecom
                
                
                GlobeTel
      Wireless
                
                
                TotalLoss
      from discontinued operations
                
                $
                —
                
                
                $
                —
                
                
                $
                —





MARCH
      31, 2008 (Unaudited)
                  
                  Telecom
                  
                  
                  GlobeTel
      Wireless
                  
                  
                  TotalGeneral
      and administrative
                  
                  $
                  (244
                  )
                  
                  $
                  —
                  
                  
                  $
                  (244
                  )Loss
      from discontinued operations
                  
                  $
                  (244
                  )
                  
                  $
                  —
                  
                  
                  $
                  (244
                  )





The
Company had the following assets and liabilities from its discontinued
operations on its consolidated balance sheet as of March 31, 2009 and December
31, 2008:





MARCH
      31, 2009 (Unaudited)
                        
                        Telecom
                        
                        
                        GlobeTel
      Wireless
                        
                        
                        TotalCash
                        
                        $
                        6,406
                        
                        
                        $
                        —
                        
                        
                        $
                        6,406Total
      assets
                        
                        $
                        6,406
                        
                        
                        $
                        —
                        
                        
                        $
                        6,406Accounts
      payable
                        
                        
                        140,116
                        
                        
                        
                        1,216,208
                        
                        
                        
                        1,356,324Accrued
      liabilities
                        
                        
                        9,605
                        
                        
                        
                        21,477
                        
                        
                        
                        31,082Total
      current liabilities
                        
                        
                        149,721
                        
                        
                        
                        1,237,685
                        
                        
                        
                        1,387,406Net
      liabilities of discontinued operations
                        
                        $
                        143,315
                        
                        
                        $
                        1,237,685
                        
                        
                        $
                        1,381,000





11





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





DECEMBER
      31, 2008
                        
                        Telecom
                        
                        
                        GlobeTel
      Wireless
                        
                        
                        TotalCash
                        
                        $
                        6,406
                        
                        
                        $
                        —
                        
                        
                        $
                        6,406Total
      assets
                        
                        $
                        6,406
                        
                        
                        $
                        —
                        
                        
                        $
                        6,406Accounts
      payable
                        
                        
                        140,116
                        
                        
                        
                        1,216,208
                        
                        
                        
                        1,356,324Accrued
      liabilities
                        
                        
                        9,605
                        
                        
                        
                        21,477
                        
                        
                        
                        31,082Total
      current liabilities
                        
                        
                        149,721
                        
                        
                        
                        1,237,685
                        
                        
                        
                        1,387,406Net
      liabilities of discontinued operations
                        
                        $
                        143,315
                        
                        
                        $
                        1,237,685
                        
                        
                        $
                        1,381,000





NOTE
3. NOTES AND CONVERTIBLE NOTES PAYABLE





March
      31,
                        
                        
                        December
      31,2009
                        
                        
                        2008(Unaudited)(A)
      Notes payable
                        
                        $
                        5,997,030
                        
                        
                        $
                        5,997,030(B)
      Convertible notes payable, net of unamortized discount of $0 and
      $0
                        
                        
                        80,000
                        
                        
                        
                        80,000(C)
      Convertible promissory notes, net of unamortized discount of $303,056 and
      $134,423
                        
                        
                        1,913,279
                        
                        
                        
                        2,016,913Total
                        
                        
                        7,990,309
                        
                        
                        
                        8,093,943Accrued
      Interest
                        
                        
                        1,310,264
                        
                        
                        
                        1,170,789Total
                        
                        $
                        9,300,573
                        
                        
                        $
                        9,264,732





(A) NOTES
PAYABLE





Notes
payable are made up of two separate notes.





As of
March 31, 2009, a balance of $4,997,130 remains through an unsecured promissory
note with no formal terms of repayment on the first note.  The Company has
accrued interest at a rate of 7% per annum, which totals $910,724 as of March
31, 2009.





As of
March 31, 2009, a balance of $999,900 remains through an unsecured promissory
note with no formal terms of repayment on the second note.  The Company has
accrued interest at a rate of 7% per annum, which totals $179,649 as of March
31, 2009.





(B)
CONVERTIBLE NOTES PAYABLE





As of
March 31, 2009, a balance of $80,000 remains through a convertible notes
payable.  The Company has accrued interest at a rate of 7% per annum, which
totals $28,241 as of March 31, 2009. Subsequent to March 31, 2009, $30,000 in
principal and $13,874 in interest were converted into 516,947 shares of Company
common stock.





(C)
CONVERTIBLE PROMISSORY NOTES





On
February 17, 2009, the Company entered into subscription agreement with
accredited investors. The Company sold $110,000 of the Company’s 7% Convertible
Debentures, 3-year warrants to purchase a number of shares equal to 50% of the
number of shares issuable upon conversion of the debenture of the Company’s
common stock at an exercise price of $0.21, and three-year warrants to purchase
a number of shares equal to 50% of the number of shares issuable upon conversion
of the debenture shares of the Company’s common stock at an exercise price of
$0.315. The Debentures are convertible into shares of the Company’s common stock
at $.105 per share pursuant to the following terms. If after 90 days from the
original issue date of the debenture the market price of the Company’s common
shares during the 90 day period has not closed at a bid price at or above $.12
per share for 3 or more consecutive trading days, in such instance then the
Investors’ price per share shall be equal to the average closing bid price for
the last 30 trading days immediately prior to the 90th day
after the date of the addendum. Should the price of the common shares be $.105
or higher on the 90th day
after the date of the addendum, then the purchase price per share
shall remain at $.105 per share.  Should the Market Price of the
shares be $.105 or higher on the 90th day
after the date of the addendum, but less than $.125, then the Investor shall be
entitled to an amount of additional shares equal to 10% of the number of shares
to which the Investor is otherwise entitled. Because the price of the common
stock was greater than $.125 on the 90th day
after funding, the modification was extinguished.




12





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





The
Company determined that the total fair value of the warrants was $22,252 based
upon the relative value of the Black Scholes valuation of the warrants and the
underlying debt amount.  For the Black Scholes calculation, the
Company assumed no dividend yield, a risk free interest rate ranging from 1.31%
to 1.40%, expected volatility of 169.01% and an expected term of the warrants of
3 years.  The initial calculated fair value of warrants of $22,252 was
reflected by the Company as a valuation discount and offset to the carrying
value of the Notes, and are being amortized by the effective interest method
over the term of the Notes. As of March 31, 2009, the Company amortized $1,236
of the valuation discount, which is reflected as financing costs in the
Company’s consolidated statements of operations.  During 1st quarter
2009, no principal or interest had been converted.





As of
March 31, 2009, a balance of $1,633,869 remains through convertible notes
payable.  The Company has accrued interest at a rate of 7% per annum, which
totals $171,056 as of March 31, 2009.





On
February 17, 2009, the Company entered into subscription agreement with a second
accredited investor. The Company sold $30,000 of the Company’s 7% Convertible
Debentures, 3-year warrants to purchase a number of shares equal to 50% of the
number of shares issuable upon conversion of the debenture of the Company’s
common stock at an exercise price of $0.21, and three-year warrants to purchase
a number of shares equal to 50% of the number of shares issuable upon conversion
of the debenture shares of the Company’s common stock at an exercise price of
$0.315. The Debentures are convertible into shares of the Company’s common stock
at $.105 per share pursuant to the following terms. If after 90 days from the
original issue date of the debenture the market price of the Company’s common
shares during the 90 day period has not closed at a bid price at or above $.12
per share for 3 or more consecutive trading days, in such instance then the
Investors’ price per share shall be equal to the average closing bid price for
the last 30 trading days immediately prior to the 90th day
after the date of the addendum. Should the price of the common shares be $.105
or higher on the 90th day
after the date of the addendum, then the purchase price per share shall remain
at $.105 per share.  Should the Market Price of the shares be $.105 or
higher on the 90th day
after the date of the addendum, but less than $.125, then the Investor shall be
entitled to an amount of additional shares equal to 10% of the number of shares
to which the Investor is otherwise entitled. Because the price of the common
stock was greater than $.125 on the 90th day
after funding, the modification was extinguished.





The
Company determined that the total fair value of the warrants was $5,807 based
upon the relative value of the Black Scholes valuation of the warrants and the
underlying debt amount.  For the Black Scholes calculation, the
Company assumed no dividend yield, a risk free interest rate of 1.22% , expected
volatility of 169.01% and an expected term of the warrants of 3
years.  The initial calculated fair value of warrants of $5,807 was
reflected by the Company as a valuation discount and offset to the carrying
value of the Notes, and are being amortized by the effective interest method
over the term of the Notes. As of March 31, 2009, the Company amortized $645of
the valuation discount, which is reflected as financing costs in the Company’s
consolidated statements of operations.  During 1st quarter
2009, no principal or interest had been converted.





As of
March 31, 2009, a balance of $130,000 remains through convertible notes payable.
 The Company has accrued interest at a rate of 7% per annum, which totals
$8,283 as of March 31, 2009.





In
October 2008, the Company entered into a new financing agreement for a
convertible promissory note payable totaling $25,000.  On February 11,
2009, $25,438 in principal and interest was converted into 238,096 shares of the
Company’s common stock.





13





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





In
September 2008, the Company entered into a new financing agreement for
convertible promissory note payable totaling $50,000. On February 12, 2009, the
Company issued 250,000 shares, valued at $9,500, as a penalty to extend the
maturity to an unspecified date. On March 30, 2009, the investor foreclosed on
its lien and security interest based on the previously entered into pledge
agreement.  The note was secured by 1,000,000 shares of common stock
of the Company held by the Company’s CEO.  As a result, the holder
acknowledged that by virtue of its ownership of the shares, the note was deemed
satisfied in full.




As
further described in Note 5, the EITF 07-05 became effective January 1, 2009. In
connection with its implementation, the Company was required to classify the
conversion feature of certain convertible notes and related warrants to
liabilities.


NOTE
4. TAO TECHNOLOGIES TRANSACTION





On June
3, 2008 the Company restructured a previous agreement with TAO Technologies GmbH
and Professor Bernd Kroplin. The new agreement called for the establishment of a
new US-based joint venture company to be called Sanswire-TAO that was to be
owned equally by TAO and Sanswire Corp., through its wholly-owned subsidiary
Sanswire Corp.—Florida.  Additionally, Sanswire-TAO would register the
patents and intellectual property of TAO Technologies and Kroplin in the United
States for the exclusive use of Sanswire-TAO.  On June 3, 2008, the Company
treated the transaction as the investment in a joint venture and booked a
$3,229,000 asset related to the investment.   The balance of
$2,185,000 due for the investment is accrued in accrued expenses as of March 31,
2009.  The investment will be subject to impairment testing in the
future.





NOTE 5.    DERIVATIVE
LIABILITY





In June
2008, the FASB finalized Emerging Issues Task Force (“EITF”) 07-05, “Determining
Whether an Instrument (or Embedded Feature) is indexed to an Entity’s Own
Stock.”  Under EITF 07-05, instruments which do not have fixed
settlement provisions are deemed to be derivative instruments. The conversion
feature of the Company’s Debentures, and the warrants issued with the
Debentures, do not have fixed settlement provisions because their conversion and
exercise prices, respectively, may be lowered if the Company issues securities
at lower prices in the future.  The Company was required to include
the reset provisions in order to protect the Debenture holders from the
potential dilution associated with future financings.  In accordance
with EITF 07-05, the conversion feature of the Debentures was separated from the
host contract, the Debenture, and recognized as an embedded derivative
instrument.  Both the conversion feature of the Debenture and the
warrants have been re-characterized as derivative liabilities. SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities” (“FAS 133”)
requires that the fair value of these liabilities be re-measured at the end of
every reporting period with the change in value reported in the statement of
operations.





The
derivative liabilities were valued using the Black-Scholes option pricing model
and the following assumptions:





March
      31,
                    2009
                  
                  
                  January
      1,
                    2009Conversion
      feature:Risk-free
      interest rate
                  
                  
                  0.21 – 0.81
                  %
                  
                  
                  0.27 – 0.76
                  %Expected
      volatility
                  
                  
                  118
      - 143
                  %
                  
                  
                  118
      - 134
                  %Expected
      life (in years)
                  
                  
                  0.39 – 1.87
                  
                  
                  
                  0.33 - 1.76Expected
      dividend yield
                  
                  
                  —
                  
                  
                  
                  —Warrants:Risk-free
      interest rate
                  
                  
                  0.17 – 1.15
                  %
                  
                  
                  0.11 – 1.00
                  %Expected
      volatility
                  
                  
                  40
      - 174
                  %
                  
                  
                  28
      - 167
                  %Expected
      life (in years)
                  
                  
                  0.16 – 2.89
                  
                  
                  
                  0.01 – 2.74Expected
      dividend yield
                  
                  
                  —
                  
                  
                  
                  —Fair
      value:Conversion
      feature
                  
                  $
                  412,210
                  
                  
                  $
                  495,805Warrants
                  
                  $
                  265,615
                  
                  
                  $
                  252,439





14





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





The
risk-free interest rate was based on rates established by the Federal
Reserve.  In 2009, the Company’s expected volatility was based upon
the historical volatility for its common stock.  The expected life of
the Debentures’ conversion option was based on the maturity of the Debentures
and the expected life of the warrants was determined by the expiration date of
the warrants.  The expected dividend yield was based upon the fact
that the Company has not historically paid dividends, and does not expect to pay
dividends in the future.





EITF
07-05 was implemented in the first quarter of 2009 and is reported as the
cumulative effect of a change in accounting principles.  The
cumulative effect on the accounting for the conversion feature and the warrants
as of January 1, 2009 was as follows:





Derivative
                  Instrument
                
                Additional
      Paid-
                  In-Capital
                
                
                Accumulated
                  Deficit
                
                
                Derivative
                  Liability
                
                
                DebentureConversion
      feature
                
                $
                150,834
                
                
                $
                (35,610
                )
                
                $
                (495,805
                )
                
                $
                380,581Warrants
                
                $
                —
                
                
                $
                252,439
                
                
                $
                (252,439
                )
                
                $
                —Total
                
                $
                150,834
                
                
                $
                216,829
                
                
                $
                (748,244
                )
                
                $
                380,581





Changes
in the accumulated deficit include $216,829 in losses resulting from increases
in the fair value of the derivative liabilities through December 31,
2008.  The derivative liability amounts reflect the fair value of each
derivative instrument as of the January 1, 2009 date of
implementation.   The warrants were originally recorded at their
relative fair value as an increase in additional
paid-in-capital.





NOTE
6. COMMITMENTS AND CONTINGENCIES





Securities and Exchange
Commission





On
September 28, 2006, the Company received a formal order of investigation from
the SEC. The formal order only named the Company and was not specific to any
particular allegations. Through the use of subpoenas, the SEC has requested
documentation from certain officers and directors of the Company. In subsequent
subpoenas, the SEC has asked for additional documents and
information.





On
October 5, 2007, the Company received a "Wells Notice" from the SEC in
connection with the SEC’s ongoing investigation of the Company. The Wells Notice
provides notification that the staff of the SEC intends to recommend to the
Commission that it bring a civil action against the Company for possible
violations of the securities laws including violations of Sections 5 and 17(a)
of the Securities Act of 1933; Sections 10(b), 13(a), and 13(b)(2)(A) & (B)
of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20,
13a-1, 13a-11, and 13a-13 thereunder; and seeking as relief a permanent
injunction, civil penalties, and disgorgement with prejudgment interest. The
Staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act.





On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
GlobeTel Communications Corp. (the “Company”) and three former officers of the
Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.





The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest.
The Commission subsequently consolidated this action with another pending action
involving former officers of the Company. The Commission has also moved to amend
its complaint against the Company to include additional allegations of
wrongdoing beginning in 2002, but which does not add any new defendants. On
March 23, 2009 the Court granted the SEC’s motion and extended the fact
discovery deadline in the case until July 31, 2009.  The parties are
currently engaged in discovery.  The Company has been vigorously
defending itself in this action.


15





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





Mitchell Siegel v.
GlobeTel





On
February 2, 2007, GlobeTel was sued in the Circuit Court for Broward County,
Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no.
0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for
breach of contract in regards to a Key Executive Employment
Agreement.  On February 15, 2008, both parties entered into a
settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock,
payable over 12 months, and 50% of the gross proceeds, up to a total amount of
$300,000, received from an October 2006 agreement. During 2009 the Company paid
an additional $29,167 in the Company’s common stock.





NOTE
7. COMMON STOCK TRANSACTIONS





During
the three month period ended March 31, 2009, the Company issued an aggregate of
4,620,227 shares of common stock for debt, including 1,000,000 shares for the
replacement of shares lost when an investor foreclosed on its lien and security
interest based on the previously entered into pledge agreement. Of the shares
issued, 1,000,000 shares, or 21.6% were issued to insiders and affiliates as
restricted securities and in accordance with SEC Rule 144. The common stock
issued was valued at prices ranging from $0.038 to $0.105 per share, based on
the closing market prices on the date the board of directors authorized the
issuances. Subsequent to March 31, 2009, the Company issued an aggregate of
15,790,747 shares of common stock for debt, board compensation, and consulting
agreements.





NOTE
8. STOCK OPTIONS AND WARRANTS





STOCK
OPTIONS





During
the three months ended March 31, 2009, the Company issued no options to acquire
common stock.





As of
March 31, 2009, the exercise price of all options outstanding exceeds the market
price of the Company’s stock, and therefore there was no intrinsic
value.





Employee
options vest according to the terms of the specific grant and expire from 3 to
5 years from date of grant. As of March 31, 2009, all options issued and
outstanding have fully vested and thus there was no deferred compensation. Stock
option activity as of March 31, 2009 was as follows:





Number
      of Options
                        (in
      shares)
                      
                      
                      Weighted
      Average
                        Exercise
      PriceOutstanding
      at December 31, 2008
                      
                      
                      15,982,752
                      
                      
                      $
                      .350Options
      Granted
                      
                      
                      —
                      
                      
                      
                      —Options
      Forfeited
                      
                      
                      —
                      
                      
                      
                      —Options
      Cancelled
                      
                      
                      —
                      
                      
                      
                      —Outstanding
      at March 31, 2009
                      
                      
                      15,982,752
                      
                      
                      $
                      .350





WARRANTS





The
following table summarizes certain information about the Company’s stock
purchase warrants (including the warrants discussed in Note 3).





16





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





Warrants
                        Class
      A
                      
                      
                      Warrants
                        Class
      B
                      
                      
                      Weighted
      Average
                        Exercise
      PriceOutstanding
      at December 31, 2008
                      
                      
                      13,987,204
                      
                      
                      
                      9,634,763
                      
                      
                      $
                      0.253Warrants
      Granted
                      
                      
                      666,667
                      
                      
                      
                      444,444
                      
                      
                      
                      0.252Warrants
      Expired
                      
                      
                      3,305,383
                      
                      
                      
                      2,203,589
                      
                      
                      
                      0.252Outstanding
      at March 31, 2009
                      
                      
                      11,348,488
                      
                      
                      
                      7,875,618
                      
                      
                      $
                      0.253





NOTE
9. INCOME TAXES





The
Company has accumulated net operating losses, which can be used to offset future
earnings. Accordingly, no provision for income taxes is recorded in the
financial statements. A deferred tax asset for the future benefits of net
operating losses and other differences is offset by a 100% valuation allowance
due to the uncertainty of the Company's ability to utilize the losses. These net
operating losses begin to expire in the year 2021.





NOTE
10. SUBSEQUENT EVENTS





Amendment
to September 2008 Financing Documents





On April
17, 2009, the Company entered into an amendment to the Subscription Agreement,
dated September 17, 2008 pursuant to which the Company agreed (i) to extend the
expiration date of both the Series A Warrant and Series B Warrant issued from
October 15, 2010 to December 31, 2010 and (ii) extend the final date that the
holder may make up to two additional purchases of the Company’s securities, from
October 15, 2008 and December 15, 2008, respectively, until December 31, 2010
and December 31, 2010, respectively.  The Company may have non cash
charges associated with this transaction in the future.





April
2009 Credit Facility





On April
15, 2009, Sanswire-Tao Corp. entered into a credit facility agreement pursuant
to which the holder agreed to lend up to an aggregate principal amount of
€800,000 until the earlier of (i) December 31, 2009 or (ii) until the holder
loans Sanswire Tao Corp. the full amount.  Any loan made under the
Credit Facility Agreement shall mature and become due and payable, in full,
together with all accrued but unpaid interest thereon, on the later of (i)
December 31, 2011 or (ii) the date the Company receives the proceeds from its
customers from the sale of its first 34 meter unmanned autonomously controlled
mid-altitude airship (the “STS-111”).  As consideration for entering
into the Credit Facility Agreement, Sanswire-Tao agreed to pay an amount equal
to fifty percent (50%) of the STS-111 Net Sale Proceeds, when, and if the
Company receives such proceeds.  For purposes of the Credit Facility
Agreement, the term “STS-111 Net Sale Proceeds” shall mean the actual proceeds
received by STC for the sale of the first STS-111 minus the actual cost of
construction.





On April
15, 2009, Sanswire-Tao entered into an assignment and assumption
agreement  pursuant to which the holder assigned all of its rights,
title and interest in and to the Credit Facility Agreement to a third
party.





April
2009 Services Agreement





On April
15, 2009, the Company entered into a services agreement (the “2009 Services
Agreement”) to engage a vendor to provide various, design, marketing and other
services and assistance to the Company in connection with the development the
STS-111.  The initial term of the 2009 Services Agreement shall be
until the earlier of (i) the completion of the all of the services to be
provided by the vendor in accordance with the 2009 Services Agreement or (ii)
December 31, 2010.  In consideration for the services to be provided
by the vendor in accordance with the 2009 Services Agreement, the Company will
issue an aggregate amount of 12,500,000 shares of the Company’s common stock to
be issued in accordance with the following schedule: (i) 7,500,000 shares of
common stock to be issued upon execution of the 2009 Services Agreement (ii)
833,335 shares of the Company’s common stock to be issued on May 1, 2009 and
(iii) 833,333 shares of the Company’s common stock to be issued on the first day
of each month beginning on June 1, 2009 and continuing until October 1,
2009.  On April 30, 2009, the Company issued 7,500,000 shares in
accordance with the agreement.





17





SANSWIRE
CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)


AND
SUBSIDIARIES


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


PERIODS
ENDED MARCH 31, 2009 AND 2008





April
2009 Subscription Agreements




On April
17, 2009, the Company entered into a subscription agreement pursuant to which an
investor purchased 3,809,524 shares of the Company’s common stock for an
aggregate purchase price of $400,000. On April 30, 2009 the Company issued
3,809,524 shares in accordance with the agreement.





Addition
of Board Members





On April
22, 2009, the Company appointed Maj. Gen. Wayne P. Jackson (USA-Ret.) to the
Board of Directors. The Company has agreed to compensate Gen. Jackson by paying
him $5,000 per quarter and 250,000 common shares per quarter during this term of
service. On April 30, 2009 the Company issued 250,000 shares in accordance with
the agreement.





On May 3,
2009, the Company appointed David A. Christian as a director and chairman of the
Board of Directors of the Company.   Mr. Christian will receive
$5,000 per quarter in cash compensation and 250,000 shares of common stock per
quarter during his tenure as a director. On April 30, 2009 the Company issued
250,000 shares in accordance with the agreement.





Series
E Preferred Stock




On May 3,
2009, the Board of Directors approved the creation of a Series E Preferred
Stock.  The terms of the Series E Preferred Stock were subsequently
amended on May 14, 2009. The Series E Preferred Stock, as amended, does not pay
dividends but each holder of Series E Preferred Stock shall be entitled to 21.5
votes for each share of common stock that the Series E Preferred Stock shall be
convertible into.  The Series E Preferred Stock, as amended, has a
conversion price of $0.105 and a stated value of $6.26.  Each share of
Series E Preferred Stock is convertible, at the option of the holder, into such
number of shares of common stock of the Company as determined by dividing the
Stated Value by the Conversion Price.  The Series E Preferred Stock
has no liquidation preference.





On May 5,
2009, the Company entered into a conversion agreement with Rocky Mountain
Advisors Corp., a consultant to the Company wholly owned by Thomas Seifert
(“RMAC”), pursuant to which the Company agreed to convert $185,387 in consulting
fees owed to RMAC for consulting services performed from October 19, 2007 to
April 9, 2009 into 29,615 shares of Series E Preferred Stock, par value $0.001
per share.





On May 5,
2009, the Company entered into a conversion agreement with Daniyel Erdberg, the
Company’s Vice President of Operations, pursuant to which the Company agreed to
convert $121,487.99 in outstanding wages owed to Mr. Erdberg from July 1, 2008
to April 3, 2009 into 19,407 shares of Series E Preferred Stock.





On May 5,
2009, the Company entered into a conversion agreement with Jonathan Leinwand,
the Chief Executive Officer, pursuant to which the Company agreed to convert $
319,118.85 in outstanding wages owed to Mr. Leinwand from October 17, 2007 to
April 3, 2009 into 50,978 shares of Series E Preferred Stock.


18


Leinwand
Employment Agreement





On May 3,
2009, the Board of Directors of the Company ratified an employment agreement
(effective March 1, 2008 (the “Effective Date”) by and between the Company and
Mr. Jonathan Leinwand (“Executive”), whereby Executive was appointed as Chief
Executive Officer and General Counsel of the Company.  The Employment
Agreement has an initial term of one year from the Effective Date and will
automatically renew for consecutive one year terms until such time that the
Employment Agreement is terminated upon mutual agreement between the parties
upon 30 days written notice or upon termination for cause. Pursuant to the
Employment Agreement, Executive is to receive an annual base salary of $250,000
per year, subject review by the Board of Directors on an annual basis (the “Base
Salary”). Executive was provided a signing bonus of 2,000,000 shares of the
Company’s common stock upon execution of the Employment
Agreement and will also be entitled to receive an annual bonus in the form of
cash and/or equity compensation in amount equal to up to one hundred and fifty
percent (150%) of Employee’s Base Salary.  Executive shall also be
entitled to receive additional equity compensation in the amounts and upon
completion of the following milestones as set forth below: (1) 2,000,000 shares
upon the filing of the Company’s restated Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 and the fiscal year ended December 31, 2004;
(2) 2,000,000 shares upon the filing of the Company’s Annual Report on Form 10-K
for the fiscal year December 31, 2007 and the fiscal year ended December 31,
2006; (3) 1,000,000 shares upon the Company’s quotation for trading on the
Over-the-Counter Bulletin Board; (4) 2,000,000 shares upon the Company entering
into an agreement that results in revenue for the Company in either the form of
funds for research and development from an established defense contractor or
government agency or the sale of an airship or revenues from other projects in
excess of $250,000; (5) 2,000,000 shares upon the closing of financing of at
least $1,000,000 in gross proceeds, in the aggregate, commencing from the date
of initial appointment as CEO on September 10, 2007; and (6) 2,000,000 shares
upon the Company’s market cap reaching $50,000,000.  Executive is
entitled to participate in any and all benefit plans, from time to time, in
effect for senior management, along with vacation, sick and holiday pay in
accordance with the Company’s policies established and in effect from time to
time. Executive’s employment with the Company may be terminated at any time,
with or without cause or good reason. In the event that Executive’s employment
is terminated by the Company prior to the end of the Employment Agreement for
any reason except malfeasance, fraud, or gross negligence then Executive shall
be entitled to payment of salary, benefits and bonus for the three (3) months
following such termination and shall be entitled to a pro-rata bonus for the
term thereunder. To the extent permitted by law, the Company also agreed to
indemnify Executive against any claim or liability and will hold Executive
harmless from and pay any expenses (including, without limitation, legal fees
and court costs), judgments, fines, penalties, settlements and other amounts
arising out of or in connection with any act or omission of the Executive
performed or made in good faith on behalf of the Company pursuant to the
Employment Agreement, regardless of negligence.





Settlement
of Trimax Wireless Litigation





On April
6, 2009, the Company entered into a settlement agreement with Ulrich Altvater, a
former employee, and his company, Trimax Wireless.  As per the terms
of the settlement, Mr. Altvater will return 1,640,000 shares of the Company’s
common stock and certain equipment that was held by Trimax
Wireless.





Item
2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations





Forward-looking
Information





This
quarterly report contains forward-looking statements. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. These statements relate to future
events or to our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements. See our annual report on Form 10-K for the year ended December 31,
2008.





Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements. Moreover, we do not assume responsibility for the accuracy and
completeness of such forward-looking statements. We are under no duty to update
any of the forward-looking statements after the date of this report to conform
such statements to actual results.





General





Sanswire
Corp. ("Sanswire," "GlobeTel", “we”, “us”, “our”, or the “Company”) is focused
on the design, construction and marketing of various aerial vehicles most of
which would be capable of carrying payloads that provide persistent surveillance
and security solutions at various altitudes. The airships and auxiliary products
are intended for end users that include military, defense and government-related
entities.





19





From 2002
to 2007, the Company was involved in the following business sectors: stored
value card services; wholesale telecommunications services; voice over IP;
wireless broadband; and high altitude airships. These businesses were run
through various subsidiaries. The Company discontinued operations in all but the
high altitude airship sector.





In 2007,
we began focusing exclusively on opportunities through our wholly-owned
subsidiary at the time, Sanswire Networks. The opportunities associated with
Sanswire Networks were related to the Lighter Than Air (LTA) Unmanned Aerial
Vehicle (UAV) market, and we, through the subsidiary, sought to build and run a
UAV business that includes low-, mid- and high-altitude, lighter-than-air
vehicles intended to provide customers advanced seamless wireless broadband
capabilities and surveillance sensor suites.





On
September 22, 2008, we effected a name change to Sanswire Corp. in recognition
of the entity that contained our sole business focus (See “Recent
Developments”). Thus, moving forward, the Company is Sanswire Corp., whose
primary business is the design, construction and marketing of a variety of
aerial vehicles through a joint venture with TAO Technologies, Stuttgart,
Germany, named Sanswire-TAO Corp.





The High
Altitude class of prospective airships are generally referred to as HAAs
(High Altitude Airships) but have also been called HAPs and HALEs (High Altitude
Platforms, High Altitude Long Endurance). They have been designed to be able to
keep a station in one location in the Stratosphere, at approximately 65,000 ft
for durations of 30 days or more.





RESULTS
OF OPERATIONS





The
following discussion and analysis summarizes the results of operations of the
Company for the three-month periods ended March 31, 2009 and 2008.





COMPARISON
OF THREE MONTHS ENDED MARCH 31, 2009 AND 2008





REVENUES.
The Company had no revenue for the three month periods ended March 31, 2009 and
2008.





COST OF
SALES. The Company had no cost of sales for the three month periods ended March
31, 2009 and 2008.





GROSS
MARGIN. The Company had no gross margin for the three month periods ended March
31, 2009 and 2008.





OPERATING
EXPENSES. Our operating expenses consist primarily of payroll and related taxes,
professional and consulting services, expenses for executive and administrative
personnel and insurance,  telephone and communications,
facilities expenses, travel and related expenses, and other general
corporate expenses. Our operating expenses for the three month period ended
March 31, 2009 were $332,084 compared to the three month period ended March 31,
2008 which had operating expenses of $897,893 a decrease of $565,809 or
63.0%. The decrease was primarily due to a continued reduction of
expenses related to our operations, facilities and workforce during the second
half of 2008.





During
the three month period ended March 31, 2009 and 2008, Sanswire and its
subsidiaries incurred payroll tax liability during the normal course of business
at each payroll cycle. During 2008 the Company has reported its payroll tax
liabilities on a timely basis, however the Company failed to deposit the
appropriate withholding amounts. The Company has recognized this issue and
contacted the IRS accordingly to make arrangement to pay any taxes due, which is
currently estimated to be at least $200,000. The Company may be subject to
penalties and interest from the IRS.





LOSS FROM
OPERATIONS. We had an operating loss of $332,084 for the three month period
ended March 31, 2009 as compared to an operating loss of $897,893 for the three
month period ended March 31, 2008, primarily due to decreased operating expenses
as described above, including lower operating costs and reductions of our
various programs.





OTHER
INCOME (EXPENSE). We had net other expenses totaling $321,269 during the three
month period ended March 31, 2009 compared to other income of $1,475,104 during
the three month period ended March 31, 2008. This variance was due primarily to
the non cash charges related to the modifications of our convertible debentures
of $1,096,650 in 2008.





20





Interest
expense for the three month period ended March 31, 2009 was $391,688 compared to
$378,454 for the three month period ended March 31, 2008. Interest expense
increase was primarily due to an increase in non cash charges related to
the Company’s convertible debentures.





LOSS FROM
DISCONTINUED OPERATIONS. During the three month period ended March 31, 2009 we
had no activity related to our discontinued operations compared to a loss
of $244 during the three month period ended March 31, 2008. See note 2 in
the financial statements for more information regarding the discontinued
operations.





NET LOSS.
We had a net loss of $653,353 in the three month period ended March 31, 2009
compared to $2,373,241 in the three month period ended March 31, 2008. The
decrease in net loss is primarily attributable to the decrease in the operating
expenses as discussed above.





LIQUIDITY
AND CAPITAL RESOURCES





ASSETS.
At March 31, 2009, the Company had total assets of $3,338,991 compared to total
assets of $3,240,215 as of December 31, 2008.





The
current assets at March 31, 2009, were $109,991 compared to $11,215 at December
31, 2008. As of March 31, 2009, the Company had $103,585 of cash and cash
equivalents compared to $4,809 at December 31, 2008.





The
Company had $3,229,000 of investments in joint venture as of March 31,
2009 and December 31, 2008.





LIABILITIES.
At March 31, 2009, the Company had total liabilities of $18,746,754 compared to
total liabilities of $17,944,125 as of December 31, 2008. The increase of
$802,629 was principally due to the $677,825 in non cash charges associated with
the derivative liabilities (see note 5 of the financial statements.) and the
increase in convertible notes payable of $140,000 (see note 3 of the
financial statements.)





CASH
FLOWS. Our cash used in operating activities was $141,224 compared to $226,093
for the comparative period. The decrease was primarily due to the decreased
level of operations and operating activities and changes in our current assets
and liabilities.





Net cash
provided by financing activities was $240,000 principally from the execution of
new convertible debentures, as compared to $331,139 in the prior
year.





The
accompanying condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. As
reflected in the accompanying condensed consolidated financial statements, the
Company had a net loss of $653,353 and a negative cash flow from operations
of $141,224 for the three months ended March 31, 2009, and had a working capital
deficiency of $18,636,763 and a stockholders’ deficit of $15,407,763 at March
31, 2009.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent upon the Company’s ability to raise additional
funds and implement its business plan. The condensed consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. The Company anticipates that a net
loss will continue for fiscal 2010.





Throughout
2008 and continuing into 2009, the Company has been dependent upon monthly
funding from its existing debt holders. Funding decisions have typically not
extended beyond thirty days at any given time, and the Company does not
currently have a defined funding source. Funding delays and uncertainties have
seriously damaged vendor relationships, new product development and revenues. In
the absence of continued monthly funding by its current debt holders, the
Company would have insufficient funds to continue operations. There is no
assurance that additional funding from the current debt holders will be
available or available on terms and conditions acceptable to the
Company.





Subsequent
to March 31, 2009, the Company has raised $300,000 from investors; however this
is not adequate funding to cover the Company’s working capital deficit or the
net loss for the three month period ended March 31, 2009 of approximately
$653,353.





21





As
reflected in the accompanying financial statements, during the three month
period ended March 31, 2009 we had a net loss of $653,353 compared to a net loss
of $2,373,241 during the three month period ended March 31, 2008. Consequently,
there is an accumulated deficit of $126,704,521 at March 31, 2009 compared to
$125,834,338 at December 31, 2008.





Critical
Accounting Policies and Use of Estimates





Estimates





The
preparation of condensed consolidated financial statements requires us to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities, the reported amounts and classification of expense, and the
disclosure of contingent assets and liabilities. We evaluate our estimates and
assumptions on an ongoing basis. We base our estimates on historical experience
and various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.





Accounting
for stock options





We
believe that it is important for investors to be aware that there is a high
degree of subjectivity involved in estimating the fair value of stock-based
compensation, that the expenses recorded for stock-based compensation in the
Company’s financial statements may differ significantly from the actual value
(if any) realized by the recipients of the stock awards, and that the expenses
recorded for stock-based compensation will not result in cash payments from the
Company.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk





As a
“smaller reporting company” as defined by Regulation S-K, the Company is not
required to provide information required by this Item.





Item
4.  Controls and Procedures





Evaluation
of Disclosure Controls and Procedures





As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company carried out an evaluation under the
supervision and with the participation of Jonathan Leinwand, the Company’s Chief
Executive Officer and Principal Financial Officer (the “Reviewing Officer”), of
the effectiveness of the Company's disclosure controls and procedures as of
March 31, 2009. In designing and evaluating the Company's disclosure controls
and procedures, the Company and its management recognize that there are inherent
limitations to the effectiveness of any system of disclosure controls and
procedures, including the possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of
achieving their desired control objectives. Additionally, in evaluating and
implementing possible controls and procedures, the Company's management was
required to apply its reasonable judgment. Furthermore, in the course of this
evaluation, management considered certain internal control areas, including
those discussed below, in which we have made and are continuing to make changes
to improve and enhance controls. Based upon the required evaluation, the
Reviewing Officer concluded that as of March 31, 2009, the Company's disclosure
controls and procedures were effective to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, except
for the establishment of the audit committee as contemplated below.





Remediation
of Material WeaknessesMaterial weaknesses identified in prior years have been
addressed. In the first phase of the program, already completed as of September
30, 2007, we hired consultants and accounting consultants to review our
financial statements and prepare the restatement of our financial
statements.





Additionally
we had determined that the Company had ineffective controls over revenue
recognition. Our remediation measures relating to revenue recognition include a
review by management of revenue items other than normal sales and also the
discontinuation of the operations of our Centerline Communications LLC
subsidiary for which we had previously restated revenue.





22





In the
second phase of the program, commencing with the filing of our current financial
statements, we will be implementing certain new policies and procedures such
as:





a.
            Seeking
      to recruit board members independent of
  management;





b.
            Granting
      Board committees standing authority to retain counsel and special or
      expert advisors of their own
choice;





c.
            Seeking
      outside review of acquisition
transactions





d.
            Establishment
      of an audit committee





e.
            Upon
      adequate funding, hiring additional staff leading to the segregation of
      duties to enable a better control
environment




Changes
in Internal Control over Financial Reporting





Except as
set forth above, there have been no changes in our internal control over
financial reporting that occurred during the period ended March 31, 2009 that
have materially affected or are reasonably likely to materially affect our
internal control over financial reporting.





PART
II - OTHER INFORMATION




Item
1.  Legal Proceedings





Securities and Exchange
Commission





On
September 28, 2006, the Company received a formal order of investigation from
the SEC. The formal order only named the Company and was not specific to any
particular allegations. Through the use of subpoenas, the SEC has requested
documentation from certain officers and directors of the Company. In subsequent
subpoenas, the SEC has asked for additional documents and
information.





On
October 5, 2007, the Company received a "Wells Notice" from the SEC in
connection with the SEC’s ongoing investigation of the Company. The Wells Notice
provides notification that the staff of the SEC intends to recommend to the
Commission that it bring a civil action against the Company for possible
violations of the securities laws including violations of Sections 5 and 17(a)
of the Securities Act of 1933; Sections 10(b), 13(a), and 13(b)(2)(A) & (B)
of the Securities Exchange Act of 1934 (“Exchange Act”) and Rules 10b-5, 12b-20,
13a-1, 13a-11, and 13a-13 thereunder; and seeking as relief a permanent
injunction, civil penalties, and disgorgement with prejudgment interest. The
Staff is also considering recommending that the SEC authorize and institute
proceedings to revoke the registration of Company’s securities pursuant to
Section 12(j) of the Exchange Act.





On May 2,
2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the
United States District Court for the Southern District of Florida against
GlobeTel Communications Corp. (the “Company”) and three former officers of the
Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC
alleges, among other things, that the Company recorded $119 million in revenue
on the basis of fraudulent invoices created by Joseph Monterosso and Luis
Vargas, two individuals formerly employed by the Company who were in charge of
its wholesale telecommunications business.





The SEC
alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the
Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act.
The SEC seeks as relief a permanent injunction, civil penalties, and
disgorgement with prejudgment interest. The Commission subsequently consolidated
this action with another pending action involving former officers of the
Company. The Commission has also moved to amend its complaint against the
Company to include additional allegations of wrongdoing beginning in 2002, but
which does not add any new defendants. On March 23, 2009 the Court granted the
SEC’s motion and extended the fact discovery deadline in the case until July 31,
2009.   The parties are currently engaged in
discovery.  The Company has been vigorously defending itself in this
action.





23


Joseph
Monterosso





In
October 2007 the Company filed a lawsuit in the Circuit Court for Broward
County, Florida against Joseph J. Monterosso alleging Libel, Slander and
Defamation, Tortuous Interference, Violations of FS § 836.05 (Threats
Extortion)  and violations of FS §517 (Securities Fraud). Mr.
Monterosso has not yet been served with the complaint pending additional
information arising from the SEC lawsuit.





Mitchell Siegel v.
GlobeTel





On
February 2, 2007, GlobeTel was sued in the Circuit Court for Broward County,
Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no.
0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for
breach of contract in regards to a Key Executive Employment
Agreement.  On February 15, 2008, both parties entered into a
settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock,
payable over 12 months, and 50% of the gross proceeds, up to a total amount of
$300,000, received from an October 2006 agreement. During 2008 the Company paid
$131,250 in the Company’s common stock associated with the settlement agreement.
During 2009, the Company paid the remaining $43,750 in the Company’s common
stock.





Former
Consultants





The
Company is a defendant in two lawsuits filed by Matthew Milo and Joseph
Quattrocchi, two former consultants, filed in the Supreme Court of the State of
New York (Richmond County, Case no. 12119/00 and 12118/00). These matters were
subsequently consolidated as a result of an Order of the court and now bear the
singular index number 12118/00. The original lawsuits were for breach of
contract. The complaint demands the delivery of 10,000,000 pre split shares of
ADGI stock to Milo and 10,000,000 to Quattrocchi. The Company was entered into
the action as ADGI was the predecessor of the Company. The suit also requests an
accounting for the sales generated by the consultants and attorneys fees and
costs for the action. The
lawsuits relate to consulting services that were provided by Mr. Milo and Mr.
Quattrocchi and a $50,000 loan advanced by these individuals, dated May 14,
1997, of which $35,000 has been repaid.





The
Company entered into an agreement with Mr. Milo and Mr. Quattrocchi as
consultants on June 25, 1998. The agreement was amended on August 15, 1998. On
November 30, 1998, both Mr. Milo and Mr. Quattrocchi resigned from their
positions as consultants to the Company without fulfilling all of their
obligations under their consulting agreement. The Company issued 3 million pre
split shares each to Mr. Milo and Mr. Quattrocchi as consideration under the
consulting agreement. The Company has taken the position that Mr. Milo and Mr.
Quattrocchi received compensation in excess of the value of the services that
they provided and the amounts that they advanced as loans.





Mr. Milo
and Mr. Quattrocchi disagreed with the Company’s position and commenced action
against us that is pending in the Supreme Court of the State of New York. Mr.
Milo and Mr. Quattrocchi claim that they are entitled to an additional
24,526,000 pre split shares of common stock as damages under the consulting
agreement and to the repayment of the loan balance. The Company believes that it
has meritorious defenses to the Milo and Quattrocchi action, and the Company has
counterclaims against Mr. Milo and Mr. Quattrocchi.





With
regard to the issues related to original index number 12119/00, as a result of a
summary judgment motion, the plaintiffs were granted a judgment in the sum of
$15,000. The rest of the plaintiff's motion was denied. The court did not order
the delivery of 24,526,000 pre split shares of ADGI common stock as the decision
on that would be reserved to time of trial.





An Answer
and Counterclaim had been interposed on both of these actions. The Answer denies
many of the allegations in the complaint and is comprised of eleven affirmative
defenses and five counterclaims alleging damages in the sum of $1,000,000. The
counterclaims in various forms involve breach of contract and breach of
fiduciary duty by the plaintiffs.





For the
most part, the summary judgment motions that plaintiffs brought clearly stated
that their theories of recovery and the documents that they will rely on in
prosecuting the action. The case was assigned to a judicial hearing officer and
there was one week of trial. The trial has been since adjourned with no further
trial dates having been set.





It is
still difficult to evaluate the likelihood of an unfavorable outcome at this
time in light of the fact that there has been no testimony with regard to the
actions. However, the plaintiffs have prevailed with regard to their claim of
$15,000 as a result of the lawsuit bearing the original index Number
12119/00.





24





This case
went before a Judicial Hearing Officer on July 6 and 7, 2006. No resolution
occurred during the July hearing and the Judicial Hearing Officer has asked for
written statements of facts and law. The outcome cannot be projected with any
certainty.  However, the Company does not believe that it will be
materially adversely affected by the outcome of the proceeding. The Company has
not been informed of any further developments since the hearing.





Trimax
Wireless





On July
3, 2007 the Company filed suit against its former employee Ulrich Altvater and
his company Trimax Wireless seeking the return of certain equipment held at the
former GlobeTel Wireless offices and for the return of $175,000 lent to Altvater
by the Company. The replevin action against Trimax was dismissed on the basis of
venue and the Company intends to refile the suit with regard to Trimax in
Collier County, Florida.





On July
12, 2007, the Company terminated its agreement with Mr. Altvater and his
company, Trimax Wireless, Inc.





In August
2007, Altvater and Trimax filed suit against the Company alleging, defamation,
conversion, breach of contract and seeking injunctive relief.  On
April 6, 2009, the parties entered into a settlement agreement.  As
per the terms of the settlement, Mr. Altvater will return 1,640,000 shares of
the Company’s common stock and certain equipment that was held by Mr. Altvater’s
company, Trimax Wireless.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds





On May 3,
2009, the Board of Directors approved the creation of a Series E Preferred
Stock.  The terms of the Series E Preferred Stock were subsequently
amended on May 14, 2009. The Series E Preferred Stock, as amended, does not pay
dividends but each holder of Series E Preferred Stock shall be entitled to 21.5
votes for each share of common stock that the Series E Preferred Stock shall be
convertible into.  The Series E Preferred Stock, as amended, has a
conversion price of $0.105 and a stated value of $6.26.  Each share of
Series E Preferred Stock is convertible, at the option of the holder, into such
number of shares of common stock of the Company as determined by dividing the
Stated Value by the Conversion Price.  The Series E Preferred Stock
has no liquidation preference.





On May 5,
2009, the Company entered into a conversion agreement with Rocky Mountain
Advisors Corp., a consultant to the Company (“RMAC”), pursuant to which the
Company agreed to convert $185,387 in consulting fees owed to RMAC for
consulting services performed from October 19, 2007 to April 9, 2009 into 29,615
shares of Series E Preferred Stock, par value $0.001 per share.





On May 5,
2009, the Company entered into a conversion agreement with Daniyel Erdberg, the
Company’s Vice President of Operations, pursuant to which the Company agreed to
convert $121,487.99 in outstanding wages owed to Mr. Erdberg from July 1, 2008
to April 3, 2009 into 19,407 shares of Series E Preferred Stock.





On May 5,
2009, the Company entered into a conversion agreement with Jonathan Leinwand,
the Chief Executive Officer, pursuant to which the Company agreed to convert $
319,118.85 in outstanding wages owed to Mr. Leinwand from October 17, 2007 to
April 3, 2009 into 50,978 shares of Series E Preferred Stock.





The above
securities were issued pursuant to an exemption under Section 4(2) of the
Securities Act of 1933.





Item
3.  Defaults Upon Senior Securities





None.




Item
4.  Submission of Matters to a Vote of Security Holders





None.





Item
5.  Other Information





None.





25





Item
6.  Exhibits





Exhibit
      3.1
            Amendment
      No. 1 to the Series E Certificate of
Designation





Exhibit 31
            Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Section 302 of theSarbanes-Oxley
      Act of 2002





Exhibit 32.1
            Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




Dated:
May 20, 2009


SANSWIRECORP.By:
      /s/ Jonathan LeinwandJonathan
      Leinwand, Chief Executive Officer (Principal Executive Officer&
      Principal Financial Officer)





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