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, 2006

                                       OR

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

          For the transition period from ____________ to _____________

                         Commission file number 0-23532

                          GLOBETEL COMMUNICATIONS CORP.
        (Exact name of small business issuer as specified in its charter)

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

               9050 Pines Blvd. Suite 110 Pembroke Pines Fl 33024
                    (Address of principal executive offices)

                                  954-241-0590
                           (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 |_|

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act) Yes |_| No |X|

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

As of May 10, 2006, we had issued and outstanding  103,898,223  shares of common
stock,

Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|


                                       1
<PAGE>

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION                                              Page

Item 1. Financial Statements                                                   3

Item 2. Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                             13

Item 3. Quantitative and Qualitative Disclosures About Market Risk            16

Item 4. Controls and Procedures                                               16

PART II - OTHER INFORMATION

Item 1. Legal Proceedings                                                     17

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds           18

Item 3. Defaults Upon Senior Securities                                       18

Item 4. Submission of Matters to a Vote of Security Holders                   18

Item 5. Other Information                                                     18

Item 6. Exhibits                                                              19


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
===========================================================================================================================
                                                                                              March 31,       December 31,
                                                                                                2006              2005
                                                                                             (Unaudited)        (Audited)
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>               <C>
ASSETS

CURRENT ASSETS
      Cash and cash equivalents                                                             $  2,135,104      $  1,228,180
      Restricted cash                                                                          1,292,000         1,122,000
      Accounts receivable, less allowance for doubtful accounts of $492,329 and $409,100       1,287,880           371,618
      Loans to employees                                                                           3,258            46,068
      Prepaid expenses                                                                           471,839           184,434
      Prepaid expenses - related party, ISG Jet, LLC                                             170,660           185,960
      Inventory                                                                                  266,230            67,525
      Deposits on equipment purchase                                                             108,993           124,993
      Deferred tax asset, less valuation allowance of $10,359,842 and $9,828,700                      --                --
---------------------------------------------------------------------------------------------------------------------------
           TOTAL CURRENT ASSETS                                                                5,735,964         3,330,778
---------------------------------------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $781,319 and $596,958               7,044,123         7,028,422
---------------------------------------------------------------------------------------------------------------------------

OTHER ASSETS
      Intangible assets                                                                        9,907,550         9,907,550
      Deposits                                                                                    52,322            52,322
---------------------------------------------------------------------------------------------------------------------------
           TOTAL OTHER ASSETS                                                                  9,959,872         9,959,872
---------------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                                  22,739,959        20,319,072
===========================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

COMMITMENTS AND CONTINGENCIES (NOTE 5)

LIABILITIES

CURRENT LIABILITIES

      Accounts payable                                                                           794,200           907,208
      Due to related payable - Carrier Services, Inc.                                            259,875           901,606
      Due to former employee payable in GTE stock                                                 86,790           237,600
      Due to related party payable in GTE stock - Hotzone Wireless, Inc.                       2,451,834         2,451,834
      Accrued expenses and other liabilities                                                     183,199           643,018
      Deferred revenue                                                                           301,108                --
      Related party payables                                                                      57,500            57,500
---------------------------------------------------------------------------------------------------------------------------
           TOTAL CURRENT LIABILITIES                                                           4,134,506         5,198,766
---------------------------------------------------------------------------------------------------------------------------

LONG-TERM LIABILITIES
      Due to related party payable in GTE stock - Hotzone Wireless, Inc.                       4,533,166         4,708,167
---------------------------------------------------------------------------------------------------------------------------
           TOTAL LONG-TERM LIABILITIES                                                         4,533,166         4,708,167
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
           TOTAL LIABILITIES                                                                   8,667,672         9,906,933
---------------------------------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
      Series A Preferred stock, $.001 par value, 10,000,000 shares authorized;
           0 shares issued and outstanding:                                                           --                --
      Series B Preferred stock, $.001 par value, 35,000 shares authorized;
           0 shares issued and outstanding:                                                           --                --
      Series C Preferred stock, $.001 par value, 5,000 shares authorized;
           0 shares issued and outstanding:                                                           --                --
      Series D Preferred stock, $.001 par value, 5,000 shares authorized;
           1,000 shares issued and outstanding:                                                        1                 1
          Additional paid-in capital - Series D Preferred stock                                  999,999           999,999
      Common stock, $.00001 par value, 150,000,000 shares authorized;
           102,876,802 and 98,192,101 shares issued and outstanding                                1,029               982
      Additional paid-in capital                                                              88,890,051        81,570,082
      Stock subscriptions receivable:
           Series D Preferred Stock                                                             (500,000)         (500,000)
           Common Stock                                                                         (194,004)          (44,494)
      Accumulated deficit                                                                    (75,124,789)      (71,614,431)
---------------------------------------------------------------------------------------------------------------------------
           TOTAL STOCKHOLDERS' EQUITY                                                         14,072,287        10,412,139
---------------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                  $ 22,739,959      $ 20,319,072
===========================================================================================================================
</TABLE>

See accompanying notes.


                                       3
<PAGE>

GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSS (Unaudited)

<TABLE>
<CAPTION>
===========================================================================================================
                                                                             For the three months Ended
                                                                                      March 31,

                                                                               2006               2005
-----------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                <C>
REVENUES EARNED                                                           $  22,294,725      $  18,010,643
COST OF REVENUES EARNED                                                      22,213,503         17,283,963
-----------------------------------------------------------------------------------------------------------
           GROSS MARGIN                                                          81,222            726,680
-----------------------------------------------------------------------------------------------------------

EXPENSES
      Payroll and related taxes                                                 857,744            570,591
      Consulting and professional fees                                          389,756          1,283,458
      Officers Compensation                                                     481,742            268,534
      Bad debts                                                                  83,229             94,092
      Investment banking and financing fees                                          --            439,715
      Investor and public relations                                              94,151             25,730
      Commissions expense - related party Carrier Services, Inc.                    694            724,513
      Research and development                                                  524,085            443,924
      Other operating expenses                                                  355,333            148,558
      Telephone and communications                                               62,574             21,947
      Travel and related expenses                                               356,286            126,180
      Rents                                                                     130,023             69,958
      Insurance and employee benefits                                           113,692             63,416
      Depreciation and amortization                                             184,848             18,402
-----------------------------------------------------------------------------------------------------------
           TOTAL EXPENSES                                                     3,634,157          4,299,018
-----------------------------------------------------------------------------------------------------------

LOSS BEFORE OTHER INCOME (EXPENSE) AND INCOME TAXES                          (3,552,935)        (3,572,338)
-----------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)
      Interest income                                                            42,577              6,195
      Interest expense                                                               --            (33,910)
-----------------------------------------------------------------------------------------------------------
           NET OTHER INCOME (EXPENSE)                                            42,577            (27,715)
-----------------------------------------------------------------------------------------------------------

LOSS BEFORE INCOME TAXES                                                     (3,510,358)        (3,600,053)

INCOME TAXES
      Provision for income taxes                                                     --                 --
      Tax benefit from utilization of net operating loss carryforward                --                 --
-----------------------------------------------------------------------------------------------------------
           TOTAL INCOME TAXES                                                        --                 --
-----------------------------------------------------------------------------------------------------------

NET LOSS                                                                  $  (3,510,358)     $  (3,600,053)
===========================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
           BASIC                                                            101,353,367         66,121,945
           DILUTED                                                          101,353,367         66,121,945
===========================================================================================================

NET LOSS PER SHARE
           BASIC                                                                 $(0.03)            $(0.05)
           DILUTED                                                               $(0.03)            $(0.05)
===========================================================================================================
</TABLE>

See accompanying notes.


                                       4
<PAGE>

GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

<TABLE>
<CAPTION>
===================================================================================================================================
                                                                                                       For the Three Months Ended
                                                                                                                March 31,

                                                                                                          2006             2005
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net Loss                                                                                           (3,510,358)      (3,600,053)
    Adjustments to reconcile net loss to net cash used by operating activities:
          Depreciation and amortization                                                                   229,848           35,902
          Bad debt expense                                                                                 83,229           94,092
          Common stock options exchanged for services                                                     118,336               --
          Common stock exchanged for services                                                                  --        1,166,400

    (Increase) decrease in assets:                                                                             --               --
          Accounts receivable                                                                            (999,491)        (929,141)
          Restricted cash                                                                                (170,000)              --
          Loans to employees                                                                               42,810            5,541
          Prepaid expenses                                                                               (287,405)          17,605
          Prepaid expenses - related party, ISG Jets, LLC                                                  15,300               --
          Inventory                                                                                      (198,705)           3,000
          Deposits                                                                                         16,000           (1,351)
    Increase (decrease) in liabilities:
          Accounts payable                                                                               (113,921)          65,504
          Signing bonuses payable to Sanswire employees with Globetel stock                                    --          300,000
          Due to related party - Carrier Services, Inc.                                                  (106,231)         481,363
          Due to related party payable in GTE stock - Hotzone Wireless, Inc.                             (175,000)              --
          Accrued expenses and other liabilities                                                         (459,818)        (134,906)
          Deferred revenues                                                                               301,108          (29,312)
          -------------------------------------------------------------------------------------------------------------------------
          NET CASH USED BY OPERATING ACTIVITIES                                                        (5,214,298)      (2,525,356)
-----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of property and equipment                                                                (245,550)      (5,151,177)
-----------------------------------------------------------------------------------------------------------------------------------
          NET CASH USED BY INVESTING ACTIVITIES                                                          (245,550)      (5,151,177)
-----------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Sale of preferred stock - Series B                                                                         --        5,085,200
    Sale of common stock                                                                                       --        2,631,120
    Sale of common stock - exercises of options                                                            24,713               --
    Proceeds from unconsolidated foreign subsidiary - CGI                                                      --        1,223,786
    Proceeds from exercises of stock warrants                                                           6,341,148               --
    Proceeds from convertible notes payable                                                                    --        1,800,000
    Payments on loan payable to unconsolidated foreign subsidiary - CGI                                        --          (60,000)
    Payments on capital lease financing                                                                        --             (691)
-----------------------------------------------------------------------------------------------------------------------------------
          NET CASH PROVIDED BY FINANCING ACTIVITIES                                                     6,365,861       10,679,415
-----------------------------------------------------------------------------------------------------------------------------------

    Effects of exchange rate changes on cash                                                                  911               --
-----------------------------------------------------------------------------------------------------------------------------------

NET INCREASE IN CASH AND EQUIVALENTS                                                                      906,924        3,002,882

CASH AND EQUIVALENTS - BEGINNING                                                                        1,228,180          601,559
-----------------------------------------------------------------------------------------------------------------------------------

CASH AND EQUIVALENTS - ENDING                                                                         $ 2,135,104      $ 3,604,441
===================================================================================================================================

SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
        Interest                                                                                      $        --      $     6,537
        Income taxes                                                                                  $        --      $        --

In addition to amounts reflected above, common stock was issued for:
        Options issued for services                                                                   $   118,336      $        --
        Shares issued for services                                                                    $        --      $ 1,166,400
        Shares issued for convertible notes payable                                                   $        --      $ 1,800,000
        Shares issued as payment due to former employee in GTE stock                                  $   150,810
        Conversion of Series A preferred stock to common stock                                        $        --      $   585,000
        Payment of Series B preferred stock subscriptions receivable equipment                        $        --      $ 4,835,200

Non-cash Financing Activities:
        On July 28, 2004, $1,000,000 of Series D preferred stock was issued. A stock subscription
        receivable of $500,000 was outstanding as of March 31, 2006
</TABLE>

--------------------------------------------------------------------------------
See accompanying notes.


                                       5
<PAGE>

GLOBETEL COMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2006

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements

The accompanying unaudited financial statements reflect all adjustments,  which,
in the opinion of  management,  are  necessary  for a fair  presentation  of the
financial  position and the results of operations and cash flows for the interim
periods presented. All adjustments are of a normal recurring nature. The results
of  operations  for the three months ended March 31, 2006,  are not  necessarily
indicative of the results to be expected for the year ending December 31, 2006.

Certain  financial  information  and  footnote  disclosures  which are  normally
included  in  financial   statements  prepared  in  accordance  with  accounting
principles generally accepted in the United States of America, but which are not
required for interim  reporting  purposes,  have been condensed or omitted.  The
accounting  policies  followed  by the  Company  are set  forth in Note 1 to the
Company's  consolidated  financial  statements in its annual report on Form 10-K
for the year ended  December 31, 2005.  The  accompanying  financial  statements
should be read in conjunction with the financial statements and notes.  However,
to assist  the users of these  financial  statements,  accounting  policies  for
certain   significant    accounts   and   transactions   are   repeated   below,
notwithstanding the absence of any significant changes in any policies since the
last reported period, other than as noted in "Stock-Based Compensation" below.

Basis of Presentation

The financial  statements include the accounts of GlobeTel  Communications Corp.
and its  wholly-owned  subsidiaries.  All  material  inter-company  balances and
transactions were eliminated in the consolidation.

Reclassifications

Certain amounts in the prior year financial  statements  have been  reclassified
for comparative purposes to conform to the current year presentation. There were
no material  changes in  classifications  made to  previously  issued  financial
statements.

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.

Nature of Operations

GlobeTel  Communications  Corp.  ("GlobeTel")  is  engaged  in the  business  of
providing  telecommunications and financial services. GlobeTel operates business
units in stored value cards, as a certified  MasterCard  processor,  the sale of
Internet  telephony using Voice over Internet Protocol  ("VoIP")  technology and
equipment,  and wireless  communications both domestically and  internationally,
including  Mexico and certain  countries in South  America,  Europe and Asia. In
addition,  our  subsidiary,  Sanswire  Networks,  LLC, is  developing a National
Wireless Broadband Network utilizing  high-altitude airships called Stratellites
that will be used to provide wireless voice, video, and data services.  Although
through  March  31,  2006,  only  the  telecommunications   activities  produced
revenues,  all  of our  operations  are  considered  to be of  relatively  equal
importance, based on the anticipation of future revenue producing activities and
substantial investment in assets related to all of our operations.

Organization and Capitalization

In May 2005,  GlobeTel  approved a reverse  split of shares of common stock on a
one for fifteen  (1:15)  basis and changed  the number of shares  authorized  to
100,000,000.  In the Company's annual  shareholders  meeting on August 11, 2005,
the  shareholders  voted to increase the shares  authorized from  100,000,000 to
150,000,000.


                                       6
<PAGE>

All common  stock  amounts in this  report have been  retroactively  restated to
account for the reverse stock split, unless otherwise noted.

The American Stock Exchange (AMEX) granted  approval for the Company to list its
shares on the  exchange  and the  Company  began  trading  on the AMEX under the
symbol GTE on May 23, 2005.

Accounts Receivable and Allowance for Doubtful Accounts

Trade and  other  accounts  receivable  are  reported  at face  value,  less any
provisions for uncollectible accounts considered necessary.  Accounts receivable
primarily includes trade receivables from customers and, in connections with our
Mexico network,  Mexican tax refunds receivable.  The Company estimates doubtful
accounts on an  item-to-item  basis and includes  over-aged  accounts as part of
allowance  for  doubtful  accounts,   which  are  generally  accounts  that  are
ninety-days or more overdue. When accounts are deemed uncollectible, the account
receivable is charged off and the allowance account is reduced accordingly.  Bad
debt  expense for the three months ended March 31, 2006 and 2005 was $83,229 and
$94,092, respectively.

Inventory

Inventory  is recorded at  lower-of-cost-or-market,  first-in  first-out  (FIFO)
basis.  Inventory  at March 31, 2006  consisted  primarily  of  component  parts
related to the Company's wireless operations and communications  equipment,  and
at December 31, 2005 consisted primarily of communications equipment (IP Phones)
and component parts related to the Company's wireless operations.

During the three months ended March 31, 2006,  the Company  wrote off $16,000 of
IP Phones inventory considered obsolete and charged this amount to expense.

Concentrations of Credit Risk and Economic Dependence

Financial instruments,  which potentially subject the Company to a concentration
of credit  risk,  are cash and cash  equivalents  and accounts  receivable.  The
Company currently  maintains a substantial  portion of its day-to-day  operating
cash  balances  at  several  financial  institutions.  As of March 31,  2006 and
December 31, 2005,  the Company had  $1,727,750  and $898,701  respectively,  in
excess of federally insured limits.

The Company operates worldwide.  Consequently,  the Company's ability to collect
the amounts due from customers may be affected by economic  fluctuations in each
of the  geographical  locations  in which the  Company  provides  its  services,
principally Central and South America, Europe and Asia. The Company is dependent
upon certain major customers,  key suppliers,  and contractual  agreements,  the
absence   of  which  may   affect  the   Company's   ability   to  operate   its
telecommunications business at current levels.

In January 2006,  investors  exercised all of the outstanding  2,727,273 Class A
Warrants at $2.50 per share for gross proceeds of $6,341,148, net of broker fees
($477,032 which was charged against  Additional  Paid-in  Capital).  The Company
also agreed to issue the  investors a total of 1,935,606  new  warrants  with an
exercise price of $4.00 per share, and the warrants expire on August 31, 2008.

The  Company  anticipates  increased  cash  flows  from 2006  sales  activities;
however, 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  March 31, 2007.  However,  if
budgeted  sales  levels  are  not  achieved,  or  if  significant  unanticipated
expenditures occur, or if the Company 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 through March 31, 2007.

Stock-Based Compensation

Through   December  31,  2005,  the  Company   accounted  for  its   stock-based
compensation   arrangements   with  employees  in  accordance   with  Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB 25") and related  interpretations.  As such,  compensation  expense  under
fixed term  option  plans was  recorded  at the date of grant only to the extent
that the market value of the underlying  stock at the date of grant exceeded the
exercise  price.  In accordance  with SFAS No. 123  "Accounting  for Stock-Based
Compensation"  ("SFAS  123"),  since  the  Company  had  continued  to apply the
principles  of APB 25 to  employee  stock  compensation,  pro forma loss and pro
forma loss per share  information  had been presented as if the options had been
valued at their fair values.  The Company  recognized  compensation  expense for
stock options, common stock and other equity instruments issued to non-employees
for  services  received  based  upon the fair  value of the  services  or equity
instruments  issued,  whichever is more readily  determined.  Stock compensation
expense was  recognized as the stock option is earned,  which was generally over
the vesting period of the underlying option.


                                       7
<PAGE>

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation."  This  statement  amends SFAS 123. SFAS 148 provided  alternative
methods  of  transition  for  companies  that  voluntarily  change  to the  fair
value-based  method of accounting  for  stock-based  employee  compensation.  In
addition,  this  statement  amended the disclosure  requirements  of SFAS 123 to
require prominent  disclosures in both annual and interim  financial  statements
about the method of accounting for  stock-based  compensation  and the effect of
the method used on reported results.

In March 2000,  the FASB  issued FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving  Stock  Compensation."  ("FIN 44") The  Company
adopted  FIN 44,  effective  July 1, 2000,  with  respect to certain  provisions
applicable to new awards, option re-pricings, and changes in grantee status. FIN
44 addresses  practice  issues related to the application of APB 25. The Company
accounted for stock-based  compensation  issued to non-employees and consultants
in accordance  with the  provisions of SFAS 123 and SFAS 148 and 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." The  measurement
date used is the earlier of either the  performance  commitment date or the date
at which the equity instrument holder's performance is complete.

In  December  2005,  the FASB issued SFAS No. 123  (Revised  2005),  Share-Based
Payments,  which is a  revision  of SFAS No.  123,  Accounting  for  Stock-Based
Compensation.  SFAS No. 123(R)  supersedes  APB Opinion No. 25,  Accounting  for
Stock  Issued to  Employees  and amends  SFAS No. 95,  Statement  of Cash Flows.
Effective for the years  beginning  January 1, 2006, the Company  recognizes all
share-based  payments to employees,  including grants of employee stock options,
in  the  statement  of  operations  based  on  their  fair  values.  Stock-based
compensation  expense for stock  options is  recognized  as the stock  option is
earned, which is generally over the vesting period of the underlying option.

The fair  value of each  option  granted is  estimated  on the date of the grant
using the Black-Scholes option-pricing model with the following assumptions:

Expected dividend yield                                                0%
Expected stock price volatility                                        50%
Risk-free interest rate                                                5.0%
Expected life of options                                               1.5 years

In accordance with prior  accounting  standards as discussed  above, the Company
had continued to apply the principles of APB 25,  through  December 31, 2005, to
employee  stock  compensation,  pro  forma  loss and pro  forma  loss per  share
information had been presented in annual financial  statements as if the options
had been valued at their fair values.  The above  assumptions are  substantially
the same as those used for pro-forma  reporting purposes in 2005. No restatement
of prior  periods,  cumulative  effect  of an  accounting  change  or  pro-forma
presentation are required under FASB 123(R).

Intangible Assets

It is the Company's  policy to test for impairment of intangible  assets no less
than quarterly,  or when conditions  occur that may indicate an impairment.  The
Company's intangible assets,  which consist primarily of intellectual  property,
including technology and know-how, were evaluated by management,  initially upon
acquisition and as of March 31, 2006 and determined to have an indefinite useful
life and are not subject to amortization. The Company also tested the assets for
impairment and determined  that no adjustment for impairment was necessary as of
March 31,  2006  whereas  the fair  value of the  intangible  assets  exceed its
carrying amount.

NOTE 2. ACCOUNTS  RECEIVABLE  AND SALES - SIGNIFICANT  CONCENTRATIONS  OF CREDIT
RISK AND ECONOMIC DEPENDENCE

As of March 31, 2006, the Company had  approximately 40 customers of which seven
customers  accounted  for  approximately  62% of  accounts  receivable  balance,
including one customer accounting for 36% (or $456,704).

Sales  attributable  to foreign  operations for the three months ended March 31,
2006 were  $22,311,891  or 99.9% of total sales and  $17,751,449 or 99% of total
sales for the three  months  ended March 31, 2005.  Revenue is  attributable  to
various foreign  countries,  since calls either  originate or terminate in these
countries. All transactions,  other than those of GlobeTel Wireless Europe GmbH,
a German corporation,  were accounted for in U.S. currency, and no material gain
or loss was recorded on fluctuations in foreign currency.


                                       8
<PAGE>

NOTE  3 -  INVESTMENT  IN  AND  DISPOSITION  OF  FORMER  UNCONSOLIDATED  FOREIGN
SUBSIDIARY - CGI

Prior to December  2005,  the  Company  held a 73.15%  interest in  Consolidated
Global Investments,  Inc. (CGI), an Australian corporation and an unconsolidated
foreign subsidiary.

In December  2005, the parties agreed that: (1) GlobeTel would return all shares
and  warrants it held in CGI to CGI,  resulting in complete  elimination  of any
ownership interest in CGI; (2) GlobeTel would not be required to return a net of
$1,449,509  advanced from CGI; (3) CGI would retain  333,334  shares of GlobeTel
common stock;  and (4) CGI would return to GlobeTel  280,000  shares of GlobeTel
common  stock.  As of the date of this  report,  a total of 256,666  shares were
received  from CGI.  The Company is expected  to receive  the  remaining  23,334
shares  from CGI in the near term during  2006.  The shares  returned  are to be
utilized to satisfy the obligation with CSI (see Note 4 below).

During 2005,  the Company  recorded a loss of $352,300 upon  disposition  of the
former unconsolidated foreign subsidiary,  representing the cash invested in CGI
through  December  31,  2004.  The  $1,449,509   retained  by  the  Company  was
reclassified  to  additional  paid-in  capital,  because it  represented  monies
derived from the sale of the Company stock.

NOTE 4 - DUE TO RELATED PARTY - CSI

During 2004 and 2005,  the Company  entered  into  contractual  agreements  with
Carrier Services, Inc. (CSI) pursuant to which CSI would be compensated with the
issuance of (or  combination  of the issuance of the net proceeds  from the sale
of) a total of 333,333 shares of GlobeTel's  common stock upon achieving certain
revenue targets.

Also, in 2005, the Company  entered into two asset purchase  agreements with CSI
to acquire  telecommunication  equipment totaling  $837,836.  The parties agreed
that the purchase price for this equipment would be paid with (1) 233,333 shares
of GlobeTel's common stock; and (2) $286,136 in cash. In addition,  the purchase
agreement also required GlobeTel to provide $150,000 for the  reconstruction and
establishment  of a new telecom  switch site in Los  Angeles,  CA.  GlobeTel has
complied with this provision.

Pursuant to these  agreements,  the Company owed CSI a net amount of $901,606 as
of December 31, 2005,  consisting  of (1) 336,667  shares of  GlobeTel's  common
stock; and (2) $106,231 in cash.

In January 2006, the Company paid CSI the $106,231 in cash and 226,666 shares of
GlobeTel  stock were  transferred to CSI (from the GlobeTel  shares  returned by
CGI; see Note 3 above),  and 110,001 shares,  valued at $259,875,  are currently
owed.  The shares  owed to CSI as of March 31, 2006 and  December  31, 2005 were
recorded at approximately  $2.36 per share, based on the  weighted-average  fair
market value of the shares on the respective  dates the Company became obligated
to issue the shares.

In connection with these and other prior contractual  arrangements with CSI, for
the three months ended March 31, 2006 and 2005, the Company recorded  commission
expense of $694 and $724,513, respectively.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

Due to related party payable - Hotzone Wireless, Inc.

On June 2, 2005,  the Company  entered into an  agreement  to acquire  assets of
HotZone Wireless,  Inc.("Hotzone"),  an advanced developer of WIMAX and extended
range WIFI  Systems  with  operations  in the  United  States  and  Europe.  The
acquisition  transaction,  which closed during the three months ended  September
30,  2005,  was paid with  $27,000  cash and  provides  for a total of 2 million
shares of the  Company's  common  stock to be issued in  increments  of  666,667
shares  on each  of the  first,  second,  and  third  anniversary  dates  of the
agreement,  assuming that certain  milestones  are achieved.  Additionally,  the
HotZone staff is entering into employment agreements with the Company.

The  assets  acquired  under  the  HotZone   agreement   consist   primarily  of
intellectual  property and proprietary  rights in intellectual  property.  As of
September 30, 2005, the Company had placed all of HotZone's tangible assets into
GlobeTel Wireless Corp.  (GlobeTel  Wireless),  its Florida-based,  wholly-owned
subsidiary.

The  balance  due to  Hotzone  as of  March  31,  2006 is  $6,985,000,  of which
$2,451,834 is the current portion and $4,533,166 is the long-term portion

Litigation

See Part II - Other Information, reference Item 1 under Legal proceedings.


                                       9
<PAGE>

GlobeTel Wireless, Russian Joint Venture Agreement

As of December 30, 2005,  GlobeTel  Wireless  Corp.  ("GTEW") had entered into a
binding  agreement  to install  wireless  communications  networks  in 30 cities
throughout  the  Russian  Federation,   providing   broadband,   VOIP  and  DECT
technologies.   GTEW  had  entered  into  an  agreement   with  LLC   Internafta
("Internafta") of Moscow,  Russia, whereby Internafta would pay to GTEW a series
of four  construction  payments totaling $600 million for the installation of an
array of  proprietary  networks to be installed  in Russia's 30 largest  cities,
starting  with Moscow and St.  Petersburg.  GTEW would both manage the completed
network  and would  retain an ongoing  50%  interest  in the  operations  of the
network,  allowing  the Company to enjoy the benefits of the  recurring  revenue
stream. GlobeTel had planned to roll out the network in 3 stages,  comprising 10
cities each, over the next 27 months.

The December 2005 contract  called for four equal payments of $150 million each,
of which the first payment,  representing an initial deposit, was to be received
by GlobeTel  in January  2006.  On January 23,  2006,  Internafta  presented  to
GlobeTel a document  represented to be a Standby Letter of Credit drawn on Banco
do Brasil  S.A.  (Rio de Janeiro) in the amount of $300  million.  This  Standby
Letter of Credit was  provided  to  facilitate  the first  phase of the  network
construction. The banking instrument had a maturity date of two years and needed
to be  confirmed  and accepted by a  correspondent  bank before  GlobeTel  could
receive  any  funds  from the  instrument.  The  terms  and  conditions  of what
constituted an acceptable and functional banking instrument as it related to the
December 2005 contract  became a matter of  interpretation  between the parties.
After extensive negotiations,  Internafta agreed to take sole responsibility for
facilitating  the financing of their  banking  instrument in order to be able to
present  readily  available funds to GlobeTel.  The parties  continue to work in
good faith and remain committed to building a state-of-the-art  wireless network
in Russia.

On March 2, 2006,  the  Company  announced  that  Internafta  had  requested  an
additional  delay in the closing of the funding until the week of March 6, 2006.
The Company had provided Internafta and its banks with a significantly  expanded
business  plan  outlining,  in  detail,  the  Company's  program  for  equipment
manufacturing,  delivery, installation,  testing, monitoring, staffing, progress
payment requirements,  and other pertinent  information.  Internafta advised the
Company that its funding has been approved by its bank  syndicate,  subject only
to the bank's final review and analysis of the business plan.

GlobeTel had also indicated that if such a funding commitment not be forthcoming
by the end of the week of March 6th or unless  the  banking  syndicate  provides
written assurances of the imminent delivery of such commitment to GlobeTel,  the
Company  would have no choice but to exercise  its right to default the contract
for non-payment.

On March 17, 2006, the Company announced that based upon differences between the
Company and  Internafta  on the  financing  process,  the parties have agreed to
revise  their  agreement  to more  accurately  reflect  the  timing of  payments
GlobeTel  expected to receive for the build out of the 30 city wireless  network
in Russia and allow Internafta additional time to begin making payments.

Internafta had informed  GlobeTel that its bank  recommends  that smaller,  more
frequent, progress payments be established so that the necessary staged payments
can be delivered to GlobeTel as and when the network is delivered and installed.
These smaller,  more frequent,  staged payments did not reduce the total capital
value of the agreement  with GlobeTel  Wireless or change any other terms of the
agreement.  GlobeTel  would still  receive  $600 million for  deployment  of the
network.  The exact amount of the new proposed initial deposit, and the size and
timing of the new proposed progress payments, would be discussed and agreed with
GlobeTel  once the bank had  completed its due diligence and when the bank group
formally  accepts the terms of Internafta's  proposed  banking  instrument.  See
details in subsequent event section.

Leases and Rents

As of March 31, 2006,  the Company had leased  offices and facilities in various
locations  in  California,  Florida and  Germany.  Rent expense for three months
ended March 31, 2006 and 2005 was $130,023 and $69,958, respectively.

NOTE 6 - STOCKHOLDERS' EQUITY

Convertible Notes Payable - Stock Warrants

Under the  convertible  notes  payable  agreements  from  August 31,  2005,  the
investors  also  received  one Class A Warrant to  purchase  one share of common
stock for each  share  that the notes  would be  convertible  into had they been
converted on the closing  date (August 31, 2005) (a total of 2,727,272  shares).
The per share exercise price of the warrants was $2.50. The investors  exercised
all of the outstanding  warrants,  and In January 2006, the Company received net
proceeds of  $6,341,148  ($6,818,180,  less broker fees of  $477,032,  which was
charged against Additional Paid-in Capital).


                                       10
<PAGE>

In addition,  the Company issued the investors a total of 1,935,606 new warrants
with an exercise price of $4.00 per share. The investors were given "piggy-back"
registration  rights for the warrants.  If the warrants have not been registered
after  one  year,  then the  investors  have a demand  registration  right.  The
warrants expire on August 31, 2008. As of the date of this report, none of these
warrants were exercised.

Directors' Compensation for Services

During the three  months ended March 31, 2006,  the Company  accrued  Director's
compensation  of $47,500 in cash and 10,326 shares valued at $23,750  ($2.30 per
share) and 10,000 shares of stock options  valued at $8,901  ($0.8901 per share)
for  committee  Chairman/members.  The fair  value  of each  option  granted  is
estimated on the date of the grant using the Black-Scholes option-pricing model,
as explained in Note 1 above, and the above options all had terms of three years
and were fully vested at the grant date.

On March 20,  2006,  upon  appointment  as  Chairman  of the  GlobeTel  Board of
Directors,  Mr. J. Randolph Dumas' annual cash  compensation  was increased from
$250,000  to  $400,000,  and  stock  compensation  (payable  in  stock  options,
exercisable at $1.21 per share,  per prior  agreement) was reduced from $750,000
to $600,000 (total  aggregate dollar amount of options  purchasable).  Mr. Dumas
was awarded 149,793 shares of stock options valued at $118,336 ($0.79 per share,
based on  intrinsic  value,  with a fair market  value of $2.00 per share on the
grant date,  less exercise price of $1.21 per share).  The recorded value of the
options awarded was computed as of the date of the grant (November 11, 2006, per
prior  agreement)  using the intrinsic  value method per APB 25, as explained in
Note 1 above  (whereas the options were granted  prior to January 1, 2006),  and
the above  options  have terms of three  years and become  vested as the related
services are rendered.

Stock Options Exercised

During the three  months  ended  March 31,  2006,  212,538  options  shares were
exercised  and issued (net of shares used to pay for  "cashless  options")  with
payments of cash and stock  subscriptions  receivable  of  $174,492.  The shares
included  23,596  issued to a former  director  and  31,985  issued to a current
director for options  granted as director fees in 2005. The remainder of 156,957
shares were issued to current and former  employees for options granted pursuant
to the 2004 Employee Stock Options Bonus Plan.

In addition,  a total of 1,706,419 options shares were exercised and issued (net
of shares  used to pay for  "cashless  options")  to the  former  President  and
Director  (463,114 shares) and an affiliate of the former President and Director
(1,243,305 shares).  The shares were granted pursuant to a settlement  agreement
the parties entered into in 2005.

No expense for any of the above option shares issued were recorded,  whereas the
options were expensed when granted/vested.

Registration Statement

On January 4, 2006, GlobeTel filed a registration  statement with the Securities
and Exchange  Commission on Form S-8 to register  185,726  shares offered to the
employees in employee  benefit plans.  The offering price per share is $3.89 and
the aggregate maximum offering amount $722,474.

Preferred Stock - Series D

On July 28, 2004,  the Company agreed to sell 1,000 shares of Series D Preferred
Stock of GlobeTel  Communications  Corp.  ("GTE") to Mitchell A. Siegel,  former
Chief Operating  Officer and current Vice President and Director of the Company.
The Company  intended to use $1 million of this  investment for working  capital
and purchase of equipment  necessary to expand the  Company's  stored value card
programs.  The  Certificate of Designation  for the Series D Preferred Stock was
filed with the State of Delaware on July 30, 2004.

Mr.  Siegel  agreed  to  advance  $1  million  to  GTEL in  four  (4)  quarterly
installments  beginning August 2004. The agreement was subsequently modified for
the  installment  period to be  semi-annual  and to begin in October  2004.  Mr.
Siegel has remitted the initial $250,000,  and in June 2005, remitted the second
$250,000.

Provided that the preferred  shares have not been converted,  the Holders of the
Series D Preferred  Stock,  voting as a group,  will have voting rights equal to
the current  conversion share amount at the time of the vote of GTE's authorized
shares of common stock for a period of three years from the first closing date.


                                       11
<PAGE>

For a period of two years after the first closing  date,  the Series D Preferred
Stock shall not be convertible into shares of GTE common stock. Beginning on the
second  anniversary  of the  first  closing  date and for a  period  of one year
thereafter,  Mr.  Siegel may  convert  (in whole or part) its Series D Preferred
Stock into GTE common  stock.  The 1000 shares of Series D Preferred  Stock will
represent 2% of the GTE common in their converted  state. The Series D Preferred
Stock shall be convertible in at least 100 share increments,  each increment, at
the  time of  conversion,  will  represent  one  tenth of 2% of the  issued  and
outstanding  shares of GTE common stock.  On the third  anniversary of the first
closing  date,  all shares of Series D Preferred  Stock owned by Mr. Siegel will
automatically be converted into GTE common stock (to the extent such shares have
not been  converted  into  common  stock  prior to this  date).  Except  for the
aforementioned  voting  rights  and  conversion  rights,  each share of Series D
Preferred  Stock shall have rights that are  identical  to that of GTE's  common
stock.

The Company  expects to receive the  remaining  $500,000 in stock  subscriptions
receivable from Mr. Siegel within one year.

NOTE 7 - EARNINGS (LOSS) PER SHARE

Basic net loss per share is computed by dividing net loss attributable to common
stockholders by the weighted average number (after the 1:15 reverse stock split)
of shares of common stock  outstanding  during the period.  Diluted net loss per
share takes into  consideration  shares of common  stock  outstanding  (computed
under basic loss per share) and potentially  dilutive shares of common stock. 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.

NOTE 8 - SEGMENT INFORMATION

The accounting  policies of the segments are the same as those  described in the
summary of significant  accounting policies.  All inter-segment sales prices are
market based. The Company evaluates  performance based on operating  earnings of
the respective  business  units,  segregated  into  telecommunications  services
(Telecom)  (international wholesale carrier traffic,  networks,  prepaid calling
services,  internet telephony,  stored value services,  the Sanswire Stratellite
project  (Sanswire),   and  wireless  communications  services  (Wireless),  The
"Unallocated" column includes expenses incurred by and net other income realized
by the parent corporation, GlobeTel, including corporate operating expenses, not
specifically allocated to either operating segment.  Segment information for the
current and prior period is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                          2006                           Telecom       Sanswire       Wireless     Unallocated       Totals
------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>               <C>         <C>            <C>
Revenues Earned                                        22,276,464              0          2,974         15,287     22,294,725
Cost of Revenue Earned                                 22,189,217              0          4,206         20,080     22,213,503
                                                      -----------    -----------    -----------    -----------    -----------
Gross Margin(Loss)                                         87,247              0         (1,232)        (4,793)        81,222
Expenses                                                  353,714        949,222        470,721      1,860,500      3,634,157
                                                      -----------    -----------    -----------    -----------    -----------
Loss Before Other Income (Expense) and Income Taxes      (266,467)      (949,222)      (471,953)    (1,865,293)    (3,552,935)
Other Income (Expenses)                                         5              0         11,115         31,457         42,577
                                                      -----------    -----------    -----------    -----------    -----------
Loss Before Income Taxes                                 (266,462)      (949,222)      (460,838)    (1,833,836)    (3,510,358)
Income Taxes                                                   --             --             --             --             --
                                                      -----------    -----------    -----------    -----------    -----------
Net Loss                                                 (266,462)      (949,222)      (460,838)    (1,833,836)    (3,510,358)
------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------
                          2005                           Telecom       Sanswire       Wireless     Unallocated       Totals
------------------------------------------------------------------------------------------------------------------------------
Revenues Earned                                        18,010,643              0              0              0     18,010,643
Cost of Revenue Earned                                 17,283,963              0              0              0     17,283,963
                                                      -----------    -----------    -----------    -----------    -----------
Gross Margin(Loss)                                        726,680              0              0              0        726,680
Expenses                                                  841,783      1,018,669              0      2,438,566      4,299,018
                                                      -----------    -----------    -----------    -----------    -----------
Loss Before Other Income (Expense) and Income Taxes      (115,103)    (1,018,669)             0     (2,438,566)    (3,572,338)
Other Income (Expenses)                                         0              0              0        (27,715)       (27,715)
                                                      -----------    -----------    -----------    -----------    -----------
Loss Before Income Taxes                                 (115,103)    (1,018,669)             0     (2,466,281)    (3,600,053)
Income Taxes                                                   --             --             --             --             --
                                                      -----------    -----------    -----------    -----------    -----------
Net Loss                                                 (115,103)    (1,018,669)             0     (2,466,281)    (3,600,053)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE 9 - SUBSEQUENT EVENTS

Securities Class Action Filed Against Globetel Communications Corp

On April 28,  2006,  the law firm of Sarraf  Gentile LLP  commenced a securities
fraud  class  action  lawsuit  on behalf of those  investors  who  acquired  the
securities of GlobeTel  Communications Corp. during the period December 30, 2005
to April 11, 2006.  The lawsuit is pending in the United States  District  Court
for the  Southern  District  of Florida  and names as  defendants  GlobeTel  and
certain of its top ranking  executives.  The Company  believes  that the suit is
without merit and will vigorously defend against it.


                                       12
<PAGE>

GlobeTel Wireless, Russian Joint Venture Agreement

On May 1, 2006, the Company  announced that on Tuesday,  April 25, it instructed
its  lawyers in Moscow,  Cleary,  Gottlieb,  Steen &  Hamilton,  to prepare  and
subsequently  deliver to LLC Internafta a formal Default Notice  relating to the
Agreement signed between GlobeTel and Internafta on December 29, 2005.See note 5
for details.

Sales of Common  Stock

On April 27, 2006 the Company entered into an agreement with Caterham  Financial
Management,  LTD (`Caterham") and received  $1,050,000 for 500,000 shares of GTE
common  stock at $2.10 per  share,  in  accordance  with a  Securities  Purchase
agreement executed with Caterham. The agreement stipulates that, before June 25,
2006, Caterham will purchase from the Company, an additional 1,500,000 shares of
GTE  stock at 84% of the  market  price,  but not less  than  $2.00  per  share.
However, should the market price fall under $2.25 per share, then Caterham would
not be obligated to make the purchase.

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

Forward-Looking Statements

Certain  information  included in this Form 10-Q and other materials filed or to
be filed by GlobeTel Communications Corp. ("GlobeTel," "we" "us" or "ours") with
the Securities and Exchange  Commission as well as information  included in oral
or written statements made from time to time by us, may contain  forward-looking
statements about our current and expected  performance  trends,  business plans,
goals and  objectives,  expectations,  intentions,  assumptions  and  statements
concerning other matters that are not historical facts.  These statements may be
contained in our filings with the  Securities  and Exchange  Commission,  in our
press releases, in other written communications,  and in oral statements made by
or with the approval of one of our authorized officers. Words or phrases such as
"believe",  "plan", "will likely result",  "expect",  "intend", "will continue",
"is anticipated",  "estimate",  "project", "may", "could", "would", "should" and
similar expressions are intended to identify forward-looking  statements.  These
statements,  and any  other  statements  that  are  not  historical  facts,  are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform Act of 1995,  15  U.S.C.A.  Sections  77Z-2 and 78U-5  (SUPP.
1996),  as codified in Section 27A of the Securities Act of 1933 and Section 21E
of the  Securities  Exchange  Act of 1934,  as  amended  from  time to time (the
"Act").

Those  statements  include  statements  regarding our intent,  belief or current
expectations,  and those of our  officers  and  directors  and the  officers and
directors  of  our  subsidiaries  as  well  as the  assumptions  on  which  such
statements  are  based.  Prospective  investors  are  cautioned  that  any  such
forward-looking  statements are not guarantees of future performance and involve
risks and  uncertainties,  and that  actual  results  and the  timing of certain
events may differ from those contemplated by such forward-looking statements.

Although we believe that the assumptions underlying  forward-looking  statements
are reasonable,  any of the assumptions could be incorrect,  and there can be no
assurance   that   forward-looking   statements   will  prove  to  be  accurate.
Forward-looking  statements speak only as of the date on which they are made. We
do not  undertake  any  obligation  to  modify  or  revise  any  forward-looking
statement  to take into  account or  otherwise  reflect  subsequent  events,  or
circumstances  arising  after the date that the  forward-looking  statement  was
made.

General

GlobeTelX(R) Product Line

On February 15, 2006,  we announced the launch of its new  GlobeTelX(R)  product
line of VoIP  Gateways.  GlobeTelX  is a series of advanced  VoIP CPE  (Customer
Premise Equipment) units based on Asterisk IAX2 (Inter-Asterisk Exchange Version
2),  jointly  developed with  Taiwan-based  Accel Inc. and IP-WARE S.L. based in
Spain.

Sanswire Networks LLC Commences Float Testing of Sanswire II

On March 1, 2006, we announced  that our Sanswire  Networks LLC  subsidiary  had
successfully  floated  the  Sanswire  II  Technology   Demonstrator  Airship  in
Palmdale,  California.  This initial testing phase marked the first test of many
currently  planned for the  program.  This first phase will test the  integrated
subsystems  within  the  Stratellite.  The  Sanswire  float  test  followed  our
streamlined test procedure in order to validate the envelope  integrity with the
Sanswire proprietary lifting system and carbon composite structure.  The testing
process was  governed by test  procedures  through a strict  Quality  Management
System, which ensures both the safety and success of this demonstration.


                                       13
<PAGE>

Money Remittance Service Program with Travelex

On April 17, 2006, we announced  that we launched its money  remittance  service
program offered in conjunction with Travelex Currency Services,  Inc. GlobeTel's
technology has been deployed to enable  remittance  functions  through  Fidelity
Express,  a national  leader in money order  generation and walk-in bill payment
solutions  with a growing  merchant  base of more  than  5,000  locations  in 22
states.   Fidelity  Express  accepts  payments  through  authorized   retailers,
primarily supermarkets and convenience stores.

Results of Operations

Three months ended March 31, 2006,  ("2006" or "the current period") compared to
the three months ended March 31, 2005, ("2005" or "the prior period").

Revenues.  During  the  current  period,  our gross  revenues  were  $22,294,725
representing  an increase of 24% over the prior  period when our gross  revenues
were  $18,010,643.  Our revenues  increased  primarily  due to revenues from our
subsidiary,   Centerline  and  its  subsidiaries,  which  recorded  consolidated
revenues of  $22,275,244,  or 99.9% of total revenues,  consisting  primarily of
wholesale traffic revenues  (telecommunications  minutes).  The remainder of our
revenues were derived from sales of IP Phones.

Cost of Sales.  Our cost of sales  consists  primarily of the wholesale  cost of
buying  bandwidth  purchased  by us for resale,  collocations  costs,  technical
services,   wages,   equipment  leases,  and  the  costs  of  telecommunications
equipment. We had cost of sales of $22,213,503 for the current year, compared to
$17,283,963 for the prior period. Our goal is to replace  non-margin  generating
traffic in the  short-term  with  margin  generated  traffic.  We are  currently
working to establish  additional  direct  routes,  while  continuing to increase
sales and accordingly, its customer base.

Gross  Margin.  Our gross  margin was $81,222 or 0.4% of total  revenues for the
current  period,  compared  to  $726,680  or 4% of total  revenues  in the prior
period,  a decrease of $645,458 or (89%).  The decrease is primarily  due to the
fact that there was lower margin on resale of wholesale  minutes  related to the
increased  cost of the minutes to terminate.  We expect to derive higher margins
in the future as our wholesale traffic business experiences incremental growth.

Operating  Expenses.   Our  operating  expenses  for  the  current  period  were
$3,634,157 compared to prior period operating expenses of $4,299,018, a decrease
of $664,861 or (16%). The decrease is primarily due to the following:

Employee payroll and related taxes for the current period were $857,744 compared
to $570,591,  an increase of $287,153 or 50%. This increase was due to expansion
of our  operations,  facilities  and workforce,  related to additional  services
required  to  develop  and expand  our  geographical  and  product  markets  and
projects,  including  our  Stored  Value  Program,  our  Sanswire  Project,  and
international markets. As of March 31, 2006, our employee headcount increased to
75 from 44 at March 31, 2005.

Consulting  and  professional  fees  decreased to $389,756 from  $1,283,458  due
primarily to a reduction in non-cash compensation to $0 from $716,400. There was
also a $165,775  decrease in expenses related to project and market  development
expenses as we strive towards launching new products for 2006.

Investment  banking and financing  fees decreased to $0 in the current period as
compared to $439,715 for 2005,  as this amount  related to obtaining  funding of
approximately $4.8 million during the three months ended March 31, 2005.

We incurred $694 of sales commissions to Carrier Services,  Inc. ("CSI") for our
Centerline  operations  during the current  period,  compared to $724,513 in the
prior year. This variance is due to commission  payments for revenue  milestones
that were achieved  during fiscal year 2005. See Note 4 to financial  statements
regarding amounts due to CSI.

We incurred  $524,085 of research and development costs for our Sanswire project
- development of the Stratellite during the current period, compared to $443,924
in the prior year,  an increase of $80,161.  This is mainly due to costs related
to the successful floating of Sanswire II Technology  Demonstrator Airship along
with the initial testing phases.

Income (Loss) from Operations.  We had an operating loss of ($3,552,935) for the
current  period as compared to an operating loss of  ($3,572,338)  for the prior
period.  Our  operating  loss  remained  relatively  stable as compared to prior
years.  We expect that we will  continue to have  higher  operating  costs as we
increase our staffing and continue expanding operations,  programs, projects and
operating costs as it relates to the expected  increase in revenues,  related to
our subsidiaries.


                                       14
<PAGE>

Other Income  (Expense).  We had net other income  totaling  $42,577  during the
current period  compared to other expense of ($27,715) in the prior period.  The
variance is due to elimination of debt in the current year.

Net Income  (Loss).  We had a net loss of  ($3,510,358)  in the  current  period
compared  to a net loss of  ($3,600,053)  in the prior  period.  The net loss is
primarily  attributable  to the  decrease  in gross  margin and  increase in the
operating expenses as discussed above.

Liquidity and Capital Resources

Assets. At March 31, 2006, we had total assets of $22,739,959  compared to total
assets of $20,319,072 as of December 31, 2005.

The current assets at March 31, 2006, were $5,735,964, compared to $3,330,778 at
December 31,  2005.  As of March 31, 2006,  we had  $2,135,104  of cash and cash
equivalents compared to $1,228,180 as of December 31, 2005. The increase in cash
and  cash  equivalents  is  primarily  related  to the  funding  related  to the
conversion of stock warrants during the current period.

The Company had restricted cash of $1,292,000 as of March 31, 2006  representing
security  for letters of credit to  suppliers  for  MasterCard  in the amount of
$1,000,000 in support of the Store Value Card program,  a rental deposit for Los
Angeles  World  Airport  related to the  Palmdale  Hanger  occupied  by Sanswire
Networks, LLC in the amount of $72,000 and for various wholesale carriers in the
amount of  $220,000.  $1,122,000  of Letters of credit to vendors  existed as of
December 31, 2005.  The Company  anticipates  replacing  this  security with its
restricted stock within the next operating cycle.

Our net accounts  receivable were  $1,287,880 as of March 31, 2006,  compared to
$371,618  as of  December  31,  2005.  As of March 31,  2006,  the  Company  had
approximately 40 customers of which seven customers  accounted for approximately
62% of accounts  receivable  balance,  including one customer accounting for 36%
(or  $456,704).  As of March 31,  2006,  we have  increased  our  allowance  for
doubtful accounts by $83,229.

Other  current  assets  included  primarily,  as of March 31, 2006,  $170,660 in
prepayment to a related party,  ISG Jet, LLC compared to $185,960 as of December
31, 2005; $471,839 in prepaid expenses related to prepaid minutes with carriers,
compared to $184,434 at December  31,  2005;  $266,230 of  inventory  related to
components for our wireless  operations and IP Phones  compared to $67,525 as of
December 31, 2005 and deposits on  equipment  purchases of $108,993  compared to
$124,993 as of December 31, 2005.

We had other assets  totaling  $9,959,872  as of March 31, 2006 and December 31,
2005. Both balances are primarily  related to the intangible  assets  associated
with the  Sanswire  Networks  and  Hotzone  Wireless  acquisitions.  The Hotzone
Wireless  acquisition  was made  during  fiscal  year 2005,  while the  Sanswire
Networks acquisition was made during fiscal year 2004.

Liabilities.  At March 31, 2006, we had total liabilities of $8,667,672 compared
to total liabilities of $9,906,933 as of December 31, 2005.

The current liabilities at March 31, 2006 were $4,134,506 compared to $5,198,766
at December  31,  2005, a decrease of  $1,064,260.  The  variance is  attributed
primarily to  reduction in the due to related  payable to CSI (see Note 4 above)
to $259,875 from $901,606,  a $150,810  reduction (paid in stock) in the amounts
due to former  employee  to $86,790  from  $237,600,  an  increase  of  $301,108
representing deposits due to Telecom customers, classified as deferred revenues,
and a reduction  in other  accrued  liabilities  to $183,199  from  $643,018,  a
reduction of $459,819.

Cash Flows.  Our cash used in  operating  activities  was  ($5,214,298)  for the
current period,  compared to ($2,525,356) for the prior period. The increase was
primarily due to the increased level of operations and operating  activities and
changes in our current assets and liabilities.

Our cash used in investing activities was ($245,550) as compared to ($5,151,177)
in  the  prior  period,   which  mainly  due  to  less  property  and  equipment
acquisitions  as our  telecommunication  program  is  currently  operational  as
compared to acquisition and expansion of new telecommunications equipment in the
prior period.

Net cash  provided by financing  activities  was  $6,365,861,  principally  from
proceeds  from the  conversion of stock  warrants,  netting  $6,341,148  (net of
broker fees of $477,032,  which was charged against  Additional Paid-in Capital)
for the current  period,  compared to $10,679,415  in the prior period,  when we
received  proceed  of  approximately  $11  million  from  proceeds  for sales of
preferred stock, sales of common stock,  convertible notes payables and from our
former unconsolidated foreign subsidiary.


                                       15
<PAGE>

As detailed in the financial statements,  we have stock subscriptions receivable
for preferred shares that will raise a total of  approximately  $500,000 in cash
in 2006,  primarily  in the form of  financing  provided  by Series D  preferred
shareholders.  In addition,  we anticipate  increased cash flows from 2006 sales
activities; however, 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 March 31, 2007.
However,  if  budgeted  sales  levels  are  not  achieved,   or  if  significant
unanticipated  expenditures  occur,  or if the  Company  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 through March 31, 2007.

As reflected in the accompanying  financial statements,  during the period ended
March 31,  2006,  we had a net loss of  ($3,510,358)  compared  to a net loss of
($3,600,053)  during the prior  period.  Consequently,  there is an  accumulated
deficit  of  ($75,124,789)  at March 31,  2006,  compared  to  ($71,614,431)  at
December 31, 2005.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable

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 the Company's  management,  including
the Chief Executive  Officer and President and the Chief Financial  Officer,  of
the  effectiveness  of the Company's  disclosure  controls and  procedures as of
March 31, 2006. 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 Chief
Executive Officer and the Chief Financial Officer concluded that as of March 31,
2006, the Company's  disclosure  controls and procedures  were effective (at the
"reasonable  assurance"  level  mentioned  above)  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.

From time to time,  the  Company  and its  management  have  conducted  and will
continue  to  conduct  further  reviews  and,  from  time to time  put in  place
additional  documentation,  of the Company's disclosure controls and procedures,
as well as its internal control over financial  reporting.  The Company may from
time to time make changes  aimed at enhancing  their  effectiveness,  as well as
changes aimed at ensuring that the Company's  systems  evolve with, and meet the
needs of, the Company's business. These changes may include changes necessary or
desirable to address  recommendations of the Company's  management,  its counsel
and/or  its  independent   auditors,   including  any   recommendations  of  its
independent  auditors  arising out of their audits and reviews of the  Company's
financial  statements.  These  changes may include  changes to the Company's own
systems,  as well as to the systems of businesses  that the Company has acquired
or that the Company may acquire in the future and will,  if made, be intended to
enhance the effectiveness of the Company's controls and procedures.  The Company
is  also  continually   striving  to  improve  its  management  and  operational
efficiency  and the  Company  expects  that its efforts in that regard will from
time to time directly or indirectly affect the Company's disclosure controls and
procedures, as well as the Company's internal control over financial reporting.

For the year ended December 31, 2005, the Company's independent auditors,  Dohan
and Company, CPA's, P.A. ("Dohan") advised management and the Board of Directors
that in  connection  with its  audit  of the  Company's  consolidated  financial
statements  for the year  ended  December  31,  2005,  it had  noted no  matters
involving internal control and its operation that it considered to be reportable
conditions  under standards  established by the American  Institute of Certified
Public Accountants.  Reportable  conditions are matters coming to an independent
auditors' attention that, in their judgment,  relate to significant deficiencies
in the design or operation of internal  control and could  adversely  affect the
organization's ability to record, process,  summarize, and report financial data
consistent  with the  assertions  of  management  in the  financial  statements.
Further,  a material  weakness is a reportable  condition in which the design or
operation  of one or more  internal  control  components  does not  reduce  to a
relatively  low level the risk that  errors or fraud in  amounts  that  would be
material in relation to the financial statements being audited may occur and not
be  detected  within a timely  period  by  employees  in the  normal  course  of
performing their assigned functions.


                                       16
<PAGE>

Although the  independent  auditors did not report any  material  weaknesses  in
internal  controls,  as noted above,  the Company has made and is  continuing to
make changes in its controls and procedures, including its internal control over
financial  reporting,  aimed at enhancing their  effectiveness and ensuring that
the  Company's  systems  evolve  with,  and meet the  needs  of,  the  Company's
business.  As further noted above, the Company is also  continually  striving to
improve its management and  operational  efficiency and the Company expects that
its efforts in that regard will from time to time directly or indirectly  affect
the  Company's  controls and  procedures,  including  its internal  control over
financial reporting.

Changes in Internal Control Over Financial Reporting

There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of the evaluation.  The Company has  established a financial  reporting
controls committee,  which meets quarterly to address corporate financial issues
and has added one more employee to its accounting  staff.  Furthermore,  we have
restructured  departmental  responsibilities and we are currently in the process
of implementing a new accounting system.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Mexico Associate and Customer Litigation

We have a legal  action  against  our  associate  and  customer  in  Mexico  for
non-payment  of the amount they owe the Company.  This customer has  substantial
assets, including  telecommunications  equipment,  existing working networks and
Mexican  tax  refunds  which they have  proposed  to turn over to us. We filed a
motion in the Mexican  courts which was  necessary  to formally  request that we
become the assigned payee of the tax refund  receivable and formally  secure the
equipment and to take over the operations of the existing networks.

In February 2005, the customer agreed that proceeds from the network  operations
were to be paid totally to us,  including the  customer's  portion of the profit
sharing,  until the amount owed has been fully paid. Upon full payment,  we will
begin the sharing profits again in accordance with the contract.

We received a judgment on February  14, 2005,  in the amount of $330,000.  It is
not certain of the amounts  that,  ultimately,  will be realized from the Mexico
associate.

This situation  above with our customer caused us to record an allowance for bad
debt expense for the fiscal year ending 2004.  In addition,  this  customer also
caused  us to record  another  allowance  for bad debt  expense  during  2005 in
relation to the loss on a Mexican Tax Refund in the amount of $382,160.

Former Consultants Litigation

We are 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.  GlobeTel 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 had been repaid.

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,  which has since been paid. 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.


                                       17
<PAGE>

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.

The parties  entered  into an  agreement  to proceed  before a Judicial  Hearing
Officer for a non-jury  trial which is scheduled  for May 17, 2006.  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.

Patent Infringement Lawsuit

A case was filed against us for patent  infringement.  On or about  September 1,
2004, Alexsam, Inc. (Alexsam) filed an action for patent infringement against us
alleging  the stored  value card and  service  the  Company is planning to offer
infringes  one or more of U.S.  Patent No.  6,000,608  (the 608 patent) and U.S.
Patent No. 6,189,787 (the 787 patent),  allegedly owned by Alexsam.  The actions
were filed in the United  States  District  Court,  Eastern  District  of Texas,
styled Alexsam,  Inc. vs. Datastream Card Svc., et al. Case Number  2:03-cv-337.
On January 14, 2005, the court dismissed the lawsuit against the Company.

On February 8, 2005, we filed suit against Alexsam and Robert Dorf (collectively
the defendants) in the United States District Court for the Southern District of
Florida,  Civil Action No.  05-60201,  seeking a  declaratory  judgment from the
court that the 608 and 787 patents are invalid,  not enforceable and will not be
infringed by our stored value card  offering.  We are also seeking  recovery for
damages brought on us by Alexsam,  the owners of Alexsam and Dorf, for breach of
confidential  disclosure  and  trust,  intentional  interference  with  business
advantage,  and  for  unfair  competition  under  Sec.  501.204  of the  Florida
Statutes.

We and Alexsam have subsequently settled our dispute. In exchange for granting a
non-exclusive license to GlobeTel for the Patents,  GlobeTel withdrew its motion
for attorneys' fees in the Texas Lawsuit and dismissed the Florida Lawsuit.  The
License Agreement was made and entered into in September 2005. The license taken
by us extends  further to our customers,  bank partners,  third party  financial
processors and cardholders,  and all those in privity with any of them, but only
to the extent those entities' activities relate to us and its license.

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

On August 31,  2005  investors  holding  convertible  notes  payable  total $4.5
million also  received one Class A Warrant to purchase one share of common stock
for each share that the notes would be convertible  into had they been converted
on the closing date (August 31,  2005) (a total of  2,727,273  shares).  The per
share exercise price of the Warrants is $2.50.  Under these  agreements,  all of
these shares were  exercised in January 2006.  The proceeds were used  primarily
for working capital needs.

Item 3. Defaults upon Senior Securities

None

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

There were no matters  brought to a vote of security  holders during the quarter
ended March 31, 2005.

Item 5. Other Information

Officers and Directors Appointments / Resignations

On January 13, 2006, the Board of Directors  appointed  Dorian Klein and Michael
P.  Castellano  to serve as  directors on  GlobeTel's  Board of  Directors.  Mr.
Castellano also serves as Chairman of the Audit Committee and is a member of the
Compensation  and Nominating  Committees.  Mr. Klein serves on GlobeTel's  Audit
Committee  and also serves as Chairman of the  Compensation  Committee  and is a
member of the Nominating Committees.

On February 17, 2006, we announced that Sir Christopher Meyer, its Non-Executive
Chairman,  resigned his position as Chairman of Globetel as he advised the Board
that he felt unable to commit the time to the  Chairmanship of GlobeTel that the
Company's  shareholders  had the right to expect and  requested  a change in his
status  to that of an  Independent  Director  .  Effective  March 19,  2006,  he
resigned his position as an Independent Director, however, on March 23, 2006, we
announced that Sir Christopher Meyer had accepted  GlobeTel's offer to chair its
newly formed International Advisory Board.


                                       18
<PAGE>

On March 23, 2006, we announced that J. Randolph Dumas, Vice Chairman,  has been
elected  Chairman of the Board of Directors,  succeeding Sir Christopher  Meyer,
who remains with the Company as Chairman of the GlobeTel  International Advisory
Board, but who has resigned his seat on the Board of Directors.

On April 10, we  announced  that Thomas  Jimenez has retired as Chief  Financial
Officer of GlobeTel  Communications  Corp. (Mr. Jimenez had no disputes with the
Company) and Lawrence Lynch has been named Chief Financial Officer.

Item 6. Exhibits

(a) Exhibits:

Exhibit No. Document Description

31.1  Certification of the Chief Executive  Officer,  pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

31.2  Certification of the Chief Financial  Officer,  pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

32.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.  Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.  Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(b) Form 8-K.

None


                                       19
<PAGE>

SIGNATURES

In accordance  with the  requirements  of the Exchange Act, the  registrant  has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

GLOBETEL COMMUNICATIONS CORP.

Registrant


                        /s/ Timothy Huff
                        Name: Timothy Huff
                        Title: Chief Executive Officer and Director
                        Date: May 12, 2006


                        /s/ Lawrence E. Lynch
                        Name: Lawrence E. Lynch
                        Title: Chief Financial Officer
                        Date: May 12, 2006


                                       20