10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 0-23532

SANSWIRE CORP.

(formerly GlobeTel Communications Corp.)

(Exact name of Registrant as specified in its charter)

Delaware	88-0292161
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

101 NE 3rd Ave, Suite 1500, Fort Lauderdale, Florida 33301

(Address of Principal Executive Offices) (Zip Code)

Issuer's telephone number: (954) 332-3759

Securities registered under Section 12 (b) of the Exchange Act:

Title of each class Name of exchange on which registered

Securities registered pursuant to Section 12 (g) of the Exchange Act: Common Stock Par Value $.00001 per share

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.  Yes £     No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes £     No x

Indicate by check mark whether the registrant (1) has 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 £ No x     

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K .  x

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

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer¨
	Smaller Reporting Company x

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

State issuer's revenues for its most recent fiscal year ended December 31, 2008: $0.

As of March 31, 2009, there were 185,887,861 shares of the issuer's common stock issued and outstanding. Affiliates of the issuer own 2,876,752 shares of the issuer's issued and outstanding common stock and the remaining 183,011,109 shares are held by non-affiliates. The aggregate market value of the shares held by non-affiliates at March 31, 2009 was $9,333,567.

DOCUMENTS INCORPORATED BY REFERENCE:

There are documents incorporated by reference in this Annual Report on Form 10-K, which are identified in Part III, Item 13.

(*) Affiliates for the purposes of this Annual Report refer to the officers, directors of the issuer and subsidiaries and/or persons or firms owning 5% or more of issuer's common stock, both of record and beneficially.

TABLE OF CONTENTS

PART I
Item 1. Description of Business	5
Item 2. Description of Property	10
Item 3. Legal Proceedings	10
Item 4. Submission of Matters to a Vote of Security Holders	13
PART II
Item 5. Market for Common Equity and Related Stockholder Matters	14
Item 6. Selected Consolidated Financial Data	15
Item 7. Management's Discussion and Analysis or Plan of Operation	16
Item 7a. Quantitative and Qualitative Disclosures about Market Risk	22
Item 8. Financial Statements	23
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	54
Item 9a. Controls and Procedures	54
Item 9b. Other Information	55
PART III
Item 10. Directors and Executive Officers, Promoters and Control Persons	56
Item 11. Executive Compensation	57
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58
Item 13. Certain Relationships and Related Transactions	58
Item 14. Principal Accountant Fees and Services	59
Item 15. Exhibits	59

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PART I

Forward-Looking Statements and Risk Factors

Certain information included in this Form 10-K and other materials filed or to be filed by Sanswire Corp. ("Sanswire," "GlobeTel," the “Company”, "we", "us" or "our") 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.

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 materially from those contemplated by such forward-looking statements.

We are filing the following summary to identify important factors, risks and uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. These cautionary statements are to be used as a reference in connection with any forward-looking statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission. Because of these factors, risks and uncertainties, we caution against placing undue reliance on 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.

The following risk factors may affect our operating results and the environment within which we conduct our business. If our projections and estimates regarding these factors differ materially from what actually occurs, our actual results could vary significantly from any results expressed or implied by forward-looking statements. These risk factors include, but are not limited to, changes in general economic, demographic, geopolitical or public safety conditions which affect consumer behavior and spending, including the armed conflict in Iraq or other potential countries; various factors which increase the cost to develop airships, including factors under the influence and control of government agencies and others; fluctuations in the availability and/or cost of helium, carbon fiber or other resources necessary to successfully assemble our airships; our Company's ability to raise prices sufficiently to offset cost increases, including increased costs for resources; the feasibility and commercial viability of our Stratellite project; related contemplated funding from third parties to finance the project, and necessary cooperation with various military and non-military agencies of the United States government, and similar agencies of foreign governments; depth of management and technical expertise and source of intellectual and technological resources; adverse publicity about us and our airships; relations between our Company and its employees and partners; legal claims and litigation against the Company; including the recently commenced SEC lawsuit; the availability, amount, type, and cost of capital for the Company and the deployment of such capital, including the amounts of planned capital expenditures; changes in, or any failure to comply with, governmental regulations; the amount of, and any changes to, tax rates and the success of various initiatives to minimize taxes; and other risks and uncertainties referenced in this Annual Report on Form 10-K. This statement, and any other statements that are not historical facts, are forward-looking statements.

This annual report also contains certain estimates and plans related to the airship industry. The estimates and plans assume that certain events, trends and activities will occur, of which there can be no assurance. In particular, we do not know what level of growth will exist, if any, in the market for lighter than air unmanned aerial vehicles. Our growth will be dependent upon our ability to compete with larger, well-established companies. If our assumptions are wrong about any events, trends and activities, then our estimates for the future growth of Sanswire and our consolidated business operations may also be wrong. There can be no assurance that any of our estimates as to our business growth will be achieved.

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ITEM 1. DESCRIPTION OF BUSINESS

General

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

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

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

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

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

Reverse Stock Split

Sanswire is authorized to issue up to 250,000,000 shares of Common Stock, par value $0.00001 per share, (subsequent to a 15-for-1 reverse stock split on May 23, 2005 and subsequent to an increase in the authorized shares from 150,000,000 to 250,000,000 at the shareholder meeting on June 21, 2006) and 10,000,000 shares of Preferred Stock, par value $0.001. The post split share calculation will be used throughout this report, unless noted. 760,000 shares of Preferred Stock has been allocated into different series of issuance and the remaining 9,240,000 shares is a so-called "blank check" preferred, meaning that its terms such as dividends, liquidation and other preferences, are to be fixed by our Board of Directors at the time of issuance.

Recent Developments

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

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On November 26, 2007 the SEC announced that it had filed a civil lawsuit against two former employees of Sanswire alleging that Joseph J. Monterosso, former Chief Operating Officer of Sanswire and former president of the Company’s Centerline Communications Subsidiary, and Luis Vargas, an employee of Centerline, engaged in a scheme to create $119 million in revenue that was subsequently reported in the Company’s financial statements as filed with the Commission. Securities and Exchange Commission v. Joseph J. Monterosso and Luis E. Vargas , Civil Action No. 07-61693 (S.D. Fla., filed on November 21, 2007).

On May 1, 2008 the SEC filed a lawsuit (the “complaint”) against Sanswire and three of the Company's former officers (Securities and Exchange Commission v. GlobeTel Communications Corp., Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch, Case No. 08-CV-60647 (S.D. Fla., filed May 1, 2008).  The complaint filed represents decisions and actions taken by Sanswire's management team during the Company's operations covering 2004-2006.  Specifically the complaint concerns former CEO Timothy Huff, former COO and CFO Larry Lynch, and former CFO Thomas Jimenez.  The complaint reiterates that former officer Joseph Monterosso and former employee Louis Vargas conspired to and carried out a scheme to fraudulently cause the Company to report 119 million dollars in nonexistent revenue. The Company no longer has any relationship with those individuals.  As a result of the alleged schemes and actions of the previous management mentioned in the complaint, the Company is diligently working to come into compliance with all relevant regulations.  The Company has formally exited all businesses associated with the alleged schemes and continues to operate under new management with the goal of completing the restructuring of the Company and focusing all its efforts on new opportunities in the aerospace sector.

On September 22, 2008 we filed a Certificate of Merger with the Secretary of State of the State of Delaware pursuant to which our wholly owned subsidiary, Sanswire Corp., a Delaware corporation, was merged into us. As a result of the filing of the Certificate of Merger, our corporate name was changed from GlobeTel Communications Corp. to Sanswire Corp.

Background

We were previously a wholly-owned subsidiary of American Diversified Group, Inc. (“ADGI”). At a special meeting of stockholders of ADGI held on July 24, 2002, the stockholders of ADGI approved a plan (the "Plan") for the exchange of all outstanding shares of ADGI for an equal number of shares of Sanswire.

ADGI was incorporated under the laws of the State of Nevada as Terra West Homes, Inc. on January 16, 1979. On March 15, 1995, its name was changed to "American Diversified Group, Inc." During the period ended July 24, 2002, ADGI's business activities included (i) sale of telecommunication services primarily involving Internet telephony using VoIP through its Global Transmedia Communications Corporation subsidiary ("Global"), and (ii) wide area network and local area network services provided through its NCI Telecom, Inc. subsidiary ("NCI").

Global was acquired by ADGI on February 19, 2000, and NCI was acquired on June 29, 2000. During 2002, Global and NCI were merged with and into ADGI, with ADGI as the surviving corporation.

When ADGI exchanged all of its outstanding shares of common stock for Sanswire common stock, ADGI became a wholly-owned subsidiary of Sanswire and Sanswire began conducting the business formerly conducted by ADGI. 

In 2004, we formed wholly-owned subsidiaries: Sanswire Networks, LLC (“Sanswire-FL”) for our Stratellite project; and Centerline Communications, LLC, (“Centerline” or “CLC”) and its wholly-owned subsidiaries, EQ8, LLC, G Link Solutions, LLC, Volta Communications, LLC, and Lonestar Communications, LLC for the purpose of the recording and managing the sale of wholesale minutes and related network management functions. We have since closed Centerline and its subsidiaries.

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In 2004, we acquired a 73.15% interest in Consolidated Global Investments, Ltd. (“CGI”), formerly known as Advantage Telecommunications, Ltd. (“ATC”), an Australian company. CGI was to be utilized in the carrier sales sector of our business and was later to be a licensee of the Sanswire Networks, LLC in Australia. However, we have since sold our shares in CGI back to the Company and no longer have any interest in CGI. Certain shares of Sanswire acquired by CGI were sold by CGI. The Securities and Exchange Commission has questioned the validity of the exemption used for the sale of such shares as more fully discussed below in Item 3 “Legal Proceedings.”

In 2008 we incorporated Sanswire Corp., a Florida corporation and wholly-owned subsidiary, to deal directly with airship opportunities based upon our agreement with TAO Technologies, GmbH. We also incorporated Sanswire-TAO Corp., a Florida corporation that is a 50/50 joint venture with TAO Technologies. The agreements with TAO are discussed below.

On September 22, 2008 we filed a Certificate of Merger with the Secretary of State of the State of Delaware pursuant to which our wholly owned subsidiary, Sanswire Corp., a Delaware corporation, was merged into us. As a result of the filing of the Certificate of Merger, our corporate name was changed from GlobeTel Communications Corp. to Sanswire Corp.

Business of Sanswire

Sanswire Corp. has sharply refined its operating model ─ focusing exclusively on opportunities in Lighter Than Air (LTA) Unmanned Aerial Vehicles (UAV). We seek to build and run a UAV business that includes low-, mid- and high-altitude, lighter-than-air vehicles; adding value to their security, surveillance and broadcasting abilities through the integration of wireless technologies with a wide array of customer payloads. Our long-term objective is to provide commercial and government customers advanced seamless wireless broadband capabilities and surveillance sensor suites utilizing a state of the art High Altitude Airship technology.  Building upon this high altitude technology, Our near term goal is to penetrate the military/government use market for low to mid altitude unmanned airships

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

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

STRATELLITE™ The brand name for our HAA offering is the Stratellite™, so named because they offer the functionality of a satellite, but in the stratosphere. This class of airship will consist of several models to suit various purposes. Stratellites™ were conceived to help solve infrastructure issues that plague many parts of the world, including the so called "last mile" (building expensive ground based infrastructure for very low density areas) issues.  The Stratellite™ can bring a full range of telecommunications or broadcasting capabilities to any area of the world, accessible to people with customer premise equipment that is inexpensive and available. We are not yet producing the Stratellite.

The Stratellite™ is a high altitude long endurance airship intended to populate “near space” with telecommunications capability.  A presence in near space with high tech sensors and communications suites offers enormous potential for both commercial and government applications.  Whether hovering at 65,000 feet or flying a variety of mission profiles, the Stratellite offers many of the features of satellites with cost savings, refurbishment ability, and opportunity for regular system upgrades.

There is a great need for information-transmission in the future performed by High Altitude Platforms in various fields;

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· mobile broadband communications

· emergencies, use in disaster areas

· marine radio service

· new traffic engineering systems

· weather observation

· water surveillance (pollution)

· ozone and smog monitoring

· radiation monitoring (UV and radioactive)

· astronomic and terrestrial observation

· documentation of conditions in the upper atmosphere

· border control, coastal surveillance

· private communication services e.g. cellular phones

· transmission of radio- and television programmers etc.

SANSWIRE-TAO

Sanswire first entered into an agreement with TAO Technologies GmbH, Stuttgart, Germany, in 2005.  At that time, TAO provided engineering support to the efforts of former subsidiary Sanswire Networks, LLC then working out of facilities in California. In September 2007, the companies reached an agreement in principle to share sales and marketing rights of various aerial vehicles developed and currently owned by TAO. Additionally, upon closing of definitive agreements, TAO will grant to Sanswire-TAO the respective patents and intellectual property rights covering the products, including the AirChain segmented airship.

In November 2007, the Company entered into a Licensing and Technical Cooperation Agreement with TAO. TAO granted to Sanswire an exclusive license for the territories of the US, Canada, Mexico and Chile for the marketing and distribution of airships based upon the technologies patented and developed by TAO. TAO will also provide testing and engineering support for the development of airships to meet the criteria required by Sanswire customers. Sanswire was obligated to provide TAO with engineering orders of at least $1,000,000 per year and certain cash and stock payments on a quarterly basis.

On June 3, 2008 Sanswire and TAO restructured the November 2007 agreement and entered into a new agreement to form a 50/50 US based joint venture to place, among other things, the rights to the TAO intellectual property in US, Canada, and Mexico into the US based JV company to be called Sanswire-TAO.  This integration of Sanswire and Stuttgart, Germany-based TAO Technologies Gmbh took place to create various strategic advantages for both companies. Each group entered the relationship with synergistic, yet very distinct core competencies. Sanswire’s business development, its inroads into the U.S. Government review process as well as inroads into overseas markets and other marketing resources complement TAO’s vast airship product research and development ability.

On June 19, 2008, we announced that we had agreed to form and commence operations of Sanswire-TAO Corp., a Florida corporation equally owned by the Company and TAO, for the customized production, marketing and sales of unmanned aerial vehicles for the markets of the United States, Canada and Mexico.

The Sanswire-TAO research and development efforts are centered in Stuttgart, taking advantage of the relationship between TAO and the University of Stuttgart. This relationship provides cost-effective access to aerospace testing facilities including wind tunnels, environmental test chambers, structural testing devices, computer aided design and a legion of aerospace and physics professionals along with their more than 10 years of solar powered airship experience. The Sanswire-TAO joint venture provides the following:

(1) Multiple Airship Platforms – Ranging from short range low altitude platforms to Stratospheric solutions.

(2) Access to Resources – Through contractual relationships with world-renowned universities, including their hometown University of Stuttgart.

(3) Research and Development – More than a decade of knowledge and experience resulting from significant data gathered from vital airship testing.

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(4) Proprietary Systems – Custom developed systems from the design and modeling of airships to specialized flight control systems.

(5) Intellectual Property – Patented designs and concepts providing worldwide protection.

(6) Constructed Airships – Several platforms built for demonstrations

(7) Testing Facilities – Including aerospace laboratories, assembly and storage hangars, wind tunnels, certified launch and flight facilities, and certified manufacturing and production facilities.

Competitive Business Conditions

We are aware of other companies that are also developing high altitude platforms similar in nature to our Stratellite project. Our competitors, though, may have more resources available to develop their respective products. Even if a properly functioning, commercially viable product is established there can be no assurance that revenues will be achieved from the sales of Stratellites or other airships or that the costs to produce such revenues will not exceed the revenues or that the project will otherwise be profitable. There can be no assurance that we will be able to successfully achieve the results we anticipate with this project.

Sources and Availability of Hardware and Software

Equipment for the Stratellite, SAS-51 and the prototypes thereof are custom made for those products and are dependent upon either single or limited number of suppliers for certain goods. Failure of a supplier could cause significant delays in delivery of the airships if another supplier cannot be promptly found.

Sources and Availability of Technical Knowledge and Component Parts

The Sanswire project requires a high level of technological knowledge and adequately functioning component parts and sub-assemblies to continue the project and achieve commercial viability. We have current and contemplated arrangements for supply of both internal and external technical knowledge to provide the intellectual capital to continue with this project. Similarly, we have current and contemplated arrangements for supply required component parts, both internally developed, as well as, outsourced from specialty contractors to provide component parts to continue with this project in the near term.

Dependence on a Few Customers

As discussed below in Item 6, Management Discussion and Analysis and Plan of Operation, we are currently dependent on a limited number of customers. As we expand our products, services, and markets, we expect to substantially broaden our customer base and reduce our dependence upon just a few customers. However, there is no guarantee that we will be able to broaden our customer base.

Trademarks

We have filed for registration of the names "Stratellite" and "Sanswire" under the Madrid Protocol (that includes the United States) and in many non-Madrid Protocol countries.

We have additionally entered into an agreement with TAO Technologies GmbH, with whom Sanswire has collaborated with since 2005. The current agreement provides exclusive licensing and existing and future patent rights for TAO’s airship technologies and allows Sanswire to register the TAO patents in the United States.  As soon as the design and engineering for the Stratellite are finalized, we intend to file for patents covering unique design and intellectual property.

Regulatory Matters

The export of the airship products may be subject to United States State Department restrictions on the transfer of technology. We are currently investigating whether or not the export of the Sanswire products would require export licenses and how the production of these vehicles in Germany through our agreement with TAO Technologies, GmbH would impact this.

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During 2007 and 2008, Sanswire and its subsidiaries incurred payroll tax liability during the normal course of business at each payroll cycle. The Company submitted certain withholding tax payments during the first quarter through a payroll processor, ADP. Subsequent thereto, the Company no longer processed its payroll through ADP. During this time, the Company did not file the appropriate tax forms or deposit the appropriate withholding amounts. The Company has recognized this issue and contacted the IRS accordingly to bring its filings up-to-date and pay any taxes due. The Company may be subject to penalties and interest from the IRS.

Number of Total Employees and Number of Full-Time Employees

As of March 31, 2009 we have 3 full-time employees, including our executive officers and employees of our subsidiaries. We do not believe that we will have difficulty in hiring and retaining qualified individuals for our general operations and any technical personnel required for the aerospace projects will primarily be hired overseas to work with the existing TAO personnel.

ITEM 2. PROPERTIES

Sanswire’s corporate offices are now located at 101 NE 3 rd Ave., Suite 1500, Fort Lauderdale, FL 33301. Base rent is $575 per month plus the cost of services used by Sanswire. The lease is for a period of 6 months and terminates on September 30, 2009.   We believe our facilities are adequate for our current and near-term needs.  

GlobeTel previously leased office facilities at 9050 Pines Blvd., Suite 110, Pembroke Pines, Florida 33024, as of April 1, 2004, and  vacated the premises in March 2006, having turned over the space as part of the sale of the Stored Value assets. However, there was unpaid rent due on both the first and second floor suites. In August 2007, the landlord received a judgment in the amount of $206,730.

Until September 2007, GlobeTel leased a 66,000 square foot space hanger in Palmdale, California. The initial lease, between Sanswire Networks, LLC and the City of Los Angeles World Airports, was for a term of three months, ended July 22, 2005 with a monthly rent of $19,990. On June 8, 2005 the lease term was amended for fifteen months, commencing June 8, 2005 through September 7, 2006, with two one-year options. Concurrently with the signing of the amended lease, the parties entered into a reimbursement agreement to share the cost of certain improvements.

As of October 2007, the Company no longer occupies a hangar at Palmdale Regional Airport, the monthly cost of this space was $20,847. This facility was adjacent to the United States Air Force’s Plant 42 and Edwards Air Force Base. Sanswire constructed and tested Stratellite and Sky Sat prototypes at the facility. The hangar also included administrative office space. Sanswire is indebted to Los Angeles World Airports, the lessor of the hangar, in the amount of $161,761.

ITEM 3. LEGAL PROCEEDINGS

Securities and Exchange Commission

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

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

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

The SEC alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a permanent injunction, civil penalties, and disgorgement with prejudgment interest. The Commission subsequently consolidated this action with another pending action involving former officers of the Company. The Commission has also moved to amend its complaint against the Company to include additional allegations of wrongdoing beginning in 2002, which motion to amend is still pending with the Court.  The parties are currently engaged in discovery.  The Company has been vigorously defending itself in this action.

Joseph Monterosso

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

Wachovia v. GlobeTel

In connection with the operations of Globetel Wireless Europe GmbH and the acquisition of Altvater GmbH, the Company guaranteed a letter of credit in the amount of $600,000. Upon Globetel Wireless Europe GmbH ceasing operations, the letter of credit was drawn upon. The letter of credit was not collateralized. In September 2007, Wachovia filed a lawsuit in Broward County in an attempt to recover the amount through arbitration with the American Arbitration Association. On June 2, 2008, the American Arbitration Association awarded Wachovia $762,902.

Richard Stevens v. GlobeTel

The Company and its directors were sued in the case RICHARD STEVENS vs. GLOBETEL COMMUNICATIONS CORP., et al. Case No.: 06-cv 21071. The original allegations of the complaint were that the Company’s proposed transaction to build wireless networks in Russia was a sham. The amended complaint alleged that the transaction was not a sham, but that the Company refused to accept payment of $300 million. Recently, the officers and directors with the exception of Timothy Huff have been dismissed from the case.

In February 2008, the Company and the Plaintiff reached a settlement in principle that has been filed with the Court for approval. Under the terms of the proposed settlement agreement in the class action, the Company’s D&O insurance carrier will make a cash payment to the class of $2,300,000, less up to $100,000 for potential counsel fees and expenses. All claims in the class action will be dismissed with prejudice. The US District Court for the Southern District of Florida has approved the settlements reached in its pending securities class action and a shareholder derivative action on February 4, 2008.

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Derivative Action

On July 10, 2006 a derivative action was filed against the officers and directors of Sanswire alleging that they have not acted in the best interest of the Company or the shareholders and alleged that the transaction to install wireless networks in Russia was a sham. The lawsuit is pending in the Federal District Court for the Southern District of Florida (Civil Case No. 06-60923). The Company believes that the suits are without merit and will vigorously defend against it. The Company has hired outside counsel to defend it in this action. The Company and the Plaintiff have reached an agreement in principle to settle this action and have submitted such settlement with the Court for its approval. Under the terms of the settlement, Company’s D&O insurance carrier will pay $60,000 in attorneys’ fees to plaintiff’s counsel, the Company will implement or maintain certain corporate governance changes, and all claims will be dismissed with prejudice.

Mitchell Siegel v. GlobeTel

On February 2, 2007, the Company was sued in the Circuit Court for Broward County, Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no. 0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for breach of contract in regards to a Key Executive Employment Agreement.  On February 15, 2008, both parties entered into a settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock, payable over 12 months, and 50% of the gross proceeds, up to a total amount of $300,000, received from an October 2006 agreement.  During 2008 the Company paid $131,250 in the Company’s common stock associated with the settlement agreement.  During 2009 the Company paid an additional $29,167 in the Company’s common stock.

Former Consultants

The Company is a defendant in two lawsuits filed by Matthew Milo and Joseph Quattrocchi, two former consultants, filed in the Supreme Court of the State of New York (Richmond County, Case no. 12119/00 and 12118/00). These matters were subsequently consolidated as a result of an Order of the court and now bear the singular index number 12118/00. The original lawsuits were for breach of contract. The complaint demands the delivery of 10,000,000 pre split shares of ADGI stock to Milo and 10,000,000 to Quattrocchi. Sanswire was entered into the action as ADGI was the predecessor of the Company. The suit also requests an accounting for the sales generated by the consultants and attorneys fees and costs for the action.

The lawsuits relate to consulting services that were provided by Mr. Milo and Mr. Quattrocchi and a $50,000 loan advanced by these individuals, dated May 14, 1997, of which $35,000 has been repaid.

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

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

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

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

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

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

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

Trimax Wireless

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

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

In August 2007, Altvater and Trimax filed suit against Sanswire alleging, defamation, conversion, breach of contract and seeking injunctive relief. Sanswire successfully moved to have the two cases consolidated and has filed a Motion to Dismiss this suit.  The Company intends to vigorously defend this suit, but no assurance can be given about the outcome of the litigation.

American Express

American Express Travel Related Services Company, Inc. has filed a lawsuit against the Company and Sanswire Networks LLC (CASE NO: CACE 08-013239, Broward County Florida), seeking to recover a total of $394,919 for unpaid charges on the Companies’ corporate purchasing account. On October 3, 2008, American Express received a final judgment for $404,113.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters brought to a vote of security holders in 2008 and 2007. 

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) MARKET PRICE

In October 2006, our stock was delisted from the American Stock Exchange and began trading on the Pink Sheets under the symbol “GTEM”. From October 2006 to October 2008 our shares of common stock have been quoted on the Pink Sheets quotation system under the symbol “GTEM." Effective October 8, 2008 our shares of common stock have been quoted on the Pink Sheets quotation system under the symbol “SNSR."

The following information sets forth the high and low bid price of our common stock during fiscal 2008, and 2007 and was obtained from the National Quotation Bureau. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

	HIGH		LOW
CALENDAR 2007
Quarter Ended March 31	$	0.52	$	0.24
Quarter Ended June 30	$	0.32	$	0.18
Quarter Ended September 30	$	0.26	$	0.08
Quarter Ended December 31	$	0.16	$	0.04
CALENDAR 2008
Quarter Ended March 31	$	0.14	$	0.07
Quarter Ended June 30	$	0.09	$	0.03
Quarter Ended September 30	$	0.10	$	0.04
Quarter Ended December 31	$	0.08	$	0.03

(b) HOLDERS

As of the date of this report, there were approximately 21,000 registered holders of our common stock.

(c) DIVIDENDS

The Company has never paid a dividend and does not anticipate that any dividends will be paid in the foreseeable future.

(d) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets forth the information indicated with respect to our compensation plans as of December 31, 2008, under which our common stock is authorized for issuance.

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	Number of Securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average  exercise price of  outstanding options,  warrants and rights  (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		15,982,752	$	0.35		—
Equity compensation plans not approved by security holders		—		—		—
Total		15,982,752	$	0.35		—

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth our selected historical financial data for the periods indicated. The selected statement of operations data for the years ended December 31, 2008 and 2007, and the selected balance sheet data as of December 31, 2008 and 2007, have been derived from our audited financial statements and related notes thereto included elsewhere in this annual report.

The information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the notes thereto included elsewhere in this annual report.

	Year Ended December 31,
	2008			2007
Statement of Operations Data:
Revenue	$	—		$	53,754
Cost of revenue		—			15,529
Gross margin (loss)		—			38,225
Operating expenses
General and administrative expenses		476,827			1,567,968
Consulting fees		1,415,235			1,635,303
Payroll and related taxes		887,283			3,611,596
Bad debts		—			—
Research and development expenses		—			(14,856	)
Officers’ and directors’ compensation		435,000			696,790
Loss from operations		(3,214,345	)		(7,458,576	)
Loss/Gain on extinguishment of debt		(1,096,650	)		254,200
Loss on disposition of equipment		—			—
Loss on impairment of equipment		—			—
Interest expense, net		(1,127,420	)		(2,482,296	)
Loss from continuing operations		(5,438,415	)		(9,686,672	)
Loss/Gain from discontinued operations		(197	)		(1,918,806	)
Net loss	$	(5,438,612	)	$	(11,605,478	)
Net loss per share
Basic and diluted	$	(0.04	)	$	(0.10	)

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	As of December 31,
	2008			2007
Balance Sheet Data:
Cash and cash equivalents	$	4,809		$	32,278
Investment in joint venture		3,229,000			—
Deposits		—			391,000
Total assets		3,240,215			441,956
Total liabilities		17,944,125			13,666,678
Stockholders’ deficit		(14,703,910	)		(13,224,722	)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GENERAL

Twelve months ended December 31, 2008 ("Fiscal 2008" or "2008" or "the current year") compared to twelve months ended December 31, 2007 ("Fiscal 2007" or "2007" or "the prior year").

RESULTS OF OPERATIONS

REVENUES. During fiscal 2008, we had no gross sales, representing a decrease of 100% over the prior year when our gross sales were $53,754. Our revenues decreased primarily due to the Company focusing on the airship development and continuing to prepare a commercially feasible product for our future potential customers.

COST OF SALES. During fiscal 2008, we had no cost of sales representing a decrease of 100% from $15,529 for fiscal 2007.

GROSS MARGIN. Our gross margin was $0 for fiscal 2008, compared to our gross margin of $38,225 or 71.1% for fiscal 2007, a decrease of $38,225 or 100%. The decrease is due to the fact the Company had no revenues.

OPERATING EXPENSES. Our operating expenses consist primarily of payroll and related taxes, professional and consulting services, expenses for executive and administrative personnel and insurance,  investor and public relations, research and development,  telephone and communications, facilities expenses, travel and related expenses, and other general corporate expenses. Our operating expenses for fiscal 2008 were $3,214,345 compared to fiscal year 2007 operating expenses of $7,496,801 a decrease of $4,282,456 or 57.1%.

In addition, employee payroll and related taxes for fiscal 2008 were $887,283 compared to $3,611,596, a decrease of $2,724,313 or 75.4%. This decrease was due to our continued reduction of our operations, facilities and workforce during 2008.

The overall decrease is primarily due to a decrease in officers' and directors' compensation to $435,000 (including non-cash compensation), from $696,790 in the prior year.

During 2008 and 2007, Sanswire and its subsidiaries incurred payroll tax liability during the normal course of business at each payroll cycle. The Company submitted certain withholding tax payments during the first and second quarters of 2007 through a payroll processor, ADP. Subsequent thereto, the Company no longer processed its payroll through ADP. The Company did not file its 2007 tax forms until 2008 but during 2008 the Company has reported its payroll tax liabilities on a timely basis; however the Company failed to deposit the appropriate withholding amounts. The Company has recognized this issue and contacted the IRS accordingly to make arrangement to pay any taxes due, which is currently estimated to be at least $200,000. The Company may be subject to penalties and interest from the IRS.

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We incurred $1,415,235 of consulting fees, a decrease of $220,068 or 13.5% for 2008 compared to $1,635,303 in 2007. This decrease is primarily related to reduction of services required to develop and expand our geographical and product markets.

We received a $14,856 of research and development refund for our Sanswire project during 2007, compared to $0 during 2008, a decrease of $14,586 or 100%. During 2008 and 2007, there were no direct expenses for development and building of the airship. This is due mainly to the fact that Company entered into a revised agreement with TAO Technologies (See note 3 to the attached financial statements). The Company believes that further development will increase during 2009 and thus associated expenses are expected to increase for 2009.

During 2008, we incurred $476,827 of general and administrative expenses as compared to $1,567,968 during 2007. The $1,091,141 decrease was due to a continued reduction of expenses related to our operations, facilities and workforce during 2008.

LOSS FROM OPERATIONS. We had an operating loss of ($3,214,345) for fiscal year 2008 as compared to an operating loss of ($7,458,576) for fiscal 2007, primarily due to decreased operating expenses as described above, including lower operating costs and reductions of our various programs.

OTHER INCOME (EXPENSE). We had net other expenses totaling ($2,224,070) during fiscal year 2008 compared to ($2,228,096) during fiscal 2007. This variance included the non cash charges related to the modifications of our convertible debentures of ($1,096,650) compared to a $254,200 gain in 2007.

Interest expense for fiscal year 2008 was $1,127,420 compared to $2,482,296 for the prior year. Interest expense decrease was primarily due to a reduction in noncash financing charges associated with the Company’s convertible debentures.

LOSS FROM DISCONTINUED OPERATIONS. During 2008 we had a loss of ($197), related to our discontinued operations compared to a loss of ($1,918,806) during fiscal year 2007. See note 2 in the financial statements for more information regarding the discontinued operations.

NET LOSS. We had a net loss of ($5,438,612) in fiscal year 2008 compared to a net loss of ($11,605,478) in fiscal 2007. The decrease in net loss is primarily attributable to the decrease in the operating expenses as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

ASSETS. At December 31, 2008, we had total assets of $3,240,215 compared to total assets of $32,278 as of December 31, 2007.

The current assets at December 31, 2008, were $11,215 compared to $50,956 at December 31, 2007. As of December 31, 2008, we had $4,809 of cash and cash equivalents compared to $32,378 at December 31, 2007.

The Company had no deposits as of December 31, 2008 compared to $391,000 as of December 31, 2007.  The $391,000 relates to payments accrued toward an agreement reached in May 2008 for $3,229,000 as an investment in a joint venture.  This deposit was applied as an investment in joint venture in June 2008.  See note 3 in the financial statements for more information regarding the transaction.

We had $6,406 of current assets from discontinued operations as of December 31, 2008 as compared to $18,678 at December 31, 2007. See note 2 in the financial statements for more information regarding the discontinued operations.

LIABILITIES. At December 31, 2008, we had total liabilities of $17,944,125 compared to total liabilities of $13,666,678 as of December 31, 2007.

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The current liabilities at December 31, 2008 were $17,944,125 compared to $13,666,678 at December 31, 2007, an increase of $4,277,447. The increase is principally due to the increase in current portion of payments due on the notes payable of $1,208,512 (see note 5 of the financial statements), the increase in accounts payable of $647,055, and the increase in accrued expenses of $2,421,855.

CASH FLOWS. Our cash used in operating activities was $909,608 compared to $2,286,113 for the prior year. The decrease was primarily due to the decreased level of operations and operating activities and changes in our current assets and liabilities.

During 2008 there was $385,000 used in investing activities which was a payment on the Sanswire-Tao joint venture compared to $372,500 used in investing activities of which $130,000 was used as a deposit for the joint venture and $242,500 from its discontinued operations.

Net cash provided by financing activities was $1,267,139 principally from the execution of new convertible debentures, as compared to $2,686,648 in the prior year.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company had a net loss of $5,438,612 and a negative cash flow from operations of $909,608 for the year ended December 31, 2008, and had a working capital deficiency of $17,932,910 and a stockholders’ deficit of $14,703,910 at December 31, 2008.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

During 2009, the Company has subsequently raised approximately $140,000 from investors; however this is not adequate funding to cover the estimated working capital deficit of approximately $17.9 million or the net loss for 2008 of approximately $6 million.  The Company is currently working to secure additional funding for its current operations as well as for the payments associated with the Company’s joint venture.

As reflected in the accompanying financial statements, for the year ended December 31, 2008 we had a net loss of ($5,438,612) compared to a 2007 net loss of ($11,605,478). Consequently, there is an accumulated deficit of ($125,834,338) at December 31, 2008 compared to ($120,395,726) at December 31, 2007.

CRITICAL ACCOUNTING POLICIES

REGISTRATION RIGHTS

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

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These Agreements usually require us to pay penalties for any time delay in filing the required registration statements, or in the registration statements becoming effective, beyond dates specified in the Agreement. These penalties are usually expressed as a fixed percentage, per month, of the original amount we received on issuance of the debt or preferred stock, common shares, options or warrants. We account for these penalties when it is probable that a penalty will be incurred. At December 31, 2008 the Company has no registration rights agreement requiring penalties to be recorded.

REVENUE RECOGNITION

Revenue is recognized when there is persuasive evidence of an arrangement, goods are shipped and title passes, collection is probable, and the fee is fixed or determinable.  The Company records deferred revenue when cash is received in advance of the revenue recognition criteria being met.

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.

STOCK-BASED COMPENSATION

The Company adopted SFAS No. 123(R) using the prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of its year ended December 31, 2006. In accordance with this transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include the impact of, SFAS No. 123(R). The Company’s consolidated financial statements for the year ended December 31, 2008 and 2007 reflect the impact of SFAS No. 123(R). Upon adopting SFAS No. 123(R), for awards with service conditions and graded-vesting, a one-time election was made to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award.

Stock-based compensation expense recognized under SFAS No. 123(R) for the years ended December 31, 2008 and 2007 were $712,501 and $1,667,107, respectively.

The Company’s determination of fair value of share-based payment awards to employees and directors on the date of grant uses the Black-Scholes model, which is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.  Forfeitures are recognized as incurred.

The Company accounts for stock option and warrant grants issued to non-employees for goods and services using the guidance of SFAS No. 123 and Emerging Issues Task Force (“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,” whereby the fair value of such option and warrant grants is determined using the Black-Scholes option pricing model at the earlier of the date at which the non-employee’s performance is completed or a performance commitment is reached.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

In February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 provides an option to report selected financial assets and financial liabilities using fair value. The standard establishes required presentation and disclosures to facilitate comparisons with companies that use different measurements for similar assets and liabilities. The Company does not expect that the adoption of SFAS No. 159 for financial assets and financial liabilities to have a material impact on our consolidated financial statements in subsequent reporting periods.

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

In December 2007, the FASB issued SFAS No. 141R, Business Combinations, and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements. SFAS No. 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statement. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141R and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company does not expect that the adoption of SFAS 141R or SFAS No. 160 to have a material impact on our financial condition and results of operations, although its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

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

In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS 161 to have a material impact on the presentation of our annual and interim period disclosures.

Management does not believe that there are any recently-issued, but not yet effective accounting pronouncements, which could have a material effect on the accompanying condensed consolidated financial statements

RISK FACTORS

Risks Related to Our Business and Industry

We need to raise a significant amount of additional capital to meet our current and future business requirements and such capital raising may be costly or difficult to obtain and could dilute current stockholders’ ownership interests.

We need to raise $4.5 million of additional financing in order to meet our cash requirements for the next twelve (12) months and to fully implement our business plan during the next twelve months.  The funds would be used to increase manufacturing of our products, expand our research and development efforts, and attract a larger talented sales force.  We intend to raise the financing from the sale of common stock in one or more private placements or public offerings and/or from bank financing.  We do not have any firm commitments or identified sources of additional capital from third parties or from our officers, directors or shareholders.  Although our officers and directors or their affiliates have in the past facilitated capital for us, or provided us with capital, they are not legally bound to do so.  There can be no assurance that additional capital will be available to us, or that, if available, it will be on terms satisfactory to us.  Any  additional financing may involve dilution to our shareholders.  If we are unable to raise additional financing on terms satisfactory to us, or at all, we would not be able to fully implement our business plan which would have a materially adverse effect our business and financial position and could cause us to delay, curtail, scale back or forgo some or all of our operations or we could cease to exist.

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We have a history of operating and net losses which we anticipate will continue.

We have a history of losses from operations.  We anticipate that for the foreseeable future, we will continue to experience losses from operations.  We had a net loss from continuing operations of $5,438,415 during fiscal 2008 and a net loss from continuing operations of $9,686,672 during fiscal 2007.  We anticipate that our net loss will increase for fiscal 2009.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.

In its report dated March 30, 2009, our independent auditors, Weinberg and Company, P.A., expressed an opinion that there is substantial doubt about our ability to continue as a going concern because we have suffered recurring losses from operations and we have an accumulated deficit and a working capital deficit.  We expect to continue to incur losses for the foreseeable future.  The accompanying financial statements have been prepared assuming that we will continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence. Our continuation as a going concern is dependent upon future events, including the acquisition of additional capital to fully implement our business plan.  There can be no assurance these future events will occur or that we will continue as a going concern even if they do occur.  If we are unable to continue as a going concern, you will lose your entire investment.

If we fail to protect our intellectual property rights, our competitors may take advantage of our ideas to compete more effectively with us.

Our proprietary rights are one of the keys to our performance and ability to remain competitive. We rely on a combination of patent, trademark, copyright and trade secret laws in the U.S. and other jurisdictions as well as confidentiality agreements and procedures, non-compete agreements and other contractual provisions to protect our intellectual property, other proprietary rights and our brand.  Our intellectual property rights may be challenged, invalidated or circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Litigation may be necessary to enforce our intellectual property rights which could result in substantial costs to us and substantial diversion of management attention. If we do not adequately protect our intellectual property, our competitors could use it to enhance their products.  Our inability to adequately protect our intellectual property rights could adversely affect our business and financial condition, and the value of our brand name and other intangible assets. 

Risk Related To Ownership of Our Common Stock

There is currently a small market for our common stock, and we expect that any market that does develop will be illiquid and extremely volatile.

As of March 31, 2009, we had approximately twenty one thousand (21,000) shareholders of record, and we had been subject to the reporting requirements of the Exchange Act for at least ninety (90) days.  There were shares of our common stock that had been held by non-affiliates for a minimum of one year which could be freely resold under Rule 144, and shares of our common stock that had been held by such persons for a minimum of six months which could be resold under Rule 144 subject to public information requirements for reporting issuers.  There were also shares of our common stock that had been held by affiliates for a minimum of six months which could be resold under Rule 144 subject to the volume limitations, manner of sale provisions, public information requirements for reporting issuers and notice requirements.  

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The market for our common stock is illiquid and subject to wide fluctuations in response to several factors, including, but not limited to:

· limited numbers of buyers and sellers in the market;

· actual  or  anticipated  variations  in  our  results  of  operations;

· our ability or inability to generate new revenues;

· increased competition; and

Furthermore, our stock price may be impacted by factors that are unrelated or disproportionate to our operating performance which include stock market fluctuations, general economic, political and overall global market conditions, such  as  recessions, interest rates or international currency fluctuations. Any and all of these factors, while unrelated directly to us, may adversely affect the market price and liquidity of our common stock.

We have authorized preferred stock which can be designated by our board of directors without shareholder approval.

We have authorized 10,000,000 shares of preferred stock.  The shares of preferred stock may be issued from time to time in one or more series, each of which shall have distinctive designation or title as shall be determined by our board of directors prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by our board of directors. Because our board of directors is able to designate the powers and preferences of the preferred stock without the vote of the holders of our common stock, the holders of our common stock will have no control over what designations and preferences our preferred stock will have. As a result of this, our board of directors could designate one or more series of preferred stock with superior rights to the rights of the holders of our common stock.

We do not expect to pay dividends for the foreseeable future.

We have not declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock.  Our ability to pay dividends is dependent upon, among other things, our future earnings, operating and financial condition, our capital requirements, general business conditions and other pertinent factors, and is subject to the discretion of our board of directors.  Accordingly, there is no assurance that any dividends will ever be paid on our common stock.

Investors may face significant restrictions on the resale of our common stock due to federal regulations of penny stock.

Our common stock is subject to the requirements of Rule 15(g)9, promulgated under the Securities Exchange Act as long as the price of our common stock is below $5.00 per share. Under such rule, broker-dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser's consent prior to the transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure in connection with any trades involving a stock defined as a penny stock. Generally, the SEC defines a penny stock as any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share. The required penny stock disclosures include the delivery, prior to any transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.  In addition, various state securities laws impose restrictions on transferring penny stocks.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

NA

22

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

23

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of:

Sanswire Corp. (formerly known as GlobeTel Communications Corp.) and Subsidiaries

We have audited the accompanying consolidated balance sheets of Sanswire Corp. (formerly known as GlobeTel Communications Corp.) and Subsidiaries (the “Company”), as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We were not engaged to examine management’s assertion about the effectiveness of Sanswire Corp. (formerly known as GlobeTel Communications Corp.) and Subsidiaries’ internal control over financial reporting as of December 31, 2008 included in the Company’s Item 9A “Controls and Procedures” in the Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sanswire Corp. (formerly known as GlobeTel Communications Corp.) and Subsidiaries as of December 31, 2008 and 2007 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced net losses and negative cash flows from operations and expects such losses to continue. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 1, on May 2, 2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the United States District Court for the Southern District of Florida against GlobeTel Communications Corp. (the “Company”) and three former officers of the Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC alleges, among other things, that the Company recorded $119 million in revenue on the basis of fraudulent invoices created by Joseph Monterosso and Luis Vargas, two individuals formerly employed by the Company who were in charge of its wholesale telecommunications business. The SEC alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a permanent injunction, civil penalties, and disgorgement with prejudgment interest. The Company has advised that it intends to vigorously defend itself in this action. The SEC lawsuit states that the staff is also considering recommending that the SEC authorize and institute proceedings to revoke the registration of Company’s securities pursuant to Section 12(j) of the Exchange Act. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Weinberg & Company, P.A.

Boca Raton, Florida

March 30, 2009

24

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	DECEMBER 31, 2008			DECEMBER 31, 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,809		$	32,278
Current assets from discontinued operations		6,406			18,678
TOTAL CURRENT ASSETS		11,215			50,956
Deposits		—			391,000
Investment in joint venture		3,229,000			—
TOTAL NONCURRENT ASSETS		3,229,000			391,000
TOTAL ASSETS	$	3,240,215		$	441,956
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	3,802,777		$	3,155,722
Notes and convertible notes payable, net of discount of $134,423 and $1,257,364		9,264,732			8,056,220
Accrued expenses and other liabilities		3,489,210			1,067,355
Current liabilities from discontinued operations		1,387,406			1,387,381
TOTAL LIABILITIES		17,944,125			13,666,678
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Series A Preferred stock, $.001 par value, 250,000 shares authorized;
no shares issued and outstanding:		—			—
Series B Preferred stock, $.001 par value, 500,000 shares authorized;
no shares issued and outstanding:		—			—
Series C Preferred stock, $.001 par value, 5,000 shares authorized;
no shares issued and outstanding:		—			—
Series D Preferred stock, $.001 par value, 5,000 shares authorized;
no shares issued and outstanding:		—			—
Common stock, $.00001 par value, 250,000,000 shares authorized;
184,704,015 and 129,756,897 shares issued and outstanding		1,848			1,299
Additional paid-in capital		111,128,580			107,169,705
Accumulated deficit		(125,834,338	)		(120,395,726	)
TOTAL STOCKHOLDERS' DEFICIT		(14,703,910	)		(13,224,722	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	3,240,215		$	441,956

See accompanying notes to consolidated financial statements

25

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31,  

	2008			2007
REVENUES	$	—		$	53,754
COST OF REVENUES		—			15,529
GROSS MARGIN		—			38,225
EXPENSES
Payroll and related taxes		887,283			3,611,596
Consulting fees		1,415,235			1,635,303
Noncash officers' and directors' compensation		435,000			696,790
Research and development		—			(14,856	)
General and administrative		476,827			1,567,968
TOTAL EXPENSES		3,214,345			7,496,801
LOSS FROM OPERATIONS		(3,214,345	)		(7,458,576	)
OTHER INCOME (EXPENSE)
Loss/Gain on extinguishment of debt		(1,096,650	)		254,200
Interest expense, net		(1,127,420	)		(2,482,296	)
NET OTHER EXPENSE		(2,224,070	)		(2,228,096	)
LOSS FROM CONTINUING OPERATIONS		(5,438,415	)		(9,686,672	)
LOSS FROM DISCONTINUED OPERATIONS		(197	)		(1,918,806	)
NET LOSS	$	(5,438,612	)	$	(11,605,478	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
BASIC and DILUTED		151,534,774			121,171,392
LOSS PER SHARE FROM CONTINUING OPERATIONS
BASIC and DILUTED	$	( 0.04	)	$	( 0.08	)
LOSS PER SHARE FROM DISCONTINUED OPERATIONS
BASIC and DILUTED	$	( 0.00	)	$	( 0.02	)
NET LOSS PER SHARE
BASIC and DILUTED	$	( 0.04	)	$	( 0.10	)

See accompanying notes to consolidated financial statements

26

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	COMMON STOCK
					ADDITIONAL			STOCK
					PAID-IN			SUBSCRIPTIONS
Description	SHARES		AMOUNT		CAPITAL			RECEIVABLE
BALANCE, DECEMBER 31, 2006		109,470,803	$	1,095	$	94,733,346		$	(130,282	)
Shares issued for cash		3,750,000		38		749,962			—
Shares issued for services		6,824,920		68		1,667,039			—
Shares issued for settlement of debt obligations		1,333,333		13		4,598,320			—
Shares issued related to discontinued operations		4,001,599		41		1,056,438			—
Shares issued for interest and financing costs		1,572,951		16		557,616			—
Shares issued for conversion of notes		939,005		9		98,556			—
Shares issued for deposit		1,864,286		19		260,981			—
Writedown of receivable related to options		—		—		(130,282	)		130,282
Options issued for executive compensation		—		—		1,922,992			—
Change of fair value of warrants		—		—		421,737			—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		1,233,000			—
Net loss		—		—		—			—
BALANCE, DECEMBER 31, 2007		129,756,897	$	1,299	$	107,169,705		$	—
Shares issued for conversion of notes		27,265,195		272		1,788,566			—
Shares issued for services		12,269,444		123		712,378			—
Shares issued for settlement of debt		2,700,701		27		99,647			—
Shares issued for accrued expenses		6,831,778		68		367,852			—
Shares issued for interest		3,200,000		32		189,368			—
Shares issued for joint venture		2,680,000		27		267,973			—
Options issued for executive compensation		—		—		244,831			—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		288,260			—
Net loss		—		—		—			—
BALANCE, DECEMBER 31, 2008		184,704,015	$	1,848	$	111,128,580		$	—

See accompanying notes to consolidated financial statements

27

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	SERIES A
					ADDITIONAL		STOCK
					PAID-IN		SUBSCRIPTIONS
Description	SHARES		AMOUNT		CAPITAL		RECEIVABLE
BALANCE, DECEMBER 31, 2006		—	$	—	$	—	$	—
Shares issued for cash		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt obligations		—		—		—		—
Shares issued related to discontinued operations		—		—		—		—
Shares issued for interest and financing costs		—		—		—		—
Shares issued for conversion of notes		—		—		—		—
Shares issued for deposit		—		—		—		—
Writedown of receivable related to options		—		—		—		—
Options issued for executive compensation		—		—		—		—
Change of fair value of warrants		—		—		—		—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2007		—	$	—	$	—	$	—
Shares issued for conversion of notes		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt		—		—		—		—
Shares issued for accrued expenses		—		—		—		—
Shares issued for interest		—		—		—		—
Shares issued for joint venture		—		—		—		—
Options issued for executive compensation		—		—		—		—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2008		—	$	—	$	—	$	—

See accompanying notes to consolidated financial statements

28

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	SERIES B
					ADDITIONAL		STOCK
					PAID-IN		SUBSCRIPTIONS
Description	SHARES		AMOUNT		CAPITAL		RECEIVABLE
BALANCE, DECEMBER 31, 2006		—	$	—	$	—	$	—
Shares issued for cash		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt obligations		—		—		—		—
Shares issued related to discontinued operations		—		—		—		—
Shares issued for interest and financing costs		—		—		—		—
Shares issued for conversion of notes		—		—		—		—
Shares issued for deposit		—		—		—		—
Writedown of receivable related to options		—		—		—		—
Options issued for executive compensation		—		—		—		—
Change of fair value of warrants		—		—		—		—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2007		—	$	—	$	—	$	—
Shares issued for conversion of notes		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt		—		—		—		—
Shares issued for accrued expenses		—		—		—		—
Shares issued for interest		—		—		—		—
Shares issued for joint venture		—		—		—		—
Options issued for executive compensation		—		—		—		—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2008		—	$	—	$	—	$	—

See accompanying notes to consolidated financial statements

29

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	SERIES C
					ADDITIONAL		STOCK
					PAID-IN		SUBSCRIPTIONS
Description	SHARES		AMOUNT		CAPITAL		RECEIVABLE
BALANCE, DECEMBER 31, 2006		—	$	—	$	—	$	—
Shares issued for cash		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt obligations		—		—		—		—
Shares issued related to discontinued operations		—		—		—		—
Shares issued for interest and financing costs		—		—		—		—
Shares issued for conversion of notes		—		—		—		—
Shares issued for deposit		—		—		—		—
Writedown of receivable related to options		—		—		—		—
Options issued for executive compensation		—		—		—		—
Change of fair value of warrants
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2007		—	$	—	$	—	$	—
Shares issued for conversion of notes		—		—		—		—
Shares issued for services		—		—		—		—
Shares issued for settlement of debt		—		—		—		—
Shares issued for accrued expenses		—		—		—		—
Shares issued for interest		—		—		—		—
Shares issued for joint venture		—		—		—		—
Options issued for executive compensation		—		—		—		—
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—
Net loss		—		—		—		—
BALANCE, DECEMBER 31, 2008		—	$	—	$	—	$	—

See accompanying notes to consolidated financial statements

30

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

	SERIES D
					ADDITIONAL		STOCK					TOTAL
					PAID-IN		SUBSCRIPTIONS		ACCUMULATED			STOCKHOLDERS'
Description	SHARES		AMOUNT		CAPITAL		RECEIVABLE		DEFICIT			DEFICIT
BALANCE, DECEMBER 31, 2006		—	$	—	$	—	$	—	$	(108,790,248	)	$	504,589
Shares issued for cash		—		—		—		—		—			750,000
Shares issued for services		—		—		—		—		—			1,667,107
Shares issued for settlement of debt obligations		—		—		—		—		—			4,598,333
Shares issued related to discontinued operations		—		—		—		—		—			1,056,479
Shares issued for interest and financing costs		—		—		—		—		—			557,632
Shares issued for conversion of notes		—		—		—		—		—			98,565
Shares issued for deposit		—		—		—		—		—			261,000
Writedown of receivable related to options		—		—		—		—		—			—
Options issued for executive compensation		—		—		—		—		—			1,922,992
Change of fair value of warrants													421,737
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—		—			1,233,000
Net loss		—		—		—		—		(11,605,478	)		(11,605,478	)
BALANCE, DECEMBER 31, 2007		—	$	—	$	—	$	—	$	(120,395,726	)	$	(13,224,722	)
Shares issued for conversion of notes		—		—		—		—		—			1,788,838
Shares issued for services		—		—		—		—		—			712,501
Shares issued for settlement of debt		—		—		—		—		—			99,674
Shares issued for accrued expenses		—		—		—		—		—			367,920
Shares issued for interest		—		—		—		—		—			189,400
Shares issued for joint venture		—		—		—		—		—			268,000
Options issued for executive compensation		—		—		—		—		—			244,831
Warrants issued for and beneficial conversion feature for convertible notes		—		—		—		—		—			288,260
Net loss		—		—		—		—		(5,438,612	)		(5,438,612	)
BALANCE, DECEMBER 31, 2008		—	$	—	$	—	$	—	$	(125,834,338	)	$	(14,703,910	)

See accompanying notes to consolidated financial statements

31

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31,

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(5,438,612	)	$	(11,605,478	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount		314,549			1,111,963
Loss/Gain on extinguishment of debt		1,096,650			(254,200	)
Stock based compensation		712,501			1,667,107
Fair value of vested options		244,831			1,922,992
Fair value of modification of warrants for investment		—			421,737
Interest expense on convertible notes payable		569,590			558,612
Common stock exchanged for interest		189,400			557,632
Common stock exchanged for financing costs		37,681			—
Noncash activity from discontinued operations		—			1,056,479
Decrease in assets:
Accounts receivable		—			271,262
Deposits		—			72,987
Decrease in assets relating to discontinued operations		12,272			141,735
Increase in liabilities:
Accounts payable		746,729			692,117
Accrued expenses and other liabilities		604,776			607,258
Increase in liabilities relating to discontinued operations		25			491,684
NET CASH USED BY OPERATING ACTIVITIES		(909,608	)		(2,286,113	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment on joint venture		(385,000	)		—
Deposit for joint venture		—			(130,000	)
Investing activities from discontinued operations		—			(242,500	)
NET CASH USED BY INVESTING ACTIVITIES		(385,000	)		(372,500	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock – exercises of warrants		—			750,000
Payments on notes payable		(25,139	)		—
Proceeds from notes and loans payable		1,292,278			1,951,312
Bank overdraft		—			(14,664	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,267,139			2,686,648
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS		(27,469	)		28,035
CASH AND EQUIVALENTS – BEGINNING OF PERIOD		32,278			4,243
CASH AND EQUIVALENTS – ENDING OF PERIOD	$	4,809		$	32,278
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest	$	16,200		$	25,083
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Shares issued for debts		—			4,840,833
Shares issued for joint venture		268,000			261,000
Shares for accrued expenses		367,920			—
Shares issued for accounts payable		99,674			—
Deposit applied to accrued expenses		659,000			—
Accrued expense for joint venture		2,844,000			—
Conversion of notes payable to common stock		1,788,838			98,565
Non-cash equity-warrant valuation and intrinsic value of beneficial conversion associated with convertible notes		288,260			1,233,000

See accompanying notes to consolidated financial statements

32

SANSWIRE CORP. (FORMERLY GLOBETEL COMMUNICATIONS CORP.)

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2008 AND 2007

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

NATURE OF OPERATIONS

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

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

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

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

ORGANIZATION AND CAPITALIZATION

The Company was organized in July 2002, under the laws of the State of Delaware. Upon its incorporation, Sanswire was a wholly-owned subsidiary of American Diversified Group, Inc. (ADGI). ADGI was organized January 16, 1979, under the laws of the State of Nevada. ADGI had two other wholly-owned subsidiaries, Global Transmedia Communications Corporation (Global), a Delaware corporation, and NCI Telecom, Inc. (NCI), a Missouri corporation.

On July 1, 2002, both Global and NCI were merged into ADGI. On July 24, 2002, ADGI stockholders approved a plan of reincorporation for the exchange of all outstanding shares of ADGI for an equal number of shares of the Company. Subsequently, ADGI was merged into the Company, which is now conducting the business formerly conducted by ADGI and its subsidiaries, and all references to ADGI in these financial statements now apply to Sanswire interchangeably.

In July 2002, pursuant to the reincorporation, the Company authorized the issuance of up to 1,500,000,000 (pre-split) shares of common stock, par value of $0.00001 per share and up to 10,000,000 shares of preferred stock, par value of $0.001 per share.

In May 2005, the Company 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 1, 2005, the shareholders voted to increase the shares authorized from 100,000,000 to 150,000,000.

All common stock amounts in this report have accounted for the reverse stock split, unless otherwise noted.

33

In the Company's annual shareholders meeting on June 21, 2006, the shareholders voted to increase the shares authorized from 150,000,000 to 250,000,000.

BASIS OF PRESENTATION

The financial statements include the accounts of Sanswire Corp. ("Sanswire," the “Company”) and its wholly-owned subsidiaries: Sanswire Networks, LLC(“Sanswire Networks”); GlobeTel Wireless Corp.; GlobeTel Wireless Europe GmbH, a German corporation, and Centerline Communications, LLC, and its wholly-owned subsidiaries, EQ8, LLC, EnRoute Telecom, LLC, G Link Solutions, LLC, Volta Communications, LLC, and Lonestar Communications, LLC; High Valley Property Ltd., a British Virgin Islands corporation; as well as the accounts GTCC de Mexico, S.A. de C.V, which GlobeTel owns 99%.

Inter-company balances and transactions were eliminated in the consolidation.

GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company had a net loss of $5,438,612 and a negative cash flow from operations of $909,608 for the year ended December 31, 2008, and had a working capital deficiency of $17,932,910 and a stockholders’ deficit of $14,703,910 at December 31, 2008.  These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

On May 2, 2008, the Securities and Exchange Commission (“SEC”) filed a lawsuit in the United States District Court for the Southern District of Florida against GlobeTel Communications Corp. (the “Company”) and three former officers of the Company, Timothy J. Huff, Thomas Y. Jimenez and Lawrence E. Lynch. The SEC alleges, among other things, that the Company recorded $119 million in revenue on the basis of fraudulent invoices created by Joseph Monterosso and Luis Vargas, two individuals formerly employed by the Company who were in charge of its wholesale telecommunications business.  The SEC alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a permanent injunction, civil penalties, and disgorgement with prejudgment interest. The Company intends to vigorously defend itself in this action. The staff is also considering recommending that the SEC authorize and institute proceedings to revoke the registration of Company’s securities pursuant to Section 12(j) of the Exchange Act. (also see Note 9)

CASH AND CASH EQUIVALENTS

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

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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.

REGISTRATION RIGHTS

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

These Agreements usually require us to pay penalties for any time delay in filing the required registration statements, or in the registration statements becoming effective, beyond dates specified in the Agreement. These penalties are usually expressed as a fixed percentage, per month, of the original amount the Company received on issuance of the debt or preferred stock, common shares, options or warrants. The Company account for these penalties when it is probable that a penalty will be incurred. At December 31, 2008 the Company has no registration rights agreement requiring penalties to be recorded.

REVENUE RECOGNITION

Revenue is recognized when there is persuasive evidence of an arrangement, goods are shipped and title passes, collection is probable, and the fee is fixed or determinable.  The Company records deferred revenue when cash is received in advance of the revenue recognition criteria being met.

INCOME TAXES

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

ADVERTISING AND MARKETING COSTS

Advertising and marketing costs are charged to operations in the period incurred. Advertising and marketing expense for the years ended December 31, 2008 and 2007, were $0 and $24,087, respectively, and are included in "General and Administrative" in the consolidated statements of operations.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE

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.

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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.

BASIC AND DILUTED NET INCOME (LOSS) PER COMMON SHARE

Basic and diluted net loss per common share has been computed based upon the weighted average number of shares of common stock outstanding during each period. The basic and diluted net loss is computed by dividing the net loss by the weighted average number of common shares outstanding during each period. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. If all outstanding options, warrants and convertible shares were to be converted or exercised as of December 31, 2008, the shares outstanding would be 245,883,363.

IMPAIRMENT OF LONG-LIVED ASSETS

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

STOCK-BASED COMPENSATION

The Company adopted SFAS No. 123(R) using the prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of its year ended December 31, 2006. In accordance with this transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include the impact of, SFAS No. 123(R). The Company’s consolidated financial statements for the year ended December 31, 2008 and 2007 reflect the impact of SFAS No. 123(R). Upon adopting SFAS No. 123(R), for awards with service conditions and graded-vesting, a one-time election was made to recognize stock-based compensation expense on a straight-line basis over the requisite service period for the entire award.

Stock-based compensation expense recognized under SFAS No. 123(R) for the years ended December 31, 2008 and 2007 were $712,501 and $1,667,107, respectively.

The Company’s determination of fair value of share-based payment awards to employees and directors on the date of grant uses the Black-Scholes model, which is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.  

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The Company accounts for stock option and warrant grants issued to non-employees for goods and services using the guidance of SFAS No. 123 and Emerging Issues Task Force (“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,” whereby the fair value of such option and warrant grants is determined using the Black-Scholes option pricing model at the earlier of the date at which the non-employee’s performance is completed or a performance commitment is reached.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

In February 2007, the FASB issued SFAS No. 159. The Fair Value Option of Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 provides an option to report selected financial assets and financial liabilities using fair value. The standard establishes required presentation and disclosures to facilitate comparisons with companies that use different measurements for similar assets and liabilities. The Company does not expect that the adoption of SFAS No. 159 for financial assets and financial liabilities to have a material impact on our consolidated financial statements in subsequent reporting periods.

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

In December 2007, the FASB issued SFAS No. 141R, Business Combinations, and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements. SFAS No. 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statement. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141R and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company does not expect that the adoption of SFAS 141R or SFAS No. 160 to have a material impact on our financial condition and results of operations, although its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

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

In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS 161 to have a material impact on the presentation of our annual and interim period disclosures.

Management does not believe that there are any recently-issued, but not yet effective accounting pronouncements, which could have a material effect on the accompanying condensed consolidated financial statements.

NOTE 2. DISCONTINUED OPERATIONS

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

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Telecom

The Company decided to wind down its telecom operations, including those of its subsidiary, Centerline Communications LLC. It did not have sufficient working capital to make its telecom operations profitable. The Company decided that any capital should be directed towards the Company’s other programs and that it should collect Centerline’s outstanding receivables and sell its assets

GlobeTel Wireless Corp.

During the first quarter of 2007, the president of GlobeTel Wireless, Ulrich Altvater, became a consultant to the Company to provide many of the services that were provided under the auspices of GlobeTel Wireless. The Company believed at the time that this would be a more cost efficient manner of running the business.  However, in May of 2007 the Company terminated the contract with Altvater.  In the second quarter of 2007, the Company decided to shut down the subsidiary and concentrate its efforts solely on the development and sale of Lighter than Air Unmanned Aerial Vehicles (LTA UAV’s).

In March 2007, the Company received $242,500 in exchange for a note payable that was secured by common stock of the Company.  The proceeds were used by GlobeTel Wireless as a further investment in a joint venture that was abandoned in 2007. The Company received a Notice of Acquisition of Collateral which allowed the note holder to satisfy the note payable with the pledged common shares.

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

Telecom	2008			2007
Loss from discontinued operations	$	(197	)	$	(781,455	)
GlobeTel Wireless
Loss from discontinued operations		—			(1,137,351	)
Total loss from discontinued operations	$	(197	)	$	(1,918,806	)

The Company incurred the following losses from discontinued operations for the years ended December 31, 2008 and 2007:

2008	Telecom			GlobeTel Wireless		Total
General and administrative	$	(197	)	$	—	$	(197	)
Gain/loss from discontinued operations	$	(197	)	$	—	$	(197	)

2007	Telecom			GlobeTel Wireless			Total
Revenue	$	4,849		$	—		$	4,849
Cost of sales		(11,676	)		—			(11,676	)
Gross margin (loss)		(6,827	)		—			(6,827	)
Payroll and related taxes		(18,935	)		(91,865	)		(110,800	)
General and administrative		(84,385	)		(798,736	)		(883,121	)
Depreciation and amortization		(654,672	)		—			(654,672	)
Consulting and professional fees		(16,636	)		—			(16,636	)
Loss on investment		—			(246,750	)		(246,750	)
Loss from discontinued operations	$	(781,455	)	$	(1,137,351	)	$	(1,918,806	)

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The Company had the following assets and liabilities from its discontinued operations on its consolidated balance sheet as of December 31, 2008 and 2007:

2008	Telecom		GlobeTel Wireless		Total
Cash	$	6,406	$	—	$	6,406
Total assets		6,406		—		6,406
Accounts payable		140,116		1,216,208		593,422
Accrued liabilities		9,605		21,477		793,985
Total current liabilities		149,721		1,237,685		1,387,406
Net liabilities of discontinued operations	$	143,315	$	1,237,685	$	1,381,000

2007	Telecom		GlobeTel Wireless		Total
Cash	$	6,942	$	—	$	6,942
Accounts receivable		11,736		—		11,736
Total assets		18,678		—		18,678
Accounts payable		140,091		1,216,208		1,356,299
Accrued liabilities		9,605		21,477		31,082
Total current liabilities		149,696		1,237,685		1,387,381
Net liabilities of discontinued operations	$	131,018	$	1,237,685	$	1,368,703

NOTE 3. TAO TECHNOLOGIES TRANSACTIONS

In November 2007, the Company and TAO-Technologies, in cooperation with the University of Stuttgart in Germany, entered into a Technical Cooperation and License Agreement wherein the Company acquired the exclusive license rights to certain TAO remote airship technologies and patents.   TAO granted to Sanswire an exclusive license for the territories of the US, Canada, Mexico and Chile for the marketing and distribution of airships based upon the technologies patented and developed by TAO. TAO was also to provide testing and engineering support for the development of airships to meet the criteria required by Sanswire customers. Sanswire was obligated to provide TAO with engineering orders of at least $1,000,000 per year and certain cash and stock payments on a quarterly basis.

On June 3, 2008 Sanswire and TAO restructured the November 2007 agreement and entered into a new agreement to form a 50/50 US based joint venture to place, among other things, the license rights to the TAO intellectual property in US, Canada, and Mexico into the US based JV company to be called Sanswire-TAO. The intellectual property includes, but is not limited to an existing patent as well as any updates to that patent. This integration of Sanswire and Stuttgart, Germany-based TAO Technologies Gmbh took place to create various strategic advantages for both companies. Each group entered the relationship with synergistic, yet very distinct core competencies. Sanswire’s business development, its inroads into the U.S. Government review process as well as inroads into overseas markets and other marketing resources complement TAO’s vast airship product research and development ability. In addition the joint venture has an exclusive agreement with TAO that may require additional payments in the future.

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During 2007, the Company made payments totaling $391,000, consisting of $130,000 in cash and 1.86 million shares valued at $261,000 as part of its November 2007 agreement with TAO Technologies GmbH and Professor Bernd Kroplin.  These payments were initially part of the Technical Cooperation and License Agreements wherein the Company acquired the exclusive license rights to certain TAO remote airship technologies and patents.  However in June 2008 the Company restructured its November 2007 agreement with TAO Technologies GmbH and Professor Bernd Kroplin. The new agreement called for the establishment of a new US-based joint venture company to be called Sanswire-TAO that was to be owned equally by TAO and Sanswire Corp. Additionally, Sanswire-TAO would register the patents and the intellectual property of TAO Technologies and Kroplin in the United States for the exclusive use of Sanswire-TAO.  Further, the $391,000 paid during 2007 was applied as payment towards the new agreement and thus the Company has previously classified these payments as a long term deposit as it resulted in a long term investment. On June 3, 2008, the Company treated the transaction as the investment in a joint venture and booked a $3,229,000 asset related to the investment.   After application of the 2007 deposit of $391,000 and the 2008 payments of $703,000, the balance of $2,135,000 due for the investment is accrued in accrued expenses as of December 31, 2008 as shown in Note 4 below.  Finally, the investment will be subject to impairment in the future.

NOTE 4. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consisted of the following:

	2008		2007
Payroll Liabilities	$	1,235,264	$	813,787
Professional Fees		118,946		253,568
Due for Investment in Joint Venture		2,135,000		—
ACCRUED EXPENSES AND OTHER LIABILITIES	$	3,489,210	$	1,067,355

NOTE 5. NOTES AND CONVERTIBLE NOTES PAYABLE

	2008		2007
(A) Notes payable	$	5,997,030	$	6,139,357
(B) Convertible notes payable, net of unamortized discount of $0 and $454,531		80,000		825,469
(C) Convertible promissory notes, net of unamortized discount of $134,423 and $802,833		2,016,913		336,036
Total		8,093,943		7,300,862
Accrued interest		1,170,789		755,358
NOTES AND CONVERTIBLE NOTES PAYABLE	$	9,264,732	$	8,056,220

(A) NOTES PAYABLE

Notes payable are made up of two separate notes.

From February 2007 to October 2007, the Company received a total of $641,812 from the first note. During January 2008, the Company received a total of $7,673. As of December 31, 2008 a balance of $4,997,130 remains through an unsecured promissory note with no formal terms of repayment.  The Company has accrued interest at a rate of 7% per annum, which totals $826,784 as of December 31, 2008.

During 2007 and 2008, the Company received no additional funding related to the second note. In January 2008, the note holder converted $150,000 of the loans to 1,428,571 shares of common stock. As of December 31, 2008 a balance of $999,900 remains through an unsecured promissory note with no formal terms of repayment.  The Company has accrued interest at a rate of 7% per annum, which totals $162,151 as of December 31, 2008.

As of December 31, 2008 and 2007, the aggregate amounts outstanding under these independent notes were $5,997,030 and $6,139,357.

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(B) CONVERTIBLE NOTES PAYABLE

September 2006 Notes

On September 6, 2006, the Company entered into subscription agreements with several investors whereby these investors bought a total $1,280,000 in two year, 7% convertible notes and were issued Class A and Class B Warrants). Net proceeds of $1,124,080 were received, after deducting costs and expenses related to the transaction.

The Company determined that the fair value of the conversion feature was $624,869 and the fair value of the warrants was $655,131 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 4.5%, expected volatility of 99.63% and an expected term of the warrants of 5 years.   The initial calculated fair value of warrants and the beneficial conversion of the notes of $1,280,000 was reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and is being amortized by the effective interest method over the term of the Notes. For the year ended December 31, 2007, the Company amortized $397,872 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

In January 2007, the Company executed several Certificates of Adjustments for the previously issued Notes. The Notes previously had Exercise Prices ranging from $0.33 to $.39 and with the execution of the adjustments; the Exercise Prices were then modified to $0.196. The aforementioned substantial modification of debt is accounted for under EITF 96-19, however EITF 06-6 deemed the modification an extinguishment of debt, with a resultant gain of $254,200 recorded upon execution. On May 1, 2007, the Company executed several Certificates of Adjustments for the previously issued Warrants. The Warrants previously had Exercise Prices ranging from $0.75 to $1.00 and with the execution of the adjustments; the Exercise Prices were then modified to $0.196. The Company recognized a $140,487 loss from the increase in fair value from the modification of warrants.

Additionally, as the Company was unable to register the shares underlying the debentures and warrants due to it restating its financial statements, the Company had to pay liquidated damages to the debenture holders. In 2007, the Company agreed to and issued 662,951 shares valued at $104,400 to pay liquidated damages through March 31, 2007.

Also in December 2007, the Company separately entered into a forbearance agreement with some of the debt holders. This agreement changed their conversion to the lesser of $.20 or 70% of the volume weighted average price for the 10 days prior to conversion. The agreement also limits some of the investors from engaging in short sales on the stock and places a volume limitation on sales.   The agreement becomes effective January 16, 2008, and as such, the Company reviewed the transaction for possible derivative accounting requirements pursuant to EITF 00-19.  The Company used the Black-Scholes option pricing model to evaluate the fair value of the embedded derivative. On January 16, 2008, the Company allocated the fair value of the embedded derivative to derivatives expense in the aggregate amount of $184,081. The embedded derivative was subsequently adjusted to be recorded at fair market value at each period ending date and a total change of $184,081 recorded to derivatives income (expense).  During 4th quarter 2008, the outstanding balance of these notes and interest was converted into approximately 7.65 million shares.

In January 2008, the Company issued certificates of adjustment for certain convertible debentures and warrants issued pursuant to the 2006 financing to $.105 per share.  The Notes previously had Exercise Prices of $0.196.  The aforementioned substantial modification of debt is accounted for under EITF 96-19, however EITF 06-6 deemed the modification an extinguishment of debt, with a resultant loss of $293,817 recorded upon execution, which was recorded in January 2008.

During 2008, $1,200,000 of principal and was converted into approximately 23.4 million shares of Company common stock.

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(C) CONVERTIBLE PROMISSORY NOTES

2006 Convertible Promissory Notes

In December 2006, the Company entered into financing agreements for convertible promissory notes payable totaling $250,000.  As of December 31, 2006, the Company received $206,000 with the balance of $44,000 being received in January 2007. Upon receipt of the full 250,000, the notes become convertible into common stock of the Company at $.196 per share.  The note, which is due two years from inception, accrues interest at a rate of 7% per annum and were issued Class A and Class B warrants (valued at $103,610 and $60,528, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The Company entered into additional financing agreements on the same terms and conditions as set forth above in March 2007 for a total of $400,000; in June for $100,000; in June for $125,000 and in September for $175,000. They were also issued Class A warrants (valued at $175,727, $33,706, $42,255 and $16,520, respectively as described below) and Class B warrants (valued at $103,805, $18,995, $23,771 and $5,899, respectively as described below).

The Company determined that the total fair value of the conversion features was $595,140 and the total fair value of the warrants was $617,860 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 4.5%, expected volatility ranging from 58.68% to 105.47% and an expected term of the warrants of 5 years.  The initial calculated fair value of warrants and the beneficial conversion of total of the notes of $1,138,869 were reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and are being amortized by the effective interest method over the term of the Notes. For the year ended December 31, 2007, the Company amortized $429,333 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

In November  2007, the Company entered into securities purchase agreements to sell shares at $.105 per share for a total of $315,000, only a portion of which was payable at the time of subscription with the remainder payable upon the happening of certain corporate events with $163,000 received as of December 31, 2007. This had the effect of resetting the conversion provisions on the previously issued convertible notes to $.105 per share. The agreements were revised in the first quarter of 2008 to allow a larger percentage of the subscribed funds to become available to the Company. Thus, a portion of the subscription amount was received in the first quarter of 2008.

In January 2008, the Company issued certificates of adjustment for certain convertible debentures and warrants issued pursuant to the 2006 and 2007 financings to $.105 per share.  The Notes previously had Exercise Prices of $0.196.  The aforementioned substantial modification of debt is accounted for under EITF 96-19; however EITF 06-6 deemed the modification an extinguishment of debt, with a resultant loss of $783,667 recorded upon execution, which was recorded in January 2008.

During 2008 the Company entered into an additional $547,000 in financing agreements on the same terms and conditions as set forth above.  They were also issued Class A warrants (valued at $79,296 as described below) and Class B warrants (valued at $43,287 as described below).

The Company determined that the total fair value of the warrants was $122,583 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging from 1.58% to 2.76%, expected volatility ranging from 114.16% to 132.31% and an expected term of the warrants of 2 years.  The initial calculated fair value of warrants of $122,583 was reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and are being amortized by the effective interest method over the term of the Notes. For the year ended December 31, 2008, the Company amortized $44,454 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

During 2008 and 2007, $52,000 and $94,130 of principal and interest were converted into 543,632 and 896,480 shares, respectively, of Company common stock.

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2007 Convertible Promissory Note

In December 2007, the Company entered into a financing agreement for a convertible promissory note payable totaling $20,000.  The note is convertible into common stock of the Company at $.196 per share.  The note, which is due two years from inception, accrues interest at a rate of 7% per annum and was issued Class A and Class B warrants (valued at $7,916 and $3,921, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The Company determined that the fair value of the conversion features was $8,163 and the fair value of the warrants was $11,837 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 4.5%, expected volatility of 58.68% and an expected term of the warrants of 5 years.   The initial calculated fair value of warrants and the beneficial conversion of the notes of $20,000 was reflected by the Company as a valuation discount and offset to the carrying value of the Note, and is being amortized by the effective interest method over the term of the Note. For the year ended December 31, 2007, the Company amortized $833 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

In January 2008, the Company issued certificates of adjustment for certain convertible debentures and warrants issued pursuant to the 2007 financings to $.105 per share.  The Notes previously had Exercise Prices of $0.196.  The aforementioned substantial modification of debt is accounted for under EITF 96-19; however EITF 06-6 deemed the modification an extinguishment of debt, with a resultant loss of $19,167 recorded upon execution, which was recorded in January 2008.

During 2008 the Company entered into an additional $80,000 in financing agreements on the same terms and conditions as set forth above.  They were also issued Class A warrants (valued at $17,138 as described below) and Class B warrants (valued at $9,469 as described below).

The Company determined that the total fair value of the warrants was $26,607 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging from 1.53% to 1.65%, expected volatility ranging of 125.19% and an expected term of the warrants of 2 years.  The initial calculated fair value of warrants of $26,607 was reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and are being amortized by the effective interest method over the term of the Notes. For the year ended December 31, 2008, the Company amortized $11,086 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

During 2008 and 2007, no principal or interest has been converted.

2008 Convertible Promissory Notes

During 2008, the Company entered into new financing agreements for convertible promissory notes payable totaling $97,606.  The notes are convertible into common stock of the Company at $.105 per share.  The notes, which are due two years from inception, accrues interest at a rate of 7% per annum and were issued Class A and Class B warrants (valued at $20,485 and $11,620, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The Company determined that the fair value of the conversion features was $8,469 and the fair value of the warrants was $32,465 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging from 1.91% to 2.3%, expected volatility ranging from 114.16% to 142.06% and an expected term of the warrants of 2 years.  The initial calculated fair value of warrants and the beneficial conversion of the notes of $40,934 were reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and are being amortized by the effective interest method over the term of the Note. For the year ended December 31, 2008, the Company amortized $16,024 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

 

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During 2008, no principal or interest has been converted into the Company’s common stock however $25,139 was repaid.

2008 Convertible Promissory Note

During 2008, the Company entered into a new financing agreement for a convertible promissory note payable totaling $25,000.  The note is convertible into common stock of the Company at $.105 per share.  The note, which is due two years from inception, accrues interest at a rate of 7% per annum and was issued Class A and Class B warrants (valued at $3,466 and $1,948, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The Company determined that the fair value of the warrants was $5,414 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 1.6%, expected volatility ranging of 140.25% and an expected term of the warrants of 2 years.   The initial calculated fair value of warrants of $5,414 was reflected by the Company as a valuation discount and offset to the carrying value of the Note, and is being amortized by the effective interest method over the term of the Note. For the year ended December 31, 2008, the Company amortized $677 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

During 2008, no principal or interest has been converted however during 2009, $25,000 in principal and interest has been converted into 238,096 shares of the Company’s common stock.

2008 Convertible Promissory Notes

In September 2008, the Company entered into a new financing agreement for convertible promissory note payable totaling $50,000.  The note is convertible into common stock of the Company at $.105 per share.  The note, which is due two years from inception, accrues interest at a rate of 7% per annum and was issued Class A and Class B warrants (valued at $4,677 and $2,597, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The Company determined that the fair value of the warrants was $7,274 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging of 2.16%, expected volatility ranging of 142.06% and an expected term of the warrants of 2 years.   The initial calculated fair value of warrants of $7,274 was reflected by the Company as a valuation discount and offset to the carrying value of the Note, and is being amortized by the effective interest method over the term of the Note.  On October 6, 2008 $50,000 of principal and interest were converted into 476,190 shares of the Company’s common stock.  As such, the Company amortized the full value of the discount of $7,274, which is reflected as financing costs in the Company’s consolidated statements of operations.

In December 2008, the Company entered into a new financing agreement for a new convertible promissory note payable totaling $50,000.  The note is convertible into common stock of the Company at a price to be determined in the future.  The note, which is due on January 31, 2009, accrues interest at a rate of 5% per annum.  The note is secured by 1,000,000 shares of the Company’s common stock owned by the Company’s CEO.  In February 2009, the Company issued 250,000 shares, valued at $9,500, as a penalty to extend the maturity to an unspecified date.

2008 Convertible Promissory Notes

From October to December 2008, the Company entered into new financing agreements for convertible promissory notes payable totaling $435,000.  The notes are convertible into common stock of the Company at $.105 per share.  The notes, which are due two years from inception, accrues interest at a rate of 7% per annum and was issued Class A and Class B warrants (valued at $54,758 and $30,688, respectively as described below). The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

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The Company determined that the fair value of the warrants was $85,445 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount.  For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging from .75% to 1.62%, expected volatility ranging from 138.92% to 142.25% and an expected term of the warrants of 2 years.  The initial calculated fair value of warrants of $85,445 was reflected by the Company as a valuation discount and offset to the carrying value of the Note, and is being amortized by the effective interest method over the term of the Note. For the year ended December 31, 2008, the Company amortized $38,083 of the valuation discount, which is reflected as financing costs in the Company’s consolidated statements of operations.

During 2008, $145,000 in principal and interest has been converted into 1,369,895 of the Company’s common stock.

NOTE 6. AGREEMENTS

AGREEMENTS

Several agreements, letters of intent, and memorandums of understanding regarding the Sanswire project were entered into during 2008 and 2007 and through the date of this report, none of which require the recording of any assets, liabilities, revenues or expenses.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Securities and Exchange Commission

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

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

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

The SEC alleges that the Company violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, as amended, Sections 10(b), 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rules 10b-5, 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act. The SEC seeks as relief a permanent injunction, civil penalties, and disgorgement with prejudgment interest. The Commission subsequently consolidated this action with another pending action involving former officers of the Company. The Commission has also moved to amend its complaint against the Company to include additional allegations of wrongdoing beginning in 2002, which motion to amend is still pending with the Court.  The parties are currently engaged in discovery.  The Company has been vigorously defending itself in this action.

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Joseph Monterosso

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

Wachovia v. GlobeTel

In connection with the operations of Globetel Wireless Europe GmbH and the acquisition of Altvater GmbH, the Company guaranteed a letter of credit in the amount of $600,000. Upon Globetel Wireless Europe GmbH ceasing operations, the letter of credit was drawn upon. The letter of credit was not collateralized. In September 2007, Wachovia filed a lawsuit in Broward County in an attempt to recover the amount through arbitration with the American Arbitration Association. On June 2, 2008, the American Arbitration Association awarded Wachovia $762,902

Richard Stevens v. GlobeTel

The Company and its directors were sued in the case RICHARD STEVENS vs. GLOBETEL COMMUNICATIONS CORP., et al. Case No.: 06-cv 21071. The original allegations of the complaint were that the Company’s proposed transaction to build wireless networks in Russia was a sham. The amended complaint alleged that the transaction was not a sham, but that the Company refused to accept payment of $300 million. Recently, the officers and directors with the exception of Timothy Huff have been dismissed from the case.

In February 2008, the Company and the Plaintiff reached a settlement in principle that has been filed with the Court for approval. Under the terms of the proposed settlement agreement in the class action, the Company’s D&O insurance carrier will make a cash payment to the class of $2,300,000, less up to $100,000 for potential counsel fees and expenses. All claims in the class action will be dismissed with prejudice. The US District Court for the Southern District of Florida has approved the settlements reached in its pending securities class action and a shareholder derivative action on February 4, 2008.

Derivative Action

On July 10, 2006 a derivative action was filed against the officers and directors of the Company alleging that they have not acted in the best interest of the Company or the shareholders and alleged that the transaction to install wireless networks in Russia was a sham. The lawsuit is pending in the Federal District Court for the Southern District of Florida (Civil Case No. 06-60923). The Company believes that the suits are without merit and will vigorously defend against it. The Company has hired outside counsel to defend it in this action. The Company and the Plaintiff have reached an agreement in principle to settle this action and have submitted such settlement with the Court for its approval. Under the terms of the settlement, Company’s D&O insurance carrier will pay $60,000 in attorneys’ fees to plaintiff’s counsel, the Company will implement or maintain certain corporate governance changes, and all claims will be dismissed with prejudice.

Mitchell Siegel v. GlobeTel

On February 2, 2007, GlobeTel was sued in the Circuit Court for Broward County, Florida entitled Mitchell Siegel v. GlobeTel Communications Corp. , Case no. 0702456 (“the Siegel Lawsuit”). In this action, Siegel sued the Company for breach of contract in regards to a Key Executive Employment Agreement.  On February 15, 2008, both parties entered into a settlement agreement whereas Mr. Siegel would receive $175,000 worth of stock, payable over 12 months, and 50% of the gross proceeds, up to a total amount of $300,000, received from an October 2006 agreement. During 2008 the Company paid $131,250 in the Company’s common stock associated with the settlement agreement.  During 2009 the Company paid an additional $29,167 in the Company’s common stock.

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Former Consultants

The Company is a defendant in two lawsuits filed by Matthew Milo and Joseph Quattrocchi, two former consultants, filed in the Supreme Court of the State of New York (Richmond County, Case no. 12119/00 and 12118/00). These matters were subsequently consolidated as a result of an Order of the court and now bear the singular index number 12118/00. The original lawsuits were for breach of contract. The complaint demands the delivery of 10,000,000 pre split shares of ADGI stock to Milo and 10,000,000 to Quattrocchi. The Company was entered into the action as ADGI was the predecessor of the Company. The suit also requests an accounting for the sales generated by the consultants and attorneys fees and costs for the action.

The lawsuits relate to consulting services that were provided by Mr. Milo and Mr. Quattrocchi and a $50,000 loan advanced by these individuals, dated May 14, 1997, of which $35,000 has been repaid.

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

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

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

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

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

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

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

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Trimax Wireless

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

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

In August 2007, Altvater and Trimax filed suit against the Company alleging, defamation, conversion, breach of contract and seeking injunctive relief. The Company successfully moved to have the two cases consolidated and has filed a Motion to Dismiss this suit.  The Company intends to vigorously defend this suit, but no assurance can be given about the outcome of the litigation.

American Express

American Express Travel Related Services Company, Inc. has filed a lawsuit against the Company and Sanswire Networks LLC (CASE NO: CACE 08-013239, Broward County Florida), seeking to recover a total of $394,919 for unpaid charges on the Companies’ corporate purchasing account. On October 3, 2008, American Express received a final judgment for $404,113.  This liability was previously recorded in the Company’s accounts payable as incurred.

LEASES AND RENTS

Sanswire’s corporate offices are now located at 101 NE 3 rd Ave., Suite 1500, Fort Lauderdale, FL 33301. Base rent is $575 per month plus the cost of services used by Sanswire. The lease is for a period of 6 months. The lease is for a period of 6 months and terminates on September 30, 2009.   We believe our facilities are adequate for our current and near-term needs.  

The Company previously leased office facilities at 9050 Pines Blvd., Suite 110, Pembroke Pines, Florida 33024, as of April 1, 2004. The Company vacated the premises in March 2006, having turned over the space to Gotham Financial as part of the sale of the Stored Value assets to Gotham. However, there was unpaid rent due on both the first and second floor suites. In August 2007, the landlord received a judgment in the amount of $206,730 of which $115,693 was accrued for in 2006 as it relates to 2006 expenses. The balance was accrued in 2007.

Until September 2007, the Company leased a 66,000 square foot space hanger in Palmdale, California. The initial lease, between Sanswire Networks, LLC and the City of Los Angeles World Airports, was for a term of three months, ended July 22, 2005 with a monthly rent of $19,990. On June 8, 2005 the lease term was amended for fifteen months, commencing June 8, 2005 through September 7, 2006, with two one-year options. Concurrently with the signing of the amended lease, the parties entered into a reimbursement agreement to share the cost of certain improvements.

As of October 2007, Sanswire no longer occupies a hangar at Palmdale Regional Airport, the monthly cost of this space was $20,847. This facility was adjacent to the United States Air Force’s Plant 42 and Edwards Air Force Base. Sanswire constructed and tested Stratellite and Sky Sat prototypes at the facility. The hangar also included administrative office space. Sanswire is indebted to Los Angeles World Airports, the lessor of the hangar, in the amount of $161,761.

Rent expense for 2008 and 2007 were $42,431 and $285,033, respectively.

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NOTE 8. INCOME TAXES

Deferred income taxes and benefits for 2008 and 2007 are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes. The tax effects (computed at 15%) of these temporary differences and carry-forwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:

	2007			Current Period Changes			2008
Deferred tax assets:
Net operating loss carryforwards	$	14,849,395		$	815,792		$	15,665,187
		14,849,395			815,792			15,665,187
Valuation allowance		(14,849,395	)		(815,792	)		(15,665,187	)
Net deferred tax asset	$	—		$	—		$	—

A reconciliation of income benefit provided at the federal statutory rate of 15% to income tax benefit is as follows:

	2008			2007
Income tax benefit computed at federal statutory rate	$	(815,792	)	$	(1,740,822	)
Losses not benefited		815,792			1,740,822
	$	—		$	—

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

At the end of 2008, the Company had net operating loss carry-forwards (including those of its successor due to accounting for the reincorporation as an "F" reorganization under the Internal Revenue Code) of approximately $81,429,083, which expire at various dates through 2021.

NOTE 9. COMMON STOCK TRANSACTIONS

During the year ended December 31, 2008, the Company issued the following shares of common stock:

SHARES	CONSIDERATION	VALUATION
2,700,701	Settlement of Debt	$	99,674
1,222,222	Services - Performance Bonus		110,000
6,047,222	Consulting Services		374,502
30,465,195	Converted Notes Payable and Accrued Interest		1,978,838
6,831,778	Stock for Debt		367,920
1,500,000	Services - Performance Bonus		52,500
2,680,000	Stock for Joint Venture		268,000
2,000,000	Services - Performance Bonus		78,000
1,500,000	Services - Performance Bonus		97,500

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During the year ended December 31, 2007, the Company issued the following shares of common stock:

SHARES	CONSIDERATION	VALUATION
5,584,932	Settlement of Debts	$	5,955,565
770,870	Services - Performance Bonus		300,639
3,750,000	Exercised Warrants		750,000
2,521,037	Services - Performance Bonus		614,592
177,910	Stock for Brokers Fees		16,012
2,475,000	Consulting Services		640,000
2,261,956	Converted Notes Payable and Accrued Interest		355,444
1,864,286	Deposit for Joint Venture		261,000
880,103	Stock for Directors Fees		95,864

The valuation amounts of the above common stock transactions are based on the amounts that common stock and related additional paid-capital were increased (decreased) upon recording of each transaction. For exercises of stock options, no values are indicated, whereas the options were valued and the additional paid-in capital account was increased upon the original issuance (grant) of the options and no additional charges were recorded upon exercise of the options. For conversions of preferred stock, the valuation indicated is the recorded amount of the preferred stock upon original issuance of the preferred shares, which amount was reclassified to common stock and related additional paid-in capital upon conversion. Where preferred stock was originally issued for broker's fees (instead of cash) and, accordingly, no monetary compensation was received or recorded by the Company for the preferred shares issued, the listed common stock valuation is also zero.

For other issuances of shares during the periods described above, the Company-issued restricted shares (Rule 144) of its common stock to consultants and officers for services to the Company. Through December 31, 2004, issuance of restricted shares (Rule 144) were valued, due to limitations in current marketability, by the Company based upon half of the average bid and asked price of the Company's shares on the date of issuance, unless the services provided were valued at another amount as agreed upon between the parties.

In August 2008, the Company issued an additional 800,000 contingent shares to a vendor that will be returned to the company when the amounts due the vendor are paid the Company has accounted for them as forfeitable shares as they believe they will be returned under the agreement in 2009 they are not considered outstanding for Earnings per share purpose and the liability remains recorded.

NOTE 10. STOCK OPTIONS AND WARRANTS

During the year ended December 31, 2008, the Company issued the following fully vested options to acquire Common stock:

Date Issued	Shares		Consideration	Valuation		Relationship
1/18/2008		3,444,444	Employees’ Bonus	$	228,029	Non Executive Employees
2/6/2008		250,000	Employees’ Bonus	$	16,803	Non Executive Employees

During the year ended December 31, 2007, the Company issued the following fully vested options to acquire Common stock:

Date Issued	Shares		Consideration	Valuation		Relationship
3/19/2007		500,000	Employee Bonus	$	130,753	Non Executive Employee
3/28/2007		2,000,000	Officer Stock Option Grant	$	352,093	Chief Operating Officer
4/12/2007		2,000,000	Officer Stock Option Grant	$	347,676	Chief Operating Officer
4/13/2007		958,000	Employees’ Bonus	$	167,670	Non Executive Employees
5/22/2007		4,078,945	Employee’s Bonus	$	504,470	Executive Employees
6/15/2007		1,500,000	Officer Severance/Bonus	$	266,296	Chief Operating Officer
8/20/2007		55,555	Employees’ Bonus	$	5,408	Non Executive Employee
8/30/2007		1,833,333	Officer Severance/Bonus	$	116,236	Former Chief Executive Officer
10/18/2007		750,000	Employees’ Bonus	$	32,389	Non Executive Employee

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See below for more information regarding vesting term and exercise prices.

The above scheduled stock options were recorded at fair market value under SFAS 123R (see Note 1 above). The fair value of the options at the time of issuance was determined using the Black-Scholes option-pricing model with the following assumptions:

Risk free interest rate		3 - 4.50	%
Expected life	3 years
Expected volatility		65-112	%
Expected dividend yield		0	%

As of December 31, 2008, the exercise price of all options outstanding exceeds the market price of the Company’s stock, and therefore there was no intrinsic value. 

STOCK OPTION BONUS PLANS

In November 2005, the Company established its 2005 Stock Option Bonus Plan, wherein the board of directors authorized the issuance of stock options for restricted shares totaling 1,509,180 shares to the officers and employees of the Company as payment of accrued bonuses through December 31, 2005. The stock options are exercisable at $2.12, based on the closing market price of the Company's free-trading shares on the date the options were granted. Through the date of this report, none of these options have been exercised.

During 2005, the board of directors authorized the issuance of stock options for restricted shares totaling 199,490 shares to the directors of the Company as board members' compensation for services through December 31, 2005. The stock options are exercisable at various amounts, ranging from $1.99 to $4.35 per share, based on the closing market price of the Company's free-trading shares on the date the options were granted, except for a now former director who was issued 37,500 and 30,000 options shares at $1.49 and $0.99, respectively. Through the date of this report, none of these options have been exercised.

All of the options granted during 2008 and 2007, unless otherwise discounted as noted above, were exercisable based on the closing market price of the Company's free-trading shares.

STOCK OPTIONS

Employee options vest according to the terms of the specific grant and expire from 3 to 5 years from date of grant. As of December 31, 2007, all options issued and outstanding have fully vested and thus there was no deferred compensation, Stock option activity for the years ended December 31, 2008 and 2007 was as follows:

	Number of Options (in shares)			Weighted Average Exercise Price
Outstanding at December 31, 2006		20,173,602		$	.894
Options Granted		13,675,833			.265
Options Forfeited		(5,144,265	)		.864
Outstanding at December 31, 2007		28,705,170		$	.600
Options Granted		3,694,444			.091
Options Forfeited		(10,916,862	)		1.619
Options Cancelled		(5,500,000	)		.317
Outstanding at December 31, 2008		15,982,752		$	.350

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WARRANTS

On September 6, 2006, the Company entered into subscription agreements with several investors whereby these investors were issued Class A and Class B Warrants. The investors received one Class A Warrant to purchase one share of common stock for every two shares that the notes were convertible into on the closing date as well as one Class B Warrant to purchase the identical number of shares.

The Class A Warrants are exercisable for a purchase price equal to 150% of the market price on the day prior to closing and the Class B Warrants are exercisable for a purchase price equal to 200% of the market price on the day prior to closing which calculates to 3,602,190 warrants ranging from $.66 to $1.26. The Warrants have a 5 year term.

On April 13, 2007, the Company agreed to reprice the exercise price of warrants previously packaged with a previous Convertible Note financing from 2006 to $.20 per share, and increased the number of shares issuable upon exercise of such warrants 1.5 times the original amount of warrants issued. In consideration of the aforementioned one of the investors exercised their warrants which resulted in the issuance of 2,250,000 additional warrants.

On May 1, 2007, the Company executed several Certificates of Adjustments for the previously issued Warrants. The Warrants previously had Exercise Prices ranging from $0.75 to $1.00 and with the execution of the adjustments; the Exercise Prices were then modified to $0.196. The Company recognized a $140,487 loss from the increase in fair value from the modification of warrants.  In January 2008, the Company issued certificates of adjustment for certain convertible debentures and warrants issued pursuant to the 2006 financing to $.105 per share.  The Company does not anticipate any additional charge related to this modification due to the new price being above market price at the time of the modification.

In December 2007, the Company entered into financing agreements for convertible promissory notes payable whereby these investors were issued Class A and Class B warrants. The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

In December 2008, the Company entered into financing agreements for convertible promissory notes payable whereby these investors were issued Class A and Class B warrants. The Class A and B warrants are exercisable for a purchase price of $.21 and $.315, respectively. The warrants have a 2 year term.

The following table summarizes certain information about the Company’s stock warrants.

	Warrants Class A			Warrants  Class B		Weighted Average Exercise Price
Outstanding at December 31, 2006		3,736,701			1,801,095	$	1.994
Warrants Granted		8,121,428			3,914,285		0.242
Warrants Exercised		(3,750,000	)		—		0.200
Outstanding at December 31, 2007		8,108,129			5,715,380	$	0.330
Warrants Granted		5,879,075			3,919,383		0.252
Warrants Exercised		—			—		—
Outstanding at December 31, 2008		13,987,204			9,634,763	$	0.253

The fair value of the warrants issued during 2007 was determined using the Black-Scholes option-pricing model with the following assumptions:

Risk free interest rate		.75 - 4.50	%
Expected life	2 - 5 years
Expected volatility		58 - 142	%
Expected dividend yield		0	%

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NOTE 11. PREFERRED STOCK

As of the date of this report the Company has no preferred shares issued and/or outstanding.

NOTE 12. SUBSEQUENT EVENTS

On February 17, 2009, the Company entered into subscription agreement with accredited investors. The Company sold $140,000 of the Company’s 7% Convertible Debentures, 3-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture of the Company’s common stock at an exercise price of $0.21, and three-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture shares of the Company’s common stock at an exercise price of $0.315. The Debentures are convertible into shares of the Company’s common stock at $.105 per share pursuant to the following terms. If after 90 days from the date hereof the market price of the Company’s common shares during the 90 day period has not closed at a bid price at or above $.12 per share for 3 or more consecutive trading days. In such instance then the Investors’ price per share shall be equal to the average closing bid price for the last 30 trading days immediately prior to the 90th day after the date of this addendum. Should the price of the common shares be $.105 or higher on the 90th day after the date of this addendum, then the purchase price per share shall remain at $.105 per share.  Should the Market Price of the shares be $.105 or higher on the 90th day after the date of this addendum, but less than $.125, then the Investor shall be entitled to an amount of additional shares equal to 10% of the number of shares to which the Investor is otherwise entitled.

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ITEM 9 CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

ITEM 9A (T) CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation under the supervision and with the participation of Jonathan Leinwand, the Company’s Chief Executive Officer and Principal Financial Officer (the “Reviewing Officer”), of the effectiveness of the Company's disclosure controls and procedures as of December 31, 2008. In designing and evaluating the Company's disclosure controls and procedures, the Company and its management recognize that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, the Company's management was required to apply its reasonable judgment. Furthermore, in the course of this evaluation, management considered certain internal control areas, including those discussed below, in which we have made and are continuing to make changes to improve and enhance controls. Based upon the required evaluation, the Reviewing Officer concluded that as of December 31, 2008, the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, except for the establishment of the audit committee as contemplated below.

Material Weaknesses

The Company currently does not have an audit committee.

Remediation of Material Weaknesses

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

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

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

a.   Seeking to recruit board members independent of management;

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

c. Seeking outside review of acquisition transactions

d. Establishment of an audit committee

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

Changes in Internal Control Over Financial Reporting

Except as set forth above, there have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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Management’s Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our chief executive officer and chief financial officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2008 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2008, based on those criteria. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

This annual report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission.  

ITEM 9B. OTHER INFORMATION

BOARD APPOINTMENTS AND RESIGNATIONS

On March 14, 2007, Michael Castellano and Patrick Heyn resigned as directors of the Company. Mr. Castellano also served as chairman of the Audit Committee.

On September 7, 2007, Peter Khoury resigned as director of the Company. Mr. Khoury also resigned as CEO. 

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

As of March 31, 2009 the officers and directors of the Corporation are:

Name	Age	Position with Company
Jonathan Leinwand	38	Chief Executive Officer, Director
Przemyslaw Kostro	45	Chairman of the Board

All directors hold office until the next annual meeting of our stockholders and until their successors have been elected and shall qualify. Officers serve at the discretion of our Board of Directors.

Jonathan Leinwand

Jonathan Leinwand, Chief Executive Officer and Director, joined Sanswire as General Counsel in June 2005 and became a director in August 2005. He was appointed CEO in September 2007. Prior to joining Sanswire, he was in private practice since 1996 concentrating in the areas of corporate and securities law, representing a number of public companies. As part of his practice, Mr. Leinwand also served as a deal-maker for several US and foreign corporations arranging strategic alliances and funding both in the US and abroad. Mr. Leinwand graduated from the University of Miami with honors degrees in Political Science and Communications and graduated cum laude from the University of Miami School Of Law.

Przemyslaw L. Kostro

Przemyslaw L. Kostro, Chairman, was first elected to the Board of Directors in November 2001. From November 2001 to April 2002, Mr. Kostro also served as the CEO of Sanswire before relinquishing the position to Timothy Huff. Over the past five years, Mr. Kostro has been an attorney engaged in international law, and has been providing professional and consulting services to several large and mid-sized entities in Europe.  Mr. Kostro resigned as a Director in October 2005 and was reappointed as Director and Chairman of the Board in October 2006.

(B) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors, and persons who own more that ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and with any exchange on which the Company's securities are traded. Officers, directors and persons owning more than ten percent of such securities are required by Commission regulation to file with the Commission and furnish the Company with copies of all reports required under Section 16(a) of the Exchange Act. Based solely upon our review, we believe that all reports required under Section 16(a) of the Exchange Act were made.

Code of Ethics

We have not adopted a code of ethics.

Audit Committee Financial Expert

We do not have an audit committee financial expert because the Company has been unable to appoint such a qualified person during the period when the Company has been restating its financial statements and becoming current with its financial statements.

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ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth information regarding compensation paid to our principal executive officer, principal financial officer, and our highest paid executive officer, all of whose total annual salary and bonus for the years ended December 31, 2008, and 2007.

Name & Principal Position	Year		Salary ($)	Bonus ($)		Stock Awards ($)	Option Awards ($)		Non- Equity Incentive Plan Compensation ($)	Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation( $)	Total ($)
Jonathan Leinwand, CEO, Director		2008	34,599		—	55,000		—	—		—	48,205	137,804
Jonathan Leinwand, CEO, Director		2007	46,153		—	240,000		—	—		—	—	286,153

OUTSTANDING EQUITY AWARDS

The following table sets forth information with respect to the outstanding equity awards of our principal executive officers and principal financial officer during 2008, and each person who served as an executive officer of the Company as of December 31, 2008:

	OptionAwards									StockAwards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Jonathan Leinwand		921,052		—		—		0.190	May 22, 2010		—		—		—		—
		1,400,000		—		—		0.105	October 18, 2010		—		—		—		—
		2,916,667		—		—		0.090	January 10, 2011		—		—		—		—

COMPENSATION OF DIRECTORS

The following table summarizes the compensation for our non-employee board of directors for the fiscal years ended December 31, 2008 and 2007: 

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Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
(a)	(b)		(c)		(d)				(f)		(g)		(j)
Przemyslaw Kostro, Chairman (2007)		—		—		18,750		—		—		—		18,750
Patrick Heyn (2007)		—		—		—		—		—		—		—
Michael Castellano (2007		—		—		—		—		—		—		—
Peter Khoury (2007)		103,332		76,099		278,968		—		—		—		458,399

Compensation paid to Directors who are also officers of the Company is reflected in Item 10. Executive Compensation. We maintain a policy of compensating our directors using cash and stock options. Currently, the Company determines Board compensation on an individual basis. Employee members of the Board do not receive additional compensation for their service on the Board.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Common Stock

As of March 31, 2009, there were 185,887,861 common shares issued and outstanding. The table below sets forth the share ownership of our executive officers and directors, individually and as a group. No other person is the beneficial owner of more than 5% of our issued and outstanding common shares

Title of Class	Name & Address of Beneficial	Amount and Beneficial		Nature of Ownership		Percentage of Class (1)
Common Stock	Przemyslaw L. Kostro Chairman   101 NE 3 rd Ave, Suite 1500, Fort Lauderdale, Florida 33301		—		—		0.00	%
Common Stock	Jonathan Leinwand, CEO Since October 2007 and Director Since August 2005 101 NE 3 rd Ave, Suite 1500, Fort Lauderdale, Florida 33301		2,876,752	Direct			1.55	%
	Total of all Officers and Directors as a Group		2,876,752				1.55	%

(1) Based on 185,887,861 shares issued and outstanding on March 31, 2009.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

See Item 8, Notes 9 and 10 Common Stock Transactions and Stock Option, respectively, to the Notes to Consolidated Financial Statements.

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Director Independence

Mr. Kostro is independent as that term in defined under section 301 of the Sarbanes-Oxley Act of 2002.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The following table summarizes the fees for Weinberg & Company, P.A. services rendered to the Company during 2008 and 2007.

	Amount
TypeofFee	Fiscal Year2008		Fiscal Year2007
Audit(1)	$	299,260	$	50,858
Audit Related(2)		—		—
Taxes (3)		—		—
All Other (4)		—		—
Total	$	299,260	$	50,858

(1)  This category consists of fees for the audit of our annual financial statements included in the Company’s annual report on Form 10-KSB and review of the financial statements included in the Company’s quarterly reports on Form 10-QSB. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements, statutory audits required by non-U.S. jurisdictions and the preparation of an annual “management letter” on internal control matters.

(2)  Represents services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for those fiscal years, aggregate fees charged for assurance and related services that are reasonably related to the performance of the audit and are not reported as audit fees. These services include consultations regarding Sarbanes-Oxley Act requirements, various SEC filings and the implementation of new accounting requirements.

(3)  Represents aggregate fees charged for professional services for tax compliance and preparation, tax consulting and advice, and tax planning.

(4)  Represents aggregate fees charged for products and services other than those services previously reported.

ITEM 14. EXHIBITS

Exhibit 31.1 Certification of the Chief Executive Officer and chief financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SANSWIRE CORP.
By:	/s/ Jonathan Leinwand
	Name: Jonathan Leinwand ,
	Title: Chief Executive Officer (Principal Executive Officer)
	Dated April 9, 2009

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.

SIGNATURE	TITLE	DATE
/s/ Jonathan Leinwand	Chief Executive Officer, Principal Financial	April 9, 2009
Jonathan Leinwand	Officer and Director
/s/ Przemyslaw Kostro	Chairman of the Board	April 9, 2009
Przemyslaw Kostro

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Jonathan Leinwand, certify that:

1.    I have reviewed this annual report on Form 10-K of Sanswire Corp.;

2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f) for the registrant and have:

a)  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 5.    I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Dated:    April 9, 2009	By:	/s/ Jonathan Leinwand
		Jonathan Leinwand , Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual report of Sanswire Corp. (the “Company”) on Form 10-K for the period ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan Leinwand, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: April 9, 2009	By:	/s/ Jonathan Leinwand
		Jonathan Leinwand
		Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)