World Surveillance Group Inc (fka WSGI)

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A little refresher from the past. Almost brings tears. Jail Time?
Dear Fellow Shareholders:

I am constantly asked by my friends and colleagues: �What is GlobeTel?�� If you happen to be one of GlobeTel�s more than 37,000 long-standing shareholders �many of whom exhibit an almost cult-like dedication to the company� this probably sounds like a silly question. In fact, as the new Chairman of GlobeTel, I must confess that I spent more than a year attempting to get my arms around the many technology and business strategy nuances which are really critical to understanding this vibrant, outside-the-box company. Indeed, it is GlobeTel�s �mining� of these very nuances which is allowing it to break virtually all the rules of traditional telephony, while creating new wireless paradigms which will re-define digital communications in the immediate future.

For the many thousands of you who have closely followed the evolution of the company over the past three years� we hope that you have marveled, as we do every day, at the dramatic transformation of what was, so recently, nothing more than an odd little company with a nine million dollar market cap.� Oh yes, to be fair: three years ago, when the young engineering visionary, Tim Huff, arrived at the entity that would become GlobeTel, it had an OTC Bulletin Board listing, it had a one cent share price, it had a confusing and rather unappetizing history, and it had no products or strategy. Under Tim�s nurturing eye, the company soon brought aboard a small group of dedicated employees whose ranks continued to swell as the business began to take shape and move in new directions.

Today, GlobeTel is truly a global business. With roughly a $250 million market cap, a share price which is more than 15 times its level only three years ago, a headcount approaching eighty (still largely made up of some of the most entrepreneurial engineers in the world), a powerful, reconstituted Board of Directors with experience and access at the highest levels, and with a unique strategy built around five different (but highly synergistic) digital business lines, the company is positioned for explosive growth as it rapidly transitions from a highly innovative R&D company into a global Sales, Marketing and Project Management organization with impressive new business initiatives underway in more than 25 countries around the world�� including in China and India.

Is the strategy huge and challenging? Yes. Does it seem to represent an eclectic collection of cutting-edge technology opportunities that even some institutional investors find daunting? Yes. Does this multi-prong strategy make sense? Absolutely! In fact, for investors willing to take the time to truly understand what is going on at GlobeTel, it becomes evident that GlobeTel has thought about, and understands, the �puzzle� of the digital marketplace in a way that few other companies do. In fact, the company�s strategy has been woven around Tim Huff�s vision (which he first discussed with me more than 15 years ago at the young age of 26) �that the world of communications, in all its forms, must ultimately become interconnected and completely seamless.��

As I watched Tim�s professional career progress rapidly over the years, with startling levels of responsibility given to him at a very early age at the top of the technology ranks of MCI and Sprint, and later in his own, entrepreneurial businesses built around his growing vision of where the communications business would be going, I had a powerful sense that the young engineering genius that I had met earlier, would someday find a way to make his vision come to fruition.

Some years later (indeed, only a year and a half ago), Tim re-appeared before me in London� completely unexpectedly.� He had become a 40-year-old man, fully formed, a little grey at the temples, full of energy and enthusiasm and as� intellectually adept as ever. He told me he�d been waiting for the right time to get me involved in his vision, initially as a possible investor. And, he said the right time was now.� He told me of his decision, eighteen months earlier, to �back into� a public company vehicle (today�s GlobeTel), as a means of achieving his dream of creating a �Super-Hub� (a global, entirely private internet). We discussed it.� I researched it. We discussed it some more. And, nearly a year after this meeting, I agreed to join the company as its Vice Chairman. Since then, in the face of some early head scratching and head shaking by my private equity partners, I have become completely entranced by Tim�s vision of the Super-Hub and by the certainty that his vision can be achieved.� Much of this certainty is unquestionably due to a flurry of major technology breakthroughs in recent years. But my deep conviction in the achievability of Tim�s vision of the Super-Hub is due, equally, to the creative organization that he has built virtually from scratch in order to break the wireless �sound barrier.�

By quickly moving the wireless model well ahead of the pack, and we are doing it now, we are creating unprecedented commercial benefits for businesses and exceptional social benefits for the billions of our fellow global citizens who cannot access the wonders of the 21st century. This fascinating organization is built, much like the Super-Hub, around a central corporate structure which serves as a virtual �incubator� for each of the five businesses which are about to put GlobeTel on the international technology map in a big way.� Let me tell you about them.

GlobeTel Wireless Division.�� Under the inspired leadership of Ulrich Altvater, our GlobeTel Wireless Division has, to our almost certain knowledge, leapt significantly ahead of all our possible wireless competitors. Our remarkable wireless solution is currently being installed in Mexico, Malaysia, China and Germany, in significant municipal areas that will eventually average 400 to 600 square kilometers� with the ability to provide ultra-high-speed broadband/DSL� and mobile DECT-VoIP telephony to millions of users who previously had no access to such service. Our proprietary Hotzone� 4010 wireless communication system offers dramatically lower equipment, installation and operating costs than any of our competitors, and at a cost that makes these services accessible by the average man-on-the-street in these important emerging economies.� And, of course, our system completely eliminates the �last mile problem�� a problem which has caused incumbent telecom companies around the developed world to pour literally billions of dollars into the ground in the pursuit of customers connected via fiber-optics or �conditioned� copper-pairs. This hugely expensive �trenching strategy� will be a thing of the past if we have anything to say about it.� With our over-riding focus on the emerging markets, we see the opportunity to not only do well (very well), but to do good. Soon-to-follow upgrades to our Hotzone� system will include the marvel of IPTV � bringing thousands of channels of television from around the world into millions of homes � wirelessly.�� At the moment, GlobeTel Wireless is our leading contender for near term profitability on a significant scale.� Like the other Divisions, GlobeTel Wireless will achieve its greatest potential when it is integrated with our (i) Stratellite� near-space airship, (ii) our �Magic Money� digital, Stored Value Cards, (iii) our StrateVoIP telephony services, and (iv) our Centerline switching backbone which will tie many of these services together into a neat GlobeTel bundle.

Magic Money Stored Value Division.� �After two years of long, hard, technical and regulatory brain damage, Division Head Joseph Serrousi and his team have reached �lift off.� Magic Money� has produced what seems to us to be immediate potential for almost unprecedented revenue generation linked to the digital sorcery of our GlobeTel Magic Money� system.� What has been sculpted, shaped and developed over these two long years � at great R&D expense � is a digital system which gives us the ability to reach that 90% of the global population that is �un-banked� and that, as a result, has absolutely no access to bank accounts, credit cards, affordable telephony or reasonably-priced money-remittance mechanisms.�

In an exclusive Joint Venture with Travelex, the world�s largest retail foreign exchange business, our Stored Value Division has just installed our first Point-of- Sale terminals located in what will eventually be more than 6,000 retail locations around the U.S., allowing this un-banked community to �load� (endow with value) their Magic Money� digital cards which will, in turn, give these customers the ability to access low-cost, pre-paid, VoIP telephony services from any phone-box in the world and, separately, to transfer moderate amounts of money around the world (under $5,000 in order to fully conform to the Patriot Act, FDIC and other federal and state regulations relating to money movements) to their friends and to their family members at very low cost. And all of this will be processed through our MasterCard� certified switch, which will take over transaction processing this month.�

Conceptually, the ability to create �virtual wallets� (i.e. stored value) using global, high security, digital networks will allow several billion people around the world to �digitize� their cash hoards for secure storage and for secure remittance to any other person in the world who has access to a telephone (and, of course, to a Magic Money� card). This is, statistically, (to the extent that it can be measured), a market exceeding a half trillion dollars per year. And, in fact, it is really only an embryonic market at the moment because, until now, the technology has not existed to create such a virtual, digital financial services (and IP-based telecommunications) system� all targeted directly, and almost exclusively, at those �forgotten� members of the global economic community.�

In India, for example, in an exclusive partnership with the largest financial processor in the country, FSS (partly owned by the Carlyle Private Equity Group, of which President George H. W. Bush is a Senior Advisor), our Magic Money� Division will shortly enable more than 25 million, existing debit card holders to become immediate members of our Magic Money� network, giving them access, at very low cost (i) to money remitted from relatives abroad, and (ii) to inexpensive telephony so that they are able to stay in touch in a way that was unimaginable even a year ago. A remarkable breakthrough. The money remittance market alone is projected to grow to $257 billion per year by 2009.� And, GlobeTel�s Magic Money� Division expects to be one of the near term leaders in capturing a large part of this market through its unique digital technology in major remittance markets and, ultimately, globally, through its Super-Hub. Full Divisional profitability expected in the third quarter of this year.

GlobeTel VoIP Division -� StrateVoIP �Okay, no doubt your initial reaction to any VoIP telephone service is:� so what?� You know about VoIP via Skype. You know about VoIP via Vonage.� But, you have to know about VoIP via GlobeTel in order to really understand how exceptionally insightful the engineers at our company can be about what others might view as a commodity telephony market. At GlobeTel, our amazing VoIP team has cunningly focused its platforms, its marketing, its pricing and its quality voice services on narrowly-defined, niche, �ethnic� markets (eth � nick.� adj.� Of, or relating to, a sizeable group of people sharing a common and distinctive national, religious, linguistic, racial or cultural heritage.) The first of these highly targeted VoIP initiatives is focused on such an ethnic minority community based in our home state:� Brazilians living in Florida with many relatives in Rio and Sao Paolo. At the moment, the costs of telephone calls between Florida and Brazil, and between Brazil and Florida are (i) hugely expensive using their incumbent carriers or (ii)� neither user-friendly nor ethnically-friendly when using other VoIP providers.��

Our approach is to tailor our services to meet the special needs of these special communities who reside in large numbers throughout the United States. In particular, in our first Portuguese-language-focused VoIP roll-out, we will very soon be able to provide Portuguese speakers in Florida and in Brazil with a �local telephone number� which, using our highly proprietary, in-house developed platform, will make it possible for a nephew in Rio to call an uncle in Ft. Lauderdale by dialing a local Rio number, as if the uncle lived across the street.� Likewise, for the uncle in Ft. Lauderdale, he will now be able to dial a local Ft. Lauderdale number in order to speak to his grandson in Sao Paolo, etc.� And, this will all be achieved at a small fraction of the cost of the available alternatives.�

Our GlobeTel VoIP Division, operating under the dazzling technical and commercial insights of its President, Dan Erdberg, has developed two �ethnic portals� on the internet which will allow customers in both Brazil and in the U.S. to quickly, easily and cheaply become GlobeTel VoIP customers in a matter of minutes using our web-based, interactive technology which makes the sign-up process a snap and the user-friendliness unprecedented.�

The objective for our VoIP Division for the remainder of this year and into the next will be to create a network of such platforms which are intertwined through our proprietary VoIP system, giving users expanded reach to both members and non-members of their ethnic communities around the world.� Simultaneous with these initiatives, which we anticipate will produce a Divisional breakeven in the third quarter and significant profit in the fourth quarter, the Division is also working aggressively to integrate its unique technologies into the Hotzone� Wireless system which will add a multitude of new applications and opportunities as GlobeTel Wireless rolls out its wireless networks around the world. This represents another strand in the ultimate Super-Hub strategy, while creating significant stand-alone profitability in the meantime.

Centerline.� Centerline is probably our most challenging business, because its revenue base sits squarely in the middle of pricing models driven by white markets, grey markets and even some �black� markets in the global market for voice termination traffic. It is, in short, a commodity business based on the most competitive pricing for the termination of telephone calls over the incumbent networks. Frankly, it�s a business that can be described as �difficult, on a good day.� However, because we happen to have one of the smartest, toughest and best �traders� in the business running our Centerline Division, Joe Monterosso, we have been able to establish this as a significant revenue generator for the company.� And, its revenues are growing by the day.� We are helped by the fact (and this is part of our secret) that we have recently installed our wholly-owned, state of the art, VOIP and TDM switches at our main Network Operating Center.

While Joe was able to eke out a profit before the installation of our own switches, it amounted to daily hand-to-hand combat in order to compete with the other traders in the gladiatorial pit of commodity terminations. While each day is still very much gladiatorial in nature, Joe has now professionalized his operation to such a level that when, married to his own personal reputation, an increasing number of major incumbents are coming to him, in order to squeeze the other grey market players from what he politely terms� �the market.��

Joe�s profitability is expected to continue to increase over the course of this coming year� stabilizing at what we anticipate will be a gross profit margin something on the order of $500,000 to $750,000 per month. And, this reliable revenue source has, and will continue to be, important to us while our other Divisions complete their run-up to profitability during 2006.� Another secret, by the way, is that Joe�s company-owned switches, combined with his significant network of fiber-optic cable leases� will form a valuable part of our global Super-Hub, once it is in place.

Sanswire� The Stratellite. �� The icing on the cake of the GlobeTel strategy (and admittedly, the butt of some unfounded jokes from the tabloid financial press) is our near-space digital platform, called the Stratellite�. This rigid airship (not a blimp, not a balloon as the pundits remind us), when it becomes operational later this year, will produce what we believe will be the single greatest revolution in communications technology in the history of the world.� Sure sounds like an outlandish statement, doesn�t it?� And, I admit it is hard to make such a statement in an annual report to the Shareholders of a public company.� But, if the regulators will allow me to get away with saying it, I have to say it, because I firmly believe it.�

What makes the Stratellite� so special is that it will provide (i) an incredibly cheap (ii) fully-recoverable (iii) high altitude (13 miles from the surface of the earth) (iv) stable, geo-synchronous digital equipment platform� that will flood more than 125,000 square miles beneath it with every conceivable flavor of digital radio spectrum.�� �The Highest Tower in the Sky� is the way we think about it, except that unlike ugly cell towers which blight our landscapes and whose signals are blocked, diverted or diminished by surface obstacles (hills, trees, buildings, etc.), our Stratellite� will have a direct, vertical, line-of-sight shot immediately beneath it with no obstacles in the way of its signals� whether broadband signals, cellphone signals, IPTV signals, data signals, infra-red photography, high resolution photography, electromagnetic sensors, �radar, etc.�

When (i) integrated with our GlobeTel Wireless installations on the ground (all mounted on a series of roof-top masts about six feet tall), (ii) tied into our VoIP platforms, (iii) meshed with our Magic Money� digital stored value cards, and (iv) married to our Centerline terrestrial backbone and switches � we will have a remarkable, entirely private, subscriber-only, world-wide web with the ability to provide � wirelessly � (i) mobile and fixed line telephony, (ii) very high speed broadband (iii) IPTV, and (iv) security, educational, medical, environmental and other data services, all at remarkably low prices. This � is the Super-Hub.��

While the successful, commercial deployment of the Stratellite� will surely add a large measure of synergy and �market reach� to the GlobeTel strategy (allowing us to communicate wirelessly with literally every human being on the face of the earth), it does not define GlobeTel. It is simply the final brush stroke on the canvas which will bring our other four digital businesses� which in at least two cases (GlobeTel Wireless and Magic Money) have the capability to become multi-billion dollar companies in their own rights� under a single, integrated umbrella to form a worldwide Super Hub.�

The Sanswire team is planning to flight test Sanswire II, our final �technology demonstrator�, in the immediate future at Edwards Air Force Base. Currently, Sanswire II is undergoing various systems tests and systems integration at our Palmdale, California facility. We�re waiting for clearance from the Edwards Range for the test flights.� Having floated Sanswire II in the California desert at the end of February, our Stratellite� Division, under the energetic and visionary leadership of former NASA Mission Director and decorated Air Force Pilot, Bob Jones, is now prepared to commence its high altitude testing in June, and continue through the summer. First, however, there will be further testing of various subsystems leading to further tethered flight tests. The tethered tests will be followed by un-tethered taxi tests at Palmdale, which is located just a short distance from Edwards AFB. After validating and completing the Combined Systems tests, we will conduct an un-tethered flight test at Edwards, and this is when we will be preparing ourselves, shortly thereafter, �to break the World Altitude Record for an Advanced Rigid Airship.

Our Stratellite� airship� -� for the technically-minded among you� -� �utilizes a state-of-the-art carbon composite frame integrated into an advanced envelope, with power generation from photo-voltaic panels attached to the envelope.� Using the latest battery storage technology and electric engines to power the airship, we believe we have the ability to keep the airship aloft, and in position, for many months on end.

Simultaneously, plans are currently underway to begin construction of Sanswire III, our first commercial variant, for expected delivery to a Latin American country for use in digital communications and border security. The completion, final testing and delivery of Sanswire III is targeted for early 2007. From there, we hope the world will be our oyster.

Conclusions.�� When I sat down to write this letter to our shareholders, I asked myself: �If I were a shareholder of this company, what would I like to know?�� After reflecting on the question, I concluded that I would simply like to hear an honest, comprehensible statement about what this, sometimes confusing, company is really all about. I realized, because of my personal enthusiasm, that there was a risk of communicating something that might sound more like an advertising commercial than a cut-and-dried statement of the financial facts. If what I have produced here sounds too much like a Ferrari commercial, I apologize.� But, I have genuinely tried to convey the very exciting facts to you as I understand them.

I am no engineer. I am a businessman with a lot of years under my belt� working in virtually every sector and in virtually every market around the world.�� And, indeed, it is this background and this perspective that attracted the company to me, and me to the company.� My job, as I see it, is to do everything professionally possible, in concert with our CEO and his management team, to ensure that GlobeTel achieves its great potential.� As a shareholder myself, and as one of your most committed representatives � along with my fellow Board Members � I am convinced that we have an exceptional opportunity to create new markets, create new business models, reach new constituencies, generate exceptional profits and, also, to do some good for the world. Nothing in life is ever certain, of course. And at GlobeTel � because we are inspired everyday by our supporters and diverted by our detractors� we are fully attuned to the fact that what we are striving to do has few precedents. But, we believe in what we are trying to do, down to our toenails.�

The greatest revolutions in history have had few or no precedents.� I am often reminded of the London Times description of Alexander Graham Bell: �He is an �impostor�, a �ventriloquist�, a �crank� who says he can talk through a wire.�� Or the New York Herald�s statement that his (technology) is �weird, almost supernatural.� Clearly, we assume we are beyond the plague of petty superstitions and skeptical, uninformed �journalists.� But, in many ways we are not.� We remain perplexed by the handful of casual, uninformed, tabloid press artisans who simply fail to do their homework, fail to investigate the facts, debunk original research and, instead, fly into the grasping arms of their flighty, gossip-mongering readership.�� But, perhaps this is the way it has always been.

To you, our shareholders, I can only assure you that you have one of the most committed, dedicated, hard working, focused and energized management teams to ever occupy the American Stock Exchange. We eat, sleep and breathe GlobeTel.� We believe, as we rush to populate our management ranks with more high quality, deeply experienced, international business executives, that the next stage of the company�s growth is now at hand. Our R&D costs and our capital expenditures are behind us and, now, �this is the year for ramping up our people resources and our operating profits. Our expanding management team has as its mantra:� Deploy the technology. Generate the revenues. This, during the remainder of 2006, is our overwhelming focus. We are striving to make every Division in the company profitable by year-end. Considering the unique, highly marketable technologies that we have created and the many markets that we are already tapping, the future for GlobeTel and its owners (i.e. you and me) �has never looked brighter.� We thank you for continued support and hope to reward you handsomely for it.

J. Randolph Dumas
Chairman of the Board
GlobeTel Communications Corp.
http://www.globetel.net/about/letter033106.html