Unassociated Document

NOTE 4. NOTES AND CONVERTIBLE NOTES PAYABLE

	September 30,		December 31,
	2009		2008
	(Unaudited)
(A) Notes payable	$	5,997,030	$	5,997,030
(B) Convertible notes payable		—		80,000
(C) Convertible promissory notes, net of unamortized discount of $0 and $134,423		—		2,016,913
Total		5,997,030		8,093,943
Accrued Interest		1,293,250		1,170,789
Total	$	7,290,280	$	9,264,732

(A) NOTES PAYABLE

Notes payable are made up of two separate notes.

As of September 30, 2009, a balance of $4,997,130 remains through an unsecured promissory note with no formal terms of repayment on the first note. The Company has accrued interest at a rate of 7% per annum, which totals $1,078,604 as of September 30, 2009.

As of September 30, 2009, a balance of $999,900 remains through an unsecured promissory note with no formal terms of repayment on the second note. The Company has accrued interest at a rate of 7% per annum, which totals $214,646 as of September 30, 2009.

(B) CONVERTIBLE NOTES PAYABLE

During May 2009, the balance of $80,000 of principal and $33,416 of accrued interest payable was converted into 1,127,907 shares of Company common stock. In addition, the Company issued 580,862 shares in settlement of any penalties associated with the remaining notes.

On February 17, 2009, the Company entered into subscription agreements with accredited investors. The Company sold $110,000 of the Company’s 7% Convertible Debentures, 3-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture of the Company’s common stock at an exercise price of $0.21, and three-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture shares of the Company’s common stock at an exercise price of $0.315. The Debentures are convertible into shares of the Company’s common stock at $.105 per share.

The Company determined that the total fair value of the warrants was $22,252 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount. For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate ranging from 1.31% to 1.40%, expected volatility of 169.01% and an expected term of the warrants of 3 years. The initial calculated fair value of warrants of $22,252 was reflected by the Company as a valuation discount and an offset to the carrying value of the Notes, and is being amortized by the straight line method over the term of the Notes. As of September 30, 2009, the Company amortized $22,252 of the valuation discount, which is reflected as interest expense in the Company’s consolidated statements of operations. During the quarter ended September 30, 2009, all principal and interest has been converted as part of an overall conversion request that includes all outstanding notes from this noteholder. On September 30, 2009, the balance of $1,633,869 of principal and $199,648 of interest were converted into 17,462,080 shares of Company common stock.

On April 29, 2009, the Company agreed to extend the expiration of certain warrants associated with the notes. A charge of $399,707 was recorded for the change in the fair value of the warrants at the time of modification.

On February 17, 2009, the Company entered into subscription agreement with an accredited investor. The Company sold $30,000 of the Company’s 7% Convertible Debentures, 3-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture of the Company’s common stock at an exercise price of $0.21, and three-year warrants to purchase a number of shares equal to 50% of the number of shares issuable upon conversion of the debenture shares of the Company’s common stock at an exercise price of $0.315. The Debentures are convertible into shares of the Company’s common stock at $.105 per share pursuant to the following terms.

The Company determined that the total fair value of the warrants was $5,807 based upon the relative value of the Black Scholes valuation of the warrants and the underlying debt amount. For the Black Scholes calculation, the Company assumed no dividend yield, a risk free interest rate of 1.22%, expected volatility of 169.01% and an expected term of the warrants of 3 years. The initial calculated fair value of warrants of $5,807 was reflected by the Company as a valuation discount and offset to the carrying value of the Notes, and is being amortized by the straight line method over the term of the Notes. As of September 30, 2009, the Company amortized $5,807 of the valuation discount, which is reflected as interest expense in the Company’s consolidated statements of operations. During the quarter ended September 30, 2009, all principal and interest has been converted as part of an overall conversion request that includes all outstanding notes from this noteholder. On September 30, 2009, the balance of $130,000 of principal and $10,558 of interest were converted into 1,338,651 shares of Company common stock.

On April 29, 2009, the Company agreed to extend the expiration of certain warrants associated with the notes. A charge of $41,121 was recorded for the change in the fair value of the warrants at the time of modification.

Through September 2009, the Company made payments totaling $42,630 to reduce a previously entered into note. On September 30, 2009, the balance of $119,836 of principal and $9,084 of interest were converted into 1,227,810 shares of Company common stock.

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

During May 2009, the Company converted a previously entered into note totaling $290,000 of principal and $5,921 of interest into 2,447,790 shares of Company common stock.

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

On April 17, 2009, the Company entered into an amendment to the Subscription Agreement, dated September 17, 2008 pursuant to which the Company agreed (i) to extend the expiration date of both the Series A Warrant and Series B Warrant issued from October 15, 2010 to December 31, 2010 and (ii) extend the final date that the holder may make up to two additional purchases of the Company’s securities, from October 15, 2008 and December 15, 2008, respectively, until December 31, 2010 and December 31, 2010, respectively. A charge of $2,477 was recorded for the change in the fair value of the warrants at the time of modification.

NOTE 5. INVENTORIES

Inventories are related to the Company's consolidated joint venture Sanswire-TAO (see Note 6). Inventories are stated at the lower of cost or market. Cost is determined principally on a first-in-first-out average cost basis. Inventories consist of the following at:

	September 30, 2009		December 31, 2008
	(unaudited)
Work in process	$	1,110,700	$	—
Total inventories		1,110,700		—

NOTE 6. JOINT VENTURE AND INTANGIBLE ASSETS

On June 3, 2008, the Company restructured a previous agreement with TAO Technologies GmbH and Professor Bernd Kroplin. The new agreement called for the establishment of a new 50/50 US-based joint venture company to be called Sanswire-TAO that was to be owned equally by TAO and Sanswire Corp., through its wholly-owned subsidiary Sanswire Corp.—Florida. The agreement required TAO Technologies and Kroplin to transfer the patents and intellectual property of TAO Technologies and Kroplin in the United States to Sanswire-TAO for a payment of $3,229,000. A remaining balance of $2,185,000 due for the investment is included in accrued expenses as of September 30, 2009.

The Company applied the provision of FASB ASC 810 “Consolidation of Variable Interest Entities (revised December 2003)” to its investment in Sanswire-TAO. Under ASC 810, a variable interest entity (VIE) is subject to consolidation if the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders. On April 14, 2009, the Company arranged for financing for Sanswire-TAO to construct its first 34 meter unmanned autonomously controlled mid-altitude airship and entered into a contract with TAO Technologies to construct the airship platform. As of September 30, 2009, the Company determined that consolidation of Sanswire-TAO was appropriate. In April, 2009, Sanswire-TAO entered into a services agreement whereas the Company issued 833,333 shares during the quarter ended September 30, 2009..

The useful life of the patents and intellectual property is estimated to be 3 years and is being amortized on a straight-line basis. Amortization expense for the three and nine months ended September 30, 2009 was $242,175 and $807,250, respectively. These assets are tested for impairment annually or if certain circumstances indicate a possible impairment may exist. As of September 30, 2009 there was no impairment.

NOTE 7. DERIVATIVE LIABILITIES

In 2007, the Company adopted FASB ASC 815 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” and FASB ASC 815 "Accounting for Derivative Instruments and Hedging Activities," as amended by FASB ASC 815 "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB ASC 815," collectively referred to as FASB ASC 815. FASB ASC 815 requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income.

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

	September 30, 2009			December 31, 2008
Conversion feature:
Risk-free interest rate		—			0.27 – 0.76	%
Expected volatility		—			118 - 134	%
Expected life (in years)		—			0.33 - 1.76
Expected dividend yield		—			—

Warrants:
Risk-free interest rate		0.14 – 1.45	%		0.11 – 1.00	%
Expected volatility		22 - 171	%		28 - 167	%
Expected life (in years)		0.12 – 3.00			0.01 – 2.74
Expected dividend yield		—			—

Fair value:
Conversion feature	$	—	$	495,805
Warrants	$	2,633,367	$	252,439

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

NOTE 8. CONTINGENCIES

Securities and Exchange Commission

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

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

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

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

Hudson Bay Fund LP et al.

Hudson Bay Fund LP and Hudson Bay Overseas Fund Ltd. filed an action against the Company relating to the warrants attached to a Subscription Agreement between those entities and the Company. The Hudson Bay entities are seeking to reprice the warrants, increase the number of shares they can purchase pursuant to the warrants, certain equitable remedies, and unspecified damages. The Company has retained outside counsel and has filed an answer and affirmative defenses in the case. The Company intends to vigorously defend the action, but the outcome of the action cannot be predicted.

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.

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. This action has been dismissed for lack of prosecution but may be refilled by the Company in the future.

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 2009, the Company paid the remaining $43,750 in the Company’s common stock.

Trimax Wireless

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

NOTE 9. COMMON STOCK TRANSACTIONS

During the nine month period ended September 30, 2009, the Company issued an aggregate of 64,286,887 shares of common stock for cash, debt, board compensation, and consulting agreements including 1,000,000 shares for the replacement of shares lost when an investor foreclosed on its lien and security interest based on the previously entered into pledge agreement. Of the shares issued, 12,050,000 shares, or 30.1% were issued to insiders and affiliates as restricted securities and in accordance with SEC Rule 144. The common stock issued was valued at prices ranging from $0.038 to $0.14 per share, based on the closing market prices on the date the board of directors authorized the issuances. Subsequent to September 30, 2009, the Company issued an aggregate of 125,000 shares of common stock for previously entered into agreements.

On November 2, 2009, holders of a majority of our voting shares of our company, Sanswire Corp., acted by written consent in lieu of a special meeting of shareholders to an adopt amendment to our articles of incorporation to increase the number of shares of common stock which we are authorized to issue from 250,000,000 shares to 500,000,000 shares.

NOTE 10. STOCK OPTIONS AND WARRANTS

STOCK OPTIONS

During the nine months ended September 30, 2009, the Company issued 19,672,222 options to acquire common stock. The Company recorded $0 and $1,707,780 of compensation expense related to these options to acquire common stock in the three and nine months ended September 30, 2009, respectively.

The fair value of grants issued in the three and nine months ended September 30, 2009 were determined using a Black-Scholes option pricing model with the following assumptions: 1.5% average risk-free interest rate; 184% expected volatility; three year expected term, and 0% dividend yield.

Employee options vest according to the terms of the specific grant and expire from 3 to 5 years from date of grant. As of September 30, 2009, all options issued and outstanding have fully vested. Stock option activity as of September 30, 2009 was as follows:

	Number of Options (in shares)			Weighted Average Exercise Price
Outstanding at December 31, 2008		15,982,752		$	.350
Options Granted		19,672,222			.059
Options Exercised		(250,000	)		.105
Options Cancelled		(293,760	)		1.773
Outstanding at September 30, 2009		35,111,214		$	.177

The following table summarizes information about stock options outstanding as of September 30, 2009:

		Options Outstanding				Options Exercisable
Range of Exercise Prices		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Shares		Weighted Average Exercise Price
$	0.045 to $0.37		35,111,214	$	0.177		1.58		35,111,214	$	0.177
			35,111,214						35,111,214

WARRANTS

The following table summarizes certain information about the Company’s stock purchase warrants (including the warrants discussed in note 4).

	Warrants Class A			Warrants Class B			Weighted Average Exercise Price
Outstanding at December 31, 2008		13,987,204			9,634,763		$	0.253
Warrants Granted		4,444,998			4,413,252			0.252
Warrants Expired		(3,305,382	)		(2,203,588	)		(0.252	)
Outstanding at September 30, 2009		15,126,820			11,844,427		$	0.253

The aggregate intrinsic value of 35,111,214 options and 15,126,820 Class A and 11,844,427 Class B warrants outstanding and exercisable as of September 30, 2009 was $5,321,551. The aggregate intrinsic value for the options is calculated as the difference between the price of the underlying awards and quoted price of the Company’s common shares for the options that were in-the-money as of September 30, 2009. At September 30, 2009, all warrant shares were vested. Therefore there is no unamortized cost to be recognized in future periods.

NOTE 11. PREFERRED STOCK

As of September 30, 2009, the Company has 100,000 shares of Series E Preferred Stock outstanding.

NOTE 12. INCOME TAXES

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

NOTE 13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events from the balance sheet date through November 16, 2009, the date the accompanying financial statements were issued.

The following are material subsequent events:

Changes in Registrant’s Certifying Accountant

On October 19, 2009, the Company dismissed Weinberg & Co., as its independent certifying accountant. The Company’s Board of Directors approved of the dismissal on October 20, 2009. There were no disputes or disagreements between Weinberg & Co. and the Company during the previous two fiscal years. Except for the provision of a “Going Concern” opinion, the reports of Weinberg & Co. on the Company’s financial statements for the years ended December 31, 2008 and 2007 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle.

Change in Independent Registered Public Accounting Firm

On October 20, 2009, the Company engaged Rosen Seymour Shapss Martin & Company LLP (“RSSM”), as its independent registered public accounting firm, to audit the Company’s financial statements. The decision to engage RSSM was approved by the Company’s Board of Directors at a Board meeting called for such purpose.

Majority Shareholder Action

On August 6, 2009, our Board of Directors authorized and approved, subject to shareholder approval, an increase in our authorized common stock from 250,000,000 shares to 500,000,000 shares, which our Board of Directors deemed to be in the best interests of our company and our shareholders. Our Board of Directors further authorized the preparation and circulation of this Information Statement and a shareholders' consent to the holders of a majority of our outstanding voting capital stock.

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

Forward-looking Information

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

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

General

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

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. Thus, moving forward, the Company is Sanswire Corp., whose primary business is the design, construction and marketing of a variety of aerial vehicles through a joint venture with TAO Technologies, Stuttgart, Germany, named Sanswire-TAO Corp.

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

RESULTS OF OPERATIONS

The following discussion and analysis summarizes the results of operations of the Company for the three and nine month periods ended September 30, 2009 and 2008.

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

REVENUES. The Company had no revenue for the three months ended September 30, 2009 and 2008.

OPERATING EXPENSES. Our operating expenses consist primarily of payroll and related taxes, professional and consulting services, expenses for executive and administrative personnel and insurance, telephone and communications, facilities expenses, travel and related expenses, and other general corporate expenses. Our operating expenses for the three month period ended September 30, 2009 were $1,546,560 compared to the three month period ended September 30, 2008 which had operating expenses of $766,819 an increase of $779,741 or 101.7%. The increase was primarily due to charges associated with stock and employee stock options issuances.

During the three month period ended September 30, 2009 and 2008, Sanswire and its subsidiaries incurred payroll tax liabilities during the normal course of business. During 2008, the Company has reported its payroll tax liabilities on a timely basis; however the Company failed to deposit the appropriate withholding amounts during 2008. For 2009, the Company has engaged a third party to process its payroll information, including appropriate payroll taxes and has thus has been timely and is current in its payroll tax payments. In addition, the Company has recognized its past issue and contacted the IRS accordingly to make arrangement to pay any taxes due, which is currently estimated to be at least $200,000 including liabilities associated with the Company’s subsidiaries that are classified in discontinued operations. The Company may be subject to penalties and interest from the IRS.

LOSS FROM OPERATIONS. We had an operating loss of $1,546,560 for the three month period ended September 30, 2009 as compared to an operating loss of $766,819 for the three month period ended September 30, 2008, primarily due to charges associated with stock and employee option issuances as described above, including lower operating costs and reductions of our various programs.

OTHER INCOME (EXPENSE). We had net other income totaling $53,886 during the three month period ended September 30, 2009 compared to other income of $333,136 for the three month period ended September 30, 2008. This variance was due primarily to the non cash gains related to derivatives of $251,031 during 2009 compared to $751,833 during 2008.

Interest expense for the three month period ended September 30, 2009 was $197,145 compared to $418,697 for the three month period ended September 30, 2008. Interest expense decrease was primarily due to an decrease in non cash charges related to the Company’s convertible debentures as well as note conversions that occurred during 2009.

LOSS FROM DISCONTINUED OPERATIONS. During the three month periods ended September 30, 2009 and 2008, we had no activity related to our discontinued operations.

NET LOSS. We had a net loss of $1,492,674 in the three month period ended September 30, 2009 compared to $433,683 in the three month period ended September 30, 2008. The increase in net loss is primarily attributable to the increase in the operating expenses as discussed above.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

REVENUES. The Company had no revenue for the nine months ended September 30, 2009 and 2008.

OPERATING EXPENSES. Our operating expenses consist primarily of payroll and related taxes, professional and consulting services, expenses for executive and administrative personnel and insurance, telephone and communications, facilities expenses, travel and related expenses, and other general corporate expenses. Our operating expenses for the nine month period ended September 30, 2009 were $6,272,789 compared to the nine month period ended September 30, 2008 which had operating expenses of $2,515,386 an increase of $3,757,403 or 149.4%. The increase was primarily due to charges associated with stock and employee stock options issuances.

LOSS FROM OPERATIONS. We had an operating loss of $6,272,789 for the nine month period ended June 30, 2009 as compared to an operating loss of $2,515,386 for the nine month period ended September 30, 2008, primarily due to charges associated with stock and employee option issuances as described above, including lower operating costs and reductions of our various programs.

OTHER INCOME (EXPENSE). We had net other expenses totaling $2,969,064 during the nine month period ended September 30, 2009 compared to $1,244,160 for the nine month period ended September 30, 2008. This variance was due primarily to the non cash charges related to the modifications of warrants of $443,305 and non cash charges related to derivatives of $1,885,123 during 2009 compared to the non cash charges related to the modifications of our convertible debentures of $1,096,650 in 2008.

Interest expense for the nine month period ended September 30, 2009 was $1,083,941 compared to $856,218 for the nine month period ended September 30, 2008. Interest expense increase was primarily due to an increase in non cash charges related to the Company’s convertible debentures.

LOSS FROM DISCONTINUED OPERATIONS. During the nine month period ended September 30, 2009 we had no activity related to our discontinued operations compared to a loss of $196 during the nine month period ended September 30, 2008.

NET LOSS. We had a net loss of $9,241,853 in the nine month period ended September 30, 2009 compared to $3,759,742 in the nine month period ended September 30, 2008. The increase in net loss is primarily attributable to the increase in the operating expenses as discussed above.

LIQUIDITY AND CAPITAL RESOURCES

ASSETS. At September 30, 2009, the Company had total assets of $3,557,698 compared to total assets of $3,240,215 as of December 31, 2008.

Current assets at September 30, 2009, were $1,124,798 compared to $11,215 at December 31, 2008 which were comprised of $7,692 in cash and cash equivalents and $1,110,700 in work in process/inventory.

The Company had $2,421,750 in intangible assets as of September 30, 2009 compared to none as of December 31, 2008.

LIABILITIES. At September 30, 2009, the Company had total liabilities of $19,366,637 compared to total liabilities of $18,692,369 as of December 31, 2008. The increase of $674,268 was principally due to $1,885,123 in changes associated with the derivative liabilities (see note 7 of the financial statements.)

CASH FLOWS. Our cash used in operating activities was $1,454,006 compared to $397,736 for the comparative period. The increase was primarily due to the increased level of operations and operating activities and changes in our current assets and liabilities.

Net cash provided by financing activities was $1,468,039 principally from the proceeds of the sale of common stock, as compared to $757,140 for the nine months ended September 30, 2008.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $9,241,853 and used cash in operating activities of $1,454,006 for the nine months ended September 30, 2009, and had a working capital deficit of $18,241,839 and a stockholders’ deficit of $15,808,939 at September 30, 2009. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The Company anticipates that a net loss will continue for the balance of 2009.

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

Subsequent to September 30, 2009, the Company has raised $100,000 from investors; however this is not adequate funding to cover the Company’s working capital deficit or the operating loss for the three month period ended September 30, 2009 of approximately $1,546,560.

As reflected in the accompanying financial statements, during the nine month period ended September 30, 2009 we had a net loss of $9,241,853 compared to a net loss of $3,759,742 during the three month period ended September 30, 2008. Consequently, there is an accumulated deficit of $134,544,435 at September 30, 2009 compared to $125,302,582 at December 31, 2008.

The Company's Articles of Incorporation currently allow for issuance of a maximum of 250,000,000 shares of common stock. As of November 3, 2009, the Company has approximately 249,115,902 shares outstanding, leaving an unissued balance of authorized shares that is not sufficient to service the maximum requirements of all of its convertible securities. On November 2, 2009, holders of a majority of our voting shares of our company, Sanswire Corp., acted by written consent in lieu of a special meeting of shareholders to an adopt amendment to our articles of incorporation to increase the number of shares of common stock which we are authorized to issue from 250,000,000 shares to 500,000,000 shares. As of November 2, 2009, we had 249,115,902 shares of our common stock outstanding. The Company is obligated under various existing agreements, options and warrants to issue additional shares of our common stock.

Critical Accounting Policies and Use of Estimates

Estimates

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

Accounting for stock options

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer (the “Reviewing Officers”), of the effectiveness of the Company's disclosure controls and procedures as of September 30, 2009 (the “Quarter”). 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 Officers concluded that as of the end of the Quarter, the Company's disclosure controls and procedures were not 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.

Initially, on May 4, 2007 the Company determined that the Company had ineffective controls over revenue recognition. On September 3, 2009, the Company then also determined that it has not properly accounted for various derivative liabilities resulting in this restatement.

We have categorized our efforts to address our material weaknesses into two phases. 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. 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, we have commenced to and continue to implement 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

Our remediation efforts in light of the improper accounting of our derivative liabilities include restating our financial statements for March 31, June 30, September 30 and December 31, 2008 as well as March 31, 2009.

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 Quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Securities and Exchange Commission

Hudson Bay Fund LP et al.

Hudson Bay Fund LP and Hudson Bay Overseas Fund Ltd. filed an action in Supreme Court of the State of New York, New York County (Case No. 650366/09 against the Company claiming declaratory judgment, specific performance, and breach of contract relating to the warrants it acquired in connection with its investment. The Hudson Bay entities are seeking to reprice the warrants, increase the number of shares they can purchase pursuant to the warrants, certain equitable remedies, and unspecified damages. The Company has retained outside counsel and has filed an answer and affirmative defenses in the case. The Company intends to vigorously defend the action, but the outcome of the action cannot be predicted.

Former Consultants

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.

Joseph Monterosso

Mitchell Siegel v. GlobeTel

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

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

Item 1A. Risk Factors

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

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

During the three month period ended September 30, 2009, the Company issued an aggregate of 24,307,127 shares of common stock for cash, debt, and consulting agreements. Of the shares issued, no shares were issued to insiders and affiliates as restricted securities and in accordance with SEC Rule 144. The common stock issued was valued at prices ranging from $0.105 to $0.14 per share, based on the closing market prices on the date the board of directors authorized the issuances. Subsequent to September 30, 2009, the Company issued an aggregate of 125,000 shares of common stock for previously entered into agreements.

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

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

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

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

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

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

SIGNATURES

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

	SANSWIRE CORP.

Dated: November 16, 2009	By:	/s/ David A. Christian
		David A. Christian, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

	SANSWIRE CORP.

	By:	/s/ Thomas Seifert
		Thomas Seifert, Chief Financial Officer (Principal Accounting and Financial Officer)

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.		3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		24

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		27

Item 4. Controls and Procedures.		28

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		29

Item 1A. Risk Factors.		31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		31

Item 3. Defaults Upon Senior Securities.		31

Item 4. Submission of Matters to a Vote of Security Holders.		31

Item 5. Other Information.		31

Item 6. Exhibits.		31

	SEPTEMBER 30, 2009			DECEMBER 31, 2008
ASSETS	(Unaudited)			(Restated)
CURRENT ASSETS
Cash and cash equivalents	$	7,692		$	4,809
Inventories		1,110,700			—
Current assets from discontinued operations		6,406			6,406
TOTAL CURRENT ASSETS		1,124,798			11,215
NONCURRENT ASSETS
Intangible assets, net of accumulated amortization of $807,250		2,421,750			—
Investment in joint venture		—			3,229,000
Deposits		11,150			—
TOTAL NONCURRENT ASSETS		2,432,900			3,229,000
TOTAL ASSETS	$	3,557,698		$	3,240,215

LIABILITIES AND STOCKHOLDERS’ DEFICIT

LIABILITIES

CURRENT LIABILITIES
Accounts payable (including $385,357 due to joint venture partner at September 30, 2009)	$	4,874,995		$	3,802,777
Notes and convertible notes payable, net of discount of $0 and $134,423		7,290,280			9,264,732
Accrued expenses and other liabilities (including $2,185,000 due to joint venture partner at September 30, 2009 and December 31, 2008)		3,180,589			3,489,210
Fair value of derivative liabilities		2,633,367			748,244
Current liabilities from discontinued operations		1,387,406			1,387,406
TOTAL LIABILITIES		19,366,637			18,692,369

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
Series E Preferred stock, $.001 par value, 100,000 shares authorized;
100,000 shares issued and outstanding		100			—
Additional paid-in capital - Series E Preferred stock		625,894			—
Common stock, $.00001 par value, 250,000,000 shares authorized;
248,990,902 and 184,704,015 shares issued and outstanding		2,491			1,848
Additional paid-in capital		118,107,011			109,848,580
Accumulated deficit		(134,544,435	)		(125,302,582	)
TOTAL STOCKHOLDERS' DEFICIT		(15,808,939	)		(15,452,154	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	3,557,698		$	3,240,215

	THREE MONTHS ENDED						NINE MONTHS ENDED
	SEPTEMBER 30,						SEPTEMBER 30,
	2009			2008 (Restated)			2009			2008 (Restated)

REVENUES	$	—		$	—		$	—		$	—

EXPENSES
Payroll and related taxes		153,687			135,496			404,023			666,531
Consulting fees		719,488			422,768			1,474,117			1,138,796
Officers' and directors' stock based compensation		335,750			97,500			3,246,280			435,000
Amortization		242,175			—			807,250			—
General and administrative		95,460			111,055			341,119			275,059
TOTAL EXPENSES		1,546,560			766,819			6,272,789			2,515,386
LOSS FROM OPERATIONS		(1,546,560	)		(766,819	)		(6,272,789	)		(2,515,386	)
OTHER INCOME (EXPENSE)
Loss on extinguishment of debt		—			—			—			(1,096,650	)
Extinguishment of derivative liabilities		629,563			150,995			629,563			442,529
Change in fair value of derivative liabilities		(378,532	)		600,838			(2,514,686	)		266,179
Interest expense, net		(197,145	)		(418,697	)		(1,083,941	)		(856,218	)
NET OTHER INCOME (EXPENSE)		53,886			333,136			(2,969,064	)		(1,244,160	)
LOSS FROM CONTINUING OPERATIONS		(1,492,674	)		(433,683	)		(9,241,853	)		(3,759,546	)
LOSS FROM DISCONTINUED OPERATIONS		—			—			—			(196	)
NET LOSS	$	(1,492,674	)	$	(433,683	)	$	(9,241,853	)	$	(3,759,742	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
BASIC and DILUTED		226,806,725			155,459,034			206,213,560			133,121,067

LOSS PER SHARE FROM CONTINUING OPERATIONS
BASIC and DILUTED	$	( 0.01	)	$	( 0.00	)	$	( 0.04	)	$	( 0.03	)
LOSS PER SHARE FROM DISCONTINUED OPERATIONS
BASIC and DILUTED		—			—			—		$	( 0.00	)
NET LOSS PER SHARE
BASIC and DILUTED	$	( 0.01	)	$	( 0.00	)	$	( 0.04	)	$	( 0.03	)

	COMMON STOCK
					ADDITIONAL
					PAID-IN
Description	SHARES		AMOUNT		CAPITAL

BALANCE, DECEMBER 31, 2008 (Restated)		184,704,015	$	1,848	$	109,848,580
Shares issued for cash		12,889,996		129		1,353,321
Shares issued for conversion of notes		25,683,212		257		2,702,942
Shares issued for settlement of debt		2,720,346		27		131,753
Shares issued for services		22,668,333		226		1,881,774
Shares issued for options exercised		75,000		1		(1	)
Shares issued for interest		250,000		3		9,497
Fair value of vested options issued for officers’ and directors’ compensation		—		—		1,707,780
Warrants issued with convertible notes		—		—		28,060
Modification of warrants		—		—		443,305
Preferred Series E shares issued for accrued expenses		—		—		—
Preferred Series E shares issued for accounts payable		—		—		—
Net loss		—		—		—
BALANCE, SEPTEMBER 30, 2009		248,990,902	$	2,491	$	118,107,011

	SERIES E PREFERRED STOCK
			ADDITIONAL							TOTAL
			PAID-IN				ACCUMULATED			STOCKHOLDERS'
Description	SHARES		AMOUNT		CAPITAL		DEFICIT			DEFICIT
BALANCE, DECEMBER 31, 2008 (Restated)		—	$	—	$	—	$	(125,302,582	)	$	(15,452,154	)
Shares issued for cash		—		—		—		—			1,353,450
Shares issued for conversion of notes		—		—		—		—			2,703,199
Shares issued for settlement of debt		—		—		—		—			131,780
Shares issued for services		—		—		—		—			1,882,000
Shares issued for options exercised		—		—		—		—			—
Shares issued for interest		—		—		—		—			9,500
Fair value of vested options issued for officers’ and directors’ compensation		—		—		—		—			1,707,780
Warrants issued with convertible notes		—		—		—		—			28,060
Modification of warrants		—		—		—		—			443,305
Preferred Series E shares issued for accrued expenses		70,385		70		440,537		—			440,607
Preferred Series E shares issued for accounts payable		29,615		30		185,357		—			185,387
Net loss		—		—		—		(9,241,853	)		(9,241,853	)
BALANCE, SEPTEMBER 30, 2009		100,000	$	100	$	625,894	$	(134,544,435	)	$	(15,808,939	)

	2009			2008 (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,241,853	)	$	(3,759,742	)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount		176,465			207,514
Amortization of intangible asset		807,250			—
Loss on extinguishment of debt		—			1,096,650
Stock based compensation		2,050,726			391,444
Extinguishment of derivative liabilities		—			(266,179	)
Change in fair value of derivative liabilities		1,885,123			(442,529	)
Fair value of vested options		1,707,780			244,831
Accrued interest expense on convertible notes payable		381,526			421,502
Common stock exchanged for interest and financing costs		—			227,080
Fair value of modification of warrants		443,305			—
Change in operating assets and liabilities:
Inventories		(1,110,700	)		—
Assets from discontinued operations		—			12,272
Accounts payable		1,270,636			555,192
Accrued expenses and other liabilities		175,736			914,204
Liabilities from discontinued operations		—			25
NET CASH USED IN OPERATING ACTIVITIES		(1,454,006	)		(397,736	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to joint venture		—			(385,000	)
Deposits		(11,150	)		—
NET CASH USED IN INVESTING ACTIVITIES		(11,150	)		(385,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable		(25,411	)		(25,139	)
Proceeds from notes and loans payable		140,000			782,279
Proceeds from sale of common stock		1,353,450			—
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,468,039			757,140
NET CHANGE IN CASH AND EQUIVALENTS		2,883			(25,596	)
CASH AND EQUIVALENTS – BEGINNING OF PERIOD		4,809			32,278
CASH AND EQUIVALENTS – END OF PERIOD	$	7,692		$	6,682
SUPPLEMENTAL DISCLOSURES
Cash paid during the period for:
Interest	$	2,903		$	122
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for joint venture		—			268,000
Common stock for accrued expenses		43,750			148,970
Common stock for accounts payable		13,031			—
Accrued expense for joint venture		—			659,000
Conversion of notes payable to common stock		2,618,973			4,137,442
Non-cash equity-warrant valuation and intrinsic value of beneficial conversion associated with convertible notes		28,060			194,080
Preferred stock for accrued expenses		440,607			—
Preferred stock for accounts payable		185,387			—

	Total Carrying Value at September		Fair Value Measurements at September 30, 2009
	30, 2009		(Level 1)		(Level 2)		(Level 3)

Cash and cash equivalents	$	7,692	$	7,692	$	—	$	—
Derivative liabilities		2,633,367		—		—		2,633,367

SEPTEMBER 30 2009 (Unaudited)	Telecom		GlobeTel Wireless		Total
Cash	$	6,406	$	—	$	6,406
Total assets	$	6,406	$	—	$	6,406

Accounts payable		140,116		1,216,208		1,356,324
Accrued liabilities		9,605		21,477		31,082
Total current liabilities		149,721		1,237,685		1,387,406

Net liabilities of discontinued operations	$	143,315	$	1,237,685	$	1,381,000

	December 31, 2008
Account	(As Initially Reported)			(Adjustment)			(As Restated)
Current Assets
Cash	$	4,809		$	—		$	4,809
Current assets from discontinued operations		6,406			—			6,406
Total current assets		11,215			—			11,215
Investment in joint venture		3,229,000			—			3,229,000
Total Assets	$	3,240,215		$	—		$	3,240,215
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	3,802,777		$	—		$	3,802,777
Notes and notes payable, net of discount of $134,423		9,264,732			—			9,264,732
Accrued expenses and other liabilities		3,489,210			—			3,489,210
Derivative liabilities		—			748,244	(1)		748,244
Current liabilities from discontinued operations		1,387,406			—			1,387,406
Total Current Liabilities		17,944,125			748,244			18,692,369
Stockholders’ Deficit
Common stock		1,848			—			1,848
Additional paid-in capital		111,128,580			(1,280,000	) (1)		109,848,580
Accumulated deficit		(125,834,338	)		531,756	(1)		(125,302,582	)
Total Stockholders’ Deficit		(14,703,910	)		(748,244	)		(15,452,154	)
Total Liabilities and Stockholders’Deficit	$	3,240,215		$	—		$	3,240,215

	Nine Months Ended September 30, 2008 (Unaudited)
Account	(As Initially Reported)			(Adjustment)			(As Restated)
Revenue	$	—		$	—		$	—

Payroll and related taxes		(666,531	)		—			(666,531	)
Consulting fees		(1,138,796	)		—			(1,138,796	)
Noncash officers’ and directors’ compensation		(435,000	)		—			(435,000	)
General and administrative expenses		(275,059	)		—			(275,059	)
Loss from operations		(2,515,386	)		—			(2,515,386	)

Loss on extinguishment of debt		(1,096,650	)		—			(1,096,650	)
Interest expense		(856,218	)		—			(856,218	)
Extinguishment of derivative liability		—			442,529	(3)		442,529
Change in fair value of derivative liability		—			266,179	(2)		266,179
Net other expense		(1,952,868	)		708,708			(1,244,160	)
Loss from continuing operations		(4,468,254	)		708,708			(3,759,546	)
Loss from discontinued operations		(196	)		—			(196	)
Net loss	$	(4,468,450	)	$	708,708		$	(3,759,742	)
Net loss per share from continuing operations, basic and diluted	$	(0.03	)		0.00			(0.03	)
Net loss per share from discontinuing operations, basic and diluted	$	(0.00	)		—		$	(0.00	)
Weighted average shares outstanding, basic and diluted		133,121,067						133,121,067

	Three Months Ended September 30, 2008 (Unaudited)
Account	(As Initially Reported)			(Adjustment)			(As Restated)
Revenue	$	—		$	—		$	—

Payroll and related taxes		(135,496	)		—			(135,496	)
Consulting fees		(422,768	)		—			(422,768	)
Noncash officers’ and directors’ compensation		(97,500	)		—			(97,500	)
General and administrative expenses		(111,055	)		—			(111,055	)
Loss from operations		(766,819	)		—			(766,819	)

Interest expense		(311,263	)		(107,434	)(6)		(418,697	)
Extinguishment of derivative liability		—			150,995	(5)		150,995
Change in fair value of derivative liability		—			600,838	(4)		600,838
Net other expense		(311,263	)		644,399			333,136
Loss from continuing operations		(1,078,082	)		644,399			(433,683	)
Loss from discontinued operations		—			—			—
Net loss	$	(1,078,082	)	$	644,399		$	(433,683	)
Net loss per share from continuing operations, basic and diluted	$	(0.01	)		0.00			(0.00	)
Net loss per share from discontinuing operations, basic and diluted	$	(0.00	)		—		$	(0.00	)
Weighted average shares outstanding, basic and diluted		155,459,034						155,459,034

		(1)	To record $748,244 increase to derivative liability, $531,756 decrease to accumulated deficit for prior period recognition of derivative liability, and $1,280,000 decrease to additional paid in capital upon adoption of ASC 815.

		(2)	To record $266,179 decrease in derivative liability for the nine months ended September 30, 2008.

		(3)	To record $442,529 decrease from the extinguishment of derivative liabilities for the nine months ended September 30, 2008.

		(4)	To record $600,838 decrease in derivative liability for the three months ended September 30, 2008.

		(5)	To record $150,995 decrease from the extinguishment of derivative liabilities for the three months ended September 30, 2008.

		(6)	To reclass $107,434 to interest expense from derivative liability for the three months ended September 30, 2008.