SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB/A

(Amendment No. 1)

(Mark One)
[ X ] Quarterly Report Pursuant To Section 13 Or 15(D) Of The
Securities Exchange Act Of 1934

For The Quarterly Period Ended SEPTEMBER 30, 2004

[ ] Transition Report Pursuant To Section 13 Of 15(D) Of The Securities
Exchange Act Of 1934

For The Transition Period From ___________ To ___________

Commission file number 0-25703

GTC TELECOM CORP.
(Exact Name of Registrant as Specified in its Charter)

NEVADA 88-0318246
(State Or Other Jurisdiction Of (I.R.S. Employer
Incorporation Or Organization) Identification No.)

3151 AIRWAY AVE., SUITE P-3, COSTA MESA, CALIFORNIA 92626
(Address of Principal Executive Offices) (Zip Code)

714-549-7700
(Issuer's Telephone Number)

N/A
(Former Name, Former Address And Former Fiscal Year,
If Changed Since Last Report)

---------------

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90
days.

Yes [ X ] No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

Title of each class of Common Stock Outstanding at October 31, 2004
----------------------------------- -------------------------------
Common Stock, $0.001 par value 22,401,622

Transitional Small Business Disclosure Format
(Check one);

Yes [ ] No [ X ]

-1-

INDEX

GTC TELECOM CORP.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets at September 30, 2004
(Unaudited) and June 30, 2004-As Restated

Condensed Consolidated Statements of Operations and Other
Comprehensive Loss (Unaudited) for the three months ended September
30, 2004 and 2003-As Restated

Condensed Consolidated Statements of Cash Flows (Unaudited) for the
three months ended September 30, 2004 and 2003-As Restated

Notes to Condensed Consolidated Financial Statements (Unaudited)

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

Item 3 Controls and Procedures

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 3. Defaults Upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

-2-

EXPLANATORY NOTE

This amendment on Form 10-QSB/A summarizes the impact and effect of the
restatement of our previously filed financial statements for the quarter ended
September 30, 2004; and amends Items 1 and 2 of Part I of the Quarterly Report
on Form 10QSB of GTC Telecom Corp. (the "Company") previously filed on November
15, 2004.

This amendment on Form 10-QSB/A for the quarter ended September 30, 2004 amends
and restates only those items of the previously filed Form 10-QSB which have
been affected by the restatement. In order to preserve the nature and character
of the disclosures set forth in such items as originally filed, no attempt has
been made in this amendment (i) to modify or update such disclosures except as
required to reflect the effects of the restatement or (ii) to make revisions to
the Notes to the Condensed Consolidated Financial Statements except for those
which are required by or result from the effects of the restatement. For
additional information regarding the restatement, see Note 10 to the Condensed
Consolidated Financial Statements for the Company included in Part I - Item 1.
No other information contained in the Company's Form 10-QSB for the quarter
ended September 30, 2004 has been updated or amended.

ITEM 1. FINANCIAL STATEMENTS

GTC TELECOM CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS-AS RESTATED

September 30, June 30,
2004 2004
(Unaudited)
--------------- -------------

ASSETS
Cash $ 500 $ 73,572
Accounts receivable, net of allowance for doubtful accounts of
approximately $76,000 and $49,000 at
September 30, 2004 and June 30, 2004, respectively 618,972 691,749
Deposits 57,007 57,587
Prepaid expenses 64,401 64,899
--------------- -------------
Total current assets 740,880 887,807

Property and equipment, net 590,531 620,471
Other assets 77,992 76,208
--------------- -------------

Total assets $ 1,409,403 $ 1,584,486
=============== =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 3,724,832 $ 3,185,018
Accrued payroll and related taxes 174,417 210,997
Obligation under capital leases 11,691 13,394
Notes payable 5,863,146 5,868,597
Deferred income 4,560 4,560
--------------- -------------
Total current liabilities 9,778,646 9,282,566

Long-term liabilities:
Obligation under capital leases, net of current portion 28,700 31,538
Notes payable, net of current portion 24,277 23,565
--------------- -------------
Total Liabilities 9,831,623 9,337,669

Commitments and contingencies

Minority interest in consolidated subsidiary 25,588 42,818

Stockholders' deficit:
Preferred stock, $0.001 par value; 10,000,000 shares authorized;
none issued and outstanding -- --
Common stock, $0.001 par value; 50,000,000 shares authorized;
22,401,622 and 22,106,622 shares issued and outstanding at
September 30, 2004 and June 30, 2004, respectively 22,402 22,107
Additional paid-in-capital 9,256,122 9,208,778
Note receivable officer (60,306) (60,306)
Accumulated other comprehensive loss 6,467 11,993
Accumulated deficit (17,672,493) (16,978,573)
--------------- -------------
Total stockholders' deficit (8,447,808) (7,796,001)
--------------- -------------

Total liabilities and stockholders' deficit $ 1,409,403 $ 1,584,486
=============== =============

The accompanying notes are an integral part of these condensed consolidated
financial statements.

-3-

GTC TELECOM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS-AS RESTATED
(UNAUDITED)

Three Months Ended
September 30,
2004 2003
------------ ------------

Revenues:
Telecommunications $ 1,852,585 $ 2,917,023
Internet services 175,469 204,077
BPO services 40,579 --
------------ ------------
Total revenues 2,068,633 3,121,100
------------ ------------

Cost of sales:
Telecommunications 908,896 1,388,345
Internet services 47,230 162,330
BPO services 28,728 --
------------ ------------
Total cost of sales 984,854 1,550,675
------------ ------------

Gross profit 1,083,779 1,570,425

Operating expenses:
Payroll and related 595,446 763,642
Selling, general, and administrative 908,709 1,032,864
------------ ------------
Total operating expenses 1,504,155 1,796,506
------------ ------------

Operating loss (420,376) (226,081)

Interest expense, net (288,203) (114,837)
------------ ------------

Loss before provision for income taxes and minority
interest (708,579) (340,918)

Provision for income taxes 2,571 2,245
------------ ------------

Loss before minority interest (711,150) (343,163)

Minority interest in loss of consolidated subsidiaries 17,230 18,727
------------ ------------

Net loss available to common stockholders (693,920) (324,436)

Foreign currency translation adjustment (5,526) 1,334
------------ ------------

Comprehensive loss $ (699,446) $ (323,102)
============ ============

Basic and diluted net loss available to common
stockholders per common share $ (0.03) $ (0.02)
============ ============

Basic and diluted weighted average common shares
outstanding 22,261,405 20,721,731
============ ============

The accompanying notes are an integral part of these condensed consolidated
financial statements.

-4-

GTC TELECOM CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-AS RESTATED
(UNAUDITED)

Three Months Ended
September 30,
2004 2003
---------- ---------

Cash Flows From Operating Activities:
Net loss $(693,920) $(324,436)
Adjustments to reconcile net loss to net cash
provided by/(used in) operating activities:
Estimated fair market value of options granted to
employees for compensation 27,563 27,563
Estimated fair market value of stock issued in
connection with notes payable 20,076 3,070
Depreciation and amortization 79,406 64,554
Bad debt expense 43,058 70,612
Minority interest in loss of consolidated subsidiaries (17,230) (18,727)
Loss on sale of equipment -- 12,342
Changes in operating assets and liabilities:
Accounts receivable and other current assets 29,013 127,071
Accounts payable and accrued expenses 539,814 668,595
Accrued payroll and related taxes (36,580) (18,960)
---------- ---------

Net cash provided by operating activities (8,800) 611,684
---------- ---------
Cash Flows From Investing Activities:
Purchases of property and equipment (8,237) (71,911)
---------- ---------

Net cash used in investing activities (8,237) (71,911)
---------- ---------

Cash Flows From Financing Activities:
Principal repayments on notes payable (45,968) (651,375)
Principal payments under capital lease obligations (4,541) (2,732)
Principal borrowings on notes payable, net of fees of $202,000 -- 59,000
Proceeds from issuance of stock of subsidiary, net of
offering costs of $6,000 -- 54,000
---------- ---------

Net cash used in financing activities (50,509) (541,107)
---------- ---------

Effect of exchange rate on cash (5,526) 1,334
---------- ---------
Net decrease in cash (73,072) --

Cash at beginning of period 73,572 500
---------- ---------

Cash at end of period $ 500 $ 500
========== ==========

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,166 $ 106,759
========== ==========
Income taxes $ 2,571 $ 2,245
========== ==========

See accompanying notes to condensed consolidated financial statements for other
non-cash investing and financing activities.

During the period ended September 30, 2004, the Company financed the purchase of
equipment totaling $41,229 with notes payable.

The accompanying notes are an integral part of these condensed consolidated
financial statements.

-5-

GTC TELECOM CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - MANAGEMENT'S REPRESENTATION:

The management of GTC Telecom Corp. and its subsidiaries (the "Company" or
"GTC") without audit has prepared the condensed consolidated financial
statements included herein. The accompanying unaudited condensed financial
statements consolidate the accounts of the Company and its wholly owned
subsidiaries and have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information. Certain information and note disclosures normally included in the
condensed consolidated financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have
been omitted. In the opinion of the management of the Company, all adjustments
considered necessary for fair presentation of the condensed consolidated
financial statements have been included and were of a normal recurring nature,
and the accompanying condensed consolidated financial statements present fairly
the financial position as of September 30, 2004, the results of operations for
the three months ended September 30, 2004 and 2003, and cash flows for the three
months ended September 30, 2004 and 2003.

It is suggested that these condensed consolidated financial statements be read
in conjunction with the audited consolidated financial statements and notes for
the year ended June 30, 2004, included in the Company's Form 10-KSB filed with
the Securities and Exchange Commission on September 28, 2004. The interim
results are not necessarily indicative of the results for a full year.

NOTE 2 - DESCRIPTION OF BUSINESS:

GTC - GTC provides various services including, telecommunication services, which
includes long distance telephone and calling card services, Internet related
services, including Internet Service Provider access, and business process
outsourcing ("BPO") services. GTC Telecom Corp. was organized as a Nevada
Corporation on May 17, 1994 and is currently based in Costa Mesa, California.
The Company trades on the Over-The-Counter Bulletin Board under the symbol
"GTCC".

PERFEXA - Perfexa Solutions, Inc. ("Perfexa" or "Perfexa-U.S."), a majority
owned subsidiary of the Company, currently provides customer service for the
Company's telecommunication and Internet users. Perfexa's Information
Technology ("IT") group currently develops IT solutions for GTC's customer care
needs and the integration of GTC's customer care system with those of Perfexa's
New Delhi Center. Perfexa has recently begun offering its services to third
parties and plans to focus on marketing its outsourced call center services to
U.S. based companies. Perfexa's IT group will work initially to ensure the
integration of Perfexa's systems with those of Perfexa's clients. Subsequently,
the IT group will develop customized software solutions for third parties.

NOTE 3 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

GOING CONCERN - The accompanying condensed consolidated financial statements
have been prepared assuming the Company will continue as a going concern, which
contemplates, among other things, the realization of assets and satisfaction of
liabilities in the normal course of business. As of September 30, 2004, the
Company has negative working capital of $9,037,766, an accumulated deficit of
$17,672,493, and a stockholders' deficit of $8,447,808; in addition, through
September 30, 2004, the Company historically had losses from operations and a
lack of profitable operational history, among other matters, that raise
substantial doubt about its ability to continue as a going concern. The Company
hopes to continue to increase revenues from additional revenue sources and/or
increase margins through continued negotiations with Sprint (see Note 7) and
other cost cutting measures. In the absence of significant increases in
revenues and margins, the Company intends to fund operations through additional
debt and equity financing arrangements. The successful outcome of future
activities cannot be determined at this time and there are no assurances that if
achieved, the Company will have sufficient funds to execute its intended
business plan or generate positive operating results.

These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

-6-

PRINCIPLES OF CONSOLIDATION - The accompanying condensed consolidated financial
statements include the accounts of GTC Telecom Corp. and its subsidiaries which
are CallingPlanet.com, Inc., ecallingcards.com, Inc., Curbside Communications,
Inc., and Perfexa Solutions, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.

MINORITY INTEREST - Minority interest represents the minority stockholders'
proportionate share of the equity of Perfexa Solutions, Inc. At September 30,
2004 and June 30, 2004, the Company owned approximately 97% and 97%,
respectively, of Perfexa Solutions, Inc.'s common stock. The Company's
controlling interest requires that Perfexa Solutions, Inc.'s operations be
included in the condensed consolidated financial statements of the Company. The
3% and 3% equity interest of Perfexa Solutions, Inc. that is not owned by the
Company at September 30, 2004 and June 30, 2004, respectively, is shown as
minority interest in consolidated subsidiary in the accompanying condensed
consolidated financial statements.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates. Significant estimates made by management
are, among others, provisions for losses on accounts receivable, realizability
of long-lived assets and estimates for income tax valuations.

COMPREHENSIVE INCOME - SFAS 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. Total comprehensive loss
represents the net change in stockholders' equity during a period from sources
other than transactions with stockholders and as such, includes net earnings.
For the Company, the components of other comprehensive loss are the changes in
the cumulative foreign currency translation adjustments and are recorded as
components of stockholders' deficit.

TRANSLATION OF FOREIGN CURRENCIES - GTC uses the U.S. dollar as it functional
currency while the Company's foreign subsidiary uses the Indian Rupee as its
functional currency. Assets and liabilities of foreign subsidiary are
translated into U.S. dollars at year-end or period-end exchange rates, and
revenues and expenses are translated at average rates prevailing during the year
or other period presented. In accordance with SFAS No. 52, "Foreign Currency
Translation", net exchange gains or losses resulting from such translation are
excluded from net loss, but are included in comprehensive loss and accumulated
in a separate component of stockholders' deficit. The Company recorded a
foreign translation loss of $5,526 for the three months ended September 30,
2004 and a translation gain of $1,334 for the three months ended September 30,
2004.

STOCK-BASED INCENTIVE COMPENSATION - The Company has two stock-based employee
compensation plans. The Company accounts for those plans under the recognition
and measurement principles of Accounting Principles Board ("APB") Opinion No.25,
Accounting for Stock Issued to Employees, and related interpretations.
Stock-based employee compensation cost approximating $27,563 is reflected in net
loss for each of the three month periods ended September 30, 2004 and 2003,
respectively, as certain options granted under those plans had an exercise price
less than the market value of the underlying common stock on the date of grant.
Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for
Stock-Based Compensation Transition and Disclosure, an Amendment of FASB
Statement No. 123, provides alternative methods for an entity that voluntarily
changes to the fair value based method of accounting for stock-based employee
compensation as described in SFAS No. 123 Accounting for Stock-Based
Compensation.

The following table illustrates the effect on loss and loss per common share as
if the Company had applied the fair value recognition provisions of SFAS No. 123
for all of its stock-based employee compensation plans.

Three Months Ended
September 30,
2004 2003

Net loss available to common stockholders:
As reported $ (693,920) $(324,436)
Deduct total stock-based employee compensation expense
determined under fair based method for all awards (57,000) (59,000)
------------ ----------

Pro-forma $ (750,920) $(383,436)
============ ==========

Basic and diluted net loss available to common stockholders
per common share
As reported $ (0.03) $ (0.02)
============ ==========

Pro-forma $ (0.03) $ (0.02)
============ ==========

-7-

LOSS PER SHARE - Statement of Financial Accounting Standards ("SFAS") No. 128
("SFAS 128"), "Earnings Per Share" requires basic earnings per share is computed
by dividing income available to common shareholders by the weighted-average
number of common shares assumed to be outstanding during the period of
computation. Diluted earnings per share is computed similar to basic earnings
per share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive
(using the treasury stock method, no shares were potential additional common
shares as of September 30, 2004 and 2003, respectively). Pro forma per share
data has been computed using the weighted average number of common shares
outstanding during the periods. For the three months ended September 30, 2004
and 2003, respectively, because the Company had incurred net losses, basic and
diluted loss per share are the same as additional potential common shares.

The following table sets forth the computation of basic and diluted loss per
common share:

Three Months Ended
September 30,
2004 2003
------------ ------------

Net loss available to common stockholders $ (693,920) $ (324,436)

Weighted average number of common shares outstanding 22,261,405 20,721,731
Incremental shares from the assumed exercise of dilutive stock
options and warrants -- --
Dilutive potential common shares 22,261,405 20,721,731
------------ ------------

Basic and diluted net loss available to common
stockholders per common share $ (0.03) $ (0.02)
============ ============

RECLASSIFICATIONS - Certain reclassifications have been made to prior year
financial statements to conform to current year presentation.

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS - In November 2002, the FASB issued
FIN No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of FIN No. 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, while the disclosure requirements became applicable in 2002.
The Company is complying with the disclosure requirements of FIN No. 45. The
other requirements of this pronouncement did not materially affect the Company's
financial statements.

SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure, an amendment of FASB Statement No. 123," was issued in December 2002
and is effective for fiscal years ending after December 15, 2002. SFAS No. 148
provides alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
this pronouncement amends the disclosure requirements of SFAS No. 123 to require
more prominent disclosure in both annual and interim financial statements about
the method of accounting for stock-based employee compensation and the effect of
the method used on reported results. The Company is complying with the
disclosure requirements of SFAS No. 148.

-8-

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51." The primary objectives of FIN No.
46 are to provide guidance on the identification of entities for which control
is achieved through means other than voting rights (variable interest entities,
or "VIEs"), and not to determine when and which business enterprise should
consolidate the VIE. Management has determined that the Company does not have
any VIEs.

In April 2003, the FASB issued SFAS No. 149, "Amendments of Statement 133 on
Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133. This pronouncement is effective for contracts entered into
or modified after June 30, 2003 (with certain exceptions), and for hedging
relationships designated after June 30, 2003. The adoption of SFAS No. 149 did
not have a material impact on the Company's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity and is
effective (except for certain mandatorily redeemable noncontrolling interests)
for financial instruments entered into or modified after May 31, 2003. The
Company adopted SFAS No. 150 on June 1, 2003. The adoption of this
pronouncement did not have a material impact on the Company's results of
operations or financial condition.

Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not
believed by Management to have a material impact on the Company's present or
future financial statements.

NOTE 4 - RELATED PARTY TRANSACTIONS:

NOTE RECEIVABLE OFFICER

As of September 30, 2004, the Company has net advances to an officer of $60,306.
The advances accrue interest at 10% (no interest income has been recorded as of
September 30, 2004) and are due on demand. The Company has reclassified the
note receivable as an increase to stockholders' deficit in the accompanying
condensed consolidated balance sheet at September 30, 2004.

NOTE 5 - NOTES PAYABLE AND CAPITAL LEASES:

On February 12, 2004, the Company borrowed $450,000 for working capital purposes
from an unrelated third party. The note was to be repaid plus interest of
$48,000 upon maturity at June 11, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 150,000 shares of the
Company's restricted common stock valued at $11,688 (based on the market price
on the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in February
2004. On May 5, 2004, the note, as amended, was extended to July 15, 2004. In
consideration of the extension, the Company agreed to pay an additional $13,280
in interest and issue an additional 300,000 shares of the Company's restricted
common stock valued at $45,000 (based on the market price on the date of grant).
The Company recorded the value of the common stock to interest expense in May
2004.

-9-

On November 5, 2003, the Company borrowed $350,000 for working capital purposes
from an unrelated third party. The note was to be repaid plus interest of
$37,333 upon maturity at March 5, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 20,000 shares of the
Company's restricted common stock valued at $2,581 (based on the market price on
the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in November
2003. On March 5, 2004, the Company defaulted on the note and issued 100,000
shares of the Company's restricted common stock valued at $8,000 (based on the
market price on the date of issuance) in accordance with the default terms of
the note. The note was renegotiated and $75,000 of the note plus interest of
$37,333 were repaid. The new note of $275,000 was to be repaid plus interest of
$14,667 upon maturity at May 5, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 275,000 shares of the
Company's restricted common stock valued at $20,370 (based on the market price
on the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in March
2004. On May 5, 2004, the note, as amended, was extended to July 15, 2004. In
consideration of the extension, the Company has agreed to pay an additional
$15,448 in interest and issue the additional 100,000 shares of the Company's
restricted common stock valued at $15,000 (based on the market price on the date
of grant). The Company recorded the value of the common stock to interest
expense in May 2004.

On August 18, 2004, these 2 notes, as amended, were combined into one note
totaling $816,395, incorporating principal of $725,000 and interest owed of
$91,395, and extended to November 30, 2004. In consideration of the extension,
the Company has agreed to pay an additional $73,350 in interest and issue an
additional 250,000 shares of the Company's restricted common stock valued at
$17,133 (based on the market price on the date of grant). The Company will
record the value of the common stock to interest expense in August 2004.

On June 8, 2004, the Company borrowed $50,000 for working capital purposes from
an unrelated third party. The note is to be repaid plus interest of $7,500 upon
maturity at September 7, 2004. In the event of default, the investor shall be
entitled to accelerate the repayment of the note. In addition, the Company
issued to the third party 50,000 shares of the Company's restricted common stock
valued at $4,128 (based on the market price on the date of grant and the related
pro-rata value of the common stock). The Company recorded the value of the
common stock to interest expense in June 2004. The Company is currently past
due on this note and is in discussions to restructure the terms of the note.

On December 9, 2003, the Company borrowed $200,000 for working capital purposes
from an unrelated third party. The note was to be repaid plus interest of
$21,333 upon maturity at April 8, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 40,000 shares of the
Company's restricted common stock valued at $4,305 (based on the market price on
the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in December
2003. On May 17, 2004, the note, as amended, was extended to July 19, 2004. In
consideration of the extension, the Company has agreed to pay an additional
$18,667 in interest and issue an additional 200,000 shares of the Company's
restricted common stock valued at $22,000 (based on the market price on the date
of grant). The Company recorded the value of the common stock to interest
expense in May 2004. As of September 30, 2004, the Company has repaid $100,000.
The principal balance due at September 30, 2004 is $100,000. The note is in
default and the Company is currently in discussions to restructure the terms of
the note.

On October 2, 2002, and amended on April 1, 2004, the Company renegotiated a
previous note payable (the "Previous Note") due to an unrelated third party into
a new note payable (the "New Note"). The Previous Note had an outstanding
balance of $45,000 on the date of renegotiation. The New Note, as amended, pays
simple interest of 12% per annum with principal and interest due upon maturity
at May 21, 2004. In addition, the Company issued to the third party 45,000
shares of the Company's restricted common stock valued at $4,821 (based on the
market price on the date of grant and the related pro-rata value of the common
stock). The Company recorded the value of the common stock to interest expense
in April 2004. On July 21, 2004, the note, as amended and extended, calls for
payments of $20,000 due on July 21, 2004, $15,000 due on August 21, 2004, and
$10,000 due on September 21, 2004. In consideration of the extension, the
Company has agreed to issue an additional 45,000 shares of the Company's
restricted common stock valued at $2,944 (based on the market price on the date
of grant). The Company will record the value of the common stock to interest
expense in July 2004. As of November 15, 2004, the Company has not made the
August 21 and September 21 payments pursuant to the extension. The Company is
currently in discussions to restructure the terms of the note.

In September 2003, the Company borrowed $25,000 for working capital purposes
from a third party. The note pays simple interest of 8% per annum with
principal and interest due upon maturity at December 3, 2003. In the event of
default, the investor shall be entitled to accelerate the repayment of the note.
In addition, the Company issued to the third party 25,000 shares of the
Company's restricted common stock valued at $3,070 (based on the market price on
the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in September
2003. On December 3, 2003, the note plus interest of $504 were repaid.

-10-

In April 2003, Perfexa-U.S. issued a short-term convertible note with a
principal amount of $125,000 to an unrelated third party investor. The note
provides for simple interest of 10% per annum with principal and interest due
upon maturity at July 31, 2003. Pursuant to the terms of the note, the note may
be converted, at the election of the noteholder prior to the maturity of the
note, into shares of common stock of Perfexa-U.S. at the rate of $0.50 per share
(estimated to be the fair market value on the date of issuance, based on current
third party transaction). In August 2003, the Company repaid $100,000 of the
principal balance and issued 8,152 shares of Perfexa-U.S. restricted common
stock valued at $4,076 (based on the terms of the note) in lieu of an equivalent
amount of interest due on the note. In the three month period ended December
31, 2003, the Company repaid the remaining $25,000 of the principal balance.

The Company maintains a revolving line of credit of $20,000 to finance the
purchase of computer equipment. The revolving line of credit provides for the
Company to make monthly payments of $451, including interest at a rate of
12.99%. The total outstanding balance on the revolving line of credit was
$16,684 and is included in notes payable in the accompanying condensed
consolidated balance sheet at September 30, 2004. As of the date of this
report, the Company has made all payments as required in the revolving line of
credit.

The Company from time to time borrows funds from the Company's Chief Executive
Officer ("CEO") for working capital purposes. Amounts accrue no interest and
are payable on demand. On April 15, 2004, the Company borrowed $12,000 from its
CEO. As of November 15, 2004, the Company has repaid $11,000 of the amount
borrowed.

On September 30, 2002, and amended on May 30, 2003, the Company renegotiated a
previous note payable due to MCI into a new note payable (the "New Note"). On
July 1, 2004, the Company received notice from MCI that it was in default of the
terms of the above note as well as the Telecommunications Services Agreement and
Data Services Agreement between MCI and GTC. As of September 30, 2004, the New
Note has an outstanding balance of $4,925,437. The Company is attempting to
resolve its outstanding balance and the amounts past due with MCI. However,
there can be no guarantees that the Company will be successful in its efforts to
reach an amicable resolution with MCI regarding the amounts past due. Failure
to successfully restructure the amounts due MCI will have a material adverse
effect on the Company's operations.

NOTE 6 - STOCKHOLDERS' DEFICIT:

During the three months ended September 30, 2004, the Company issued 295,000
shares of the Company's restricted common stock in connection with notes payable
(see Note 5).

The Company recorded compensation expense for previously issued "in the money"
options of $27,563 and $27,563 in the three month period ended September 30,
2004 and 2003, respectively.

NOTE 7 - CONTRACTS AND CONTINGENCIES:

The Company does not own its own long distance network and currently depends
upon third parties to provide for the transmission of phone calls by its
customers and to provide the call detail records upon which the Company bases
its customer's billings. Previously, the Company contracted with MCI WorldCom
Network Services, Inc. ("MCI") as its underlying carrier. On July 1, 2004, the
Company received notice from MCI that it was in default of the terms of its New
Note with MCI as well as the Telecommunications Services Agreement and Data
Services Agreement ("TSA") between MCI and GTC ("Default"). The total
outstanding balance due MCI was approximately $7,172,370 at September 30, 2004,
including $4,925,437 due on the New Note, $619,984 of accrued interest on the
New Note, and $1,626,949 owed on the TSA and included in accounts payable in the
accompanying condensed consolidated balance sheet at September 30, 2004. The
Company is attempting to resolve its outstanding balance and the amounts past
due with MCI. However, there can be no guarantees that the Company will be
successful in its efforts to reach an amicable resolution with MCI regarding the
amounts past due. Failure to successfully restructure the amounts due MCI will
have a material adverse effect on the Company's operations.

-11-

In order to minimize service disruptions to the Company's customers, on July 7,
2004, the Company transferred its customer accounts to its alternate supplier,
Sprint Communications Company L.P. ("Sprint"). As a consequence of this
conversion, a not yet determined number of the Company's long distance customers
have either left the Company or were not successfully converted due to technical
issues. As a result, the Company has experienced an approximate 16% reduction
in its call volumes and corresponding revenues. The Company is attempting to
resolve all outstanding technical issues relating to this conversion and will
continue to market its services in order to re-acquire or add new customers.
Pursuant to the terms of its agreement with Sprint, as amended, the Company is
obligated to a monthly minimum of $25,000 through July 26, 2006. For any period
during which the Company fails to meet its monthly minimum, the Company would be
liable for 25% of the difference between the Company's actual usage and the
stated minimum. The Company may terminate the agreement upon ninety (90) days
written notice provided that the Company pays a termination fee equal to 50% of
the aggregate minimum revenue requirement for the remaining term of the contract
if the Company terminates for convenience or by default of the Company prior to
the expiration date which was approximately $322,000 as of September 30, 2004.
Sprint may terminate the agreement upon thirty (30) days written notice and then
only in the event that the Company is in material breach of the agreement.
However, in cases of nonpayment, Sprint may elect to immediately terminate the
Agreement.

The termination of the Company's contract with Sprint, the loss of
telecommunications services provided by Sprint, or a reduction in the quality of
service the Company receives from Sprint could have a material adverse effect on
the Company's results of operations. In addition, the accurate and prompt
billing of the Company's customers is dependent upon the timeliness and accuracy
of call detail records provided to the Company by Sprint. There can be no
assurance that accurate information will be provided by Sprint on a timely
basis, the failure of which would have a material adverse effect on the
Company's results of operations.

In the event that the services provided by Sprint to the Company were
discontinued, the Company believes that it would be able to identify alternate
suppliers which would be able to provide it with sufficient levels of services
at terms similar to those of Sprint. Although the Company has the right to
switch its current customers to an alternate underlying carrier, the Company's
customers have the right to discontinue their service with the Company at any
time. Accordingly, the termination or non-renewal of the Company's contract
tariffs with Sprint or the loss of telecommunications services from Sprint may
have a material adverse effect on the Company's results of operations and
financial condition.

GTC does not currently have its own Internet Network. Currently, the Company
provides its Internet Service Provider Access services pursuant to an agreement
with a third party company for the provisioning of the Company's Internet
Service Provider Access service. The Company is not obligated to any monthly
minimums under its agreement with its underlying Internet service provider.
Although the Company believes that its relationship with its third-party
provider is strong and should remain so with continued contract compliance, the
termination of the Company's contract with its underlying provider, the loss of
Internet services provided by this company, or a reduction in the quality of
service the Company receives from this company could have an adverse effect on
the Company's internet operations. In the event that its underlying provider was
to discontinue its service to the Company, the Company believes, based upon
discussions that the Company has had with other Internet service providers, that
it could negotiate and obtain contracts with Internet service providers at
comparable rates.

Previously, pursuant to an agreement with MCI for the provisioning of the
Company's Internet Service Provider Access service, the Company was required to
pay the greater of actual incurred usage or a minimum monthly fee. In December
2003, the Company renegotiated its agreement with MCI. Under the terms of the
revised agreement, the Company was no longer obligated to monthly minimums.
However, the Company was subject to an aggregate usage minimum of $525,000
during the term of the agreement which was set to expire on June 1, 2006. As of
September 30, 2004, the Company had accrued $528,000 which is included in
accounts payable.

-12-

STOCK PURCHASE AGREEMENT - Pursuant to a common stock purchase agreement
("Agreement") with Bluefire Capital, Inc. ("Bluefire"), the Company is entitled
to issue and sell common stock to Bluefire in the form of draws for up to an
aggregate of $20,000,000, as defined in the Agreement, from time to time during
a three year period beginning on the date of the filing of an effective
registration statement. On November 20, 2001, the Company filed a registration
statement under the Securities Act with the Securities and Exchange Commission
("SEC") for 15,000,000 shares available to be issued to Bluefire under the
Agreement should the Company choose to draw down on these shares and on January
23, 2002, the registration statement was declared effective. Pursuant to the
Agreement, the Company must draw a minimum of $500,000 by January 23, 2005, or
the Company shall be required to pay liquidated damages equal to one-half of the
amount not drawn-down. As of November 15, 2004, the Company has not drawn under
this Agreement.

ACQUISITION - On April 23, 2004, the Company entered into an agreement for the
acquisition of Telspan, Inc., a California corporation ("Telspan"). Pursuant to
the Reorganization and Stock Purchase Agreement (the "Acquisition Agreement")
entered into between the Company, Telspan, Inc. and its shareholders, the
Company agreed to acquire 100% of the outstanding capital stock of Telspan in
exchange for that number of shares of the Company's common stock which would
equate to 84% of the outstanding capital stock of the Company on a fully diluted
basis following the acquisition. Closing of the acquisition was conditioned
upon various events, including the approval of the Company's stockholders and
upon Telspan's successful acquisition of certain telecommunications assets. On
October 1, 2004, pursuant to the terms of the agreement, the Company elected to
terminate the agreement.

In a related agreement, the Company on April 23, 2004 agreed to sell a
controlling interest in its Perfexa subsidiary to the shareholders of Infospan,
Inc., a California company commonly controlled by some of the shareholders of
TelSpan. Closing of the sale of the controlling interest was conditioned, in
part, upon the approval of the Company's stockholders as well as the generation
of certain amounts of business for Perfexa. On October 1, 2004, pursuant to the
terms of the agreement, the Company elected to terminate the agreement.

NOTE 8 - PERFEXA SOLUTIONS SUBSIDIARY:

On June 3, 2003, Perfexa-U.S. issued a confidential private placement memorandum
("PPM") of 2,000,000 shares of Perfexa's restricted common stock at $1.00 per
share. As of September 30, 2003, Perfexa had sold 60,000 shares pursuant to
this offering, resulting in net proceeds of $54,000 which were transferred to
GTC as partial repayment of accrued advances. The PPM closed on August 31, 2003
with no additional investments.

NOTE 9 - BUSINESS SEGMENT INFORMATION:

Segment and geographical information is assigned by region based upon management
responsibility for such items. The following table presents information about
the Company's operations by geographical area for the three months ended
September 30, 2004 and 2003.

Three Months Ended Three Months Ended
September 30, 2004 September 30, 2003

REVENUES
- ---------

Telecommunications and Internet $2,028,054 $3,121,100
BPO
Perfexa-U.S. 40,579 --
Perfexa-India -- --
----------- -----------
Total $2,068,633 $3,121,100
=========== ===========

COST OF SALES
- -------------

Telecommunications and Internet $ 956,126 $1,550,675
BPO
Perfexa-U.S. 28,728 --
Perfexa-India -- --
----------- -----------
Total $ 984,854 $1,550,675
=========== ===========

OPERATING INCOME/LOSS
- ---------------------

Telecommunications and Internet $ 155,322 $ 710,534
BPO
Perfexa-U.S. (267,660) (653,781)
Perfexa-India (308,038) (282,834)
----------- -----------
Total $ (420,376) $ (226,081)
=========== ===========

CAPITAL EXPENDITURES
- --------------------

Telecommunications and Internet $ 46,352 $ 84,349
BPO
Perfexa-U.S. -- --
Perfexa-India 3,114 93,626
----------- -----------
Total $ 49,466 $ 177,975
=========== ===========

Identifiable assets are assigned by region based upon management responsibility.
The following table presents information about the Company's identifiable assets
by geographic region:

-13-

September 30, 2004 June 30, 2004
---------- ----------
ASSETS

Telecommunications and Internet $ 848,140 $1,002,223
BPO
Perfexa-U.S. 52,619 28,549
Perfexa-India 508,644 553,714
---------- ----------
Total $1,409,403 $1,584,486
========== ==========

NOTE 10 - RESTATEMENT:

Subsequent to September 28, 2005 and after the Company had filed its Quarterly
Report on Form 10-QSB for the quarter ended September 30, 2004, management
discovered a mathematical error in the consolidation process relating to the
financial statements of the Company's foreign subsidiary, Perfexa-India, which
resulted in the inadvertent elimination of certain of Perfexa-India's operating
expenses for the three months ended September 30, 2004. Accordingly, the
accompanying statements of operations for the periods described in the preceding
sentence have been retroactively adjusted as summarized below:

Effect of Inadvertent Elimination of As Previously Retroactive
Expenses In Consolidation Process Reported Adjustment As Restated
- ------------------------------------- --------------- ------------- -------------

Three Months Ended September 30, 2004
- Net Loss $ (376,449) $ (317,471) $ (693,920)
- Loss Per Share $ (0.02) $ (0.01) $ (0.03)

The reclassification adjustments described above do not affect the previously
reported results of operations for the three months ended September 30, 2003.

-14-

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CAUTIONARY STATEMENTS:

This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company intends that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Quarterly Report contains forward-looking statements
regarding the financial condition, operating results, business prospects or any
other aspect of the Company, please be advised that the Company's actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by the Company in forward-looking
statements. The differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
intensification of price competition and entry of new competitors and products,
adverse federal, state and local government regulation, inadequate capital,
unexpected costs and operating deficits, increases in general and administrative
costs, lower sales and revenues than forecast, loss of customers, customer
returns of products sold to them by the Company, termination of contracts, loss
of supplies, technological obsolescence of the Company's products, technical
problems with the Company's products, price increases for supplies and
components, inability to raise prices, failure to obtain new customers,
litigation and administrative proceedings involving the Company, the possible
acquisition of new businesses that result in operating losses or that do not
perform as anticipated, resulting in unanticipated losses, the possible
fluctuation and volatility of the Company's operating results, financial
condition and stock price, inability of the Company to continue as a going
concern, losses incurred in litigating and settling cases, adverse publicity and
news coverage, inability to carry out marketing and sales plans, loss or
retirement of key executives, changes in interest rates, inflationary factors
and other specific risks that may be alluded to in this Quarterly Report or in
other reports issued by the Company. In addition, the business and operations
of the Company are subject to substantial risks that increase the uncertainty
inherent in the forward-looking statements. The inclusion of forward looking
statements in this Quarterly Report should not be regarded as a representation
by the Company or any other person that the objectives or plans of the Company
will be achieved.

GENERAL OVERVIEW

The Company's principal line of business is to provide long distance and
value-added services for small and medium-sized businesses and residential
customers throughout the United States. The Company's strategy has been to build
a subscriber base without committing capital or management resources to
construct its own network and transmission facilities. This strategy has allowed
the Company to add customers without being limited by capacity, geographic
coverage, or configuration of any particular network that the Company might have
developed.

The Company provides a number of Internet related services such as Internet
access via Dial-Up. The Company's services are marketed nationwide, through
sales affiliates, affinity groups, independent sales agents and its own sales
force.

As stated, the Company provides a number of telecommunications, Internet, and
BPO services. The Company's revenues consist of revenues from the sale of these
services. Telecommunication revenues are generated when customers make long
distance telephone calls from their business or residential telephones or by
using the Company's telephone calling cards. Proceeds from prepaid telephone
calling cards are recorded as deferred revenues when the cash is received and
recognized as revenue as the telephone service is utilized. The reserve for
deferred revenues is carried on the balance sheet as an accrued liability.
Internet related services are typically billed at a flat rate and are billed in
advance. Revenues are recognized in the period earned. BPO services revenues
are billed each month based on a client contract that provides for either a
dedicated or per minute rate as the services are rendered.

Cost of sales include telecommunications service costs and the costs of
providing Internet access, and BPO services. Telecommunications service costs
paid by the Company are based on the Company's customers' long distance usage.
The Company pays its carriers based on the type of call, time of call, duration
of call, the terminating telephone number, and terms of the Company's contract
in effect of the time of the call. BPO service cost of sales consists of labor
and its related support costs directly associated with a service contract.
General and administrative expenses consist of the cost of customer acquisition
(including costs paid for third party verification), customer service, billing,
cost of information systems and personnel required to support the Company's
operations and growth.

-15-

The Company, depending on the extent of its future growth, may experience
significant strain on its management, personnel, and information systems. The
Company will need to implement and improve operational, financial, and
management information systems. In addition, the Company is implementing new
information systems that will provide better record keeping, customer service
and billing. However, there can be no assurance that the Company's management
resources or information systems will be sufficient to manage any future growth
in the Company's business, and the failure to do so could have a material
adverse effect on the Company's business, results of operations and financial
condition.

RESULTS OF OPERATIONS OF THE COMPANY

THREE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2003

REVENUES - Revenues decreased by $1,052,467 or 33.7% to $2,068,633 in the three
months ended September 30, 2004 from $3,121,100 in the three months ended
September 30, 2003. The decrease was due to a decrease in telecommunications
revenues of $1,064,438 and a decrease in Internet revenues of $28,608, offset
partially by the increase in BPO revenues of $40,579. As of September 30, 2004,
the Company had 81,003 long distance customers and 4,785 Internet customers,
with usage of long distance services of approximately 29,780,000 minutes for the
three months ended September 30, 2004 as compared with 101,884 long distance
customers and 5,691 Internet customers as of September 30, 2003, with usage of
long distance services of approximately 44,063,000 minutes for the three months
ended September 30, 2003.

Management believes that the reduction in customer counts and minutes are a
result of several recent competitive pressures including: the increase in the
number of low-priced long distance calling plans currently available, the
expansion of bundled local/long distance services offered by Local Exchange
Carriers and/or Competitive Local Exchange Carriers, and the migration of
traditional long distance usage to cellular long distance and internet usage.
In addition, the difficulties the Company recently experienced as a result of
its change in underlying providers may have contributed to this reduction in
customer counts and minutes (see Change In Primary Supplier below). In an
effort to increase revenue, the Company has initiated affinity marketing
relationships with various marketing organizations and charitable groups.

The Company is also continuing its efforts in becoming a Competitive Local
Exchange Carrier ("CLEC"). The Company has recently obtained licenses in several
states including Florida, Georgia, New York, New Jersey, North Carolina, Ohio,
and Texas to operate as a CLEC. The Company recently began offering service in
Florida and Texas and is in the process of expanding its local service
offerings. Future plans are to provide local services in most of the major
states throughout the country. The Company anticipates that by providing CLEC
services, it will be able to offer its own bundled services and thereby reverse
the recent attrition of its telecommunications customer base.

Additionally, the Company is continuing to focus on developing third party
revenue for its Perfexa subsidiary. During the quarter ended December 31, 2003,
the Company began widespread marketing of its BPO services to third parties and
has begun securing client contracts for these services. For the three months
ended September 30, 2004, Perfexa generated third-party revenues of $40,579.
Perfexa had no revenues in prior years.

COST OF SALES - Cost of sales decreased by $565,821 or 36.5% to $984,854 in the
three months ended September 30, 2004 from $1,550,675 in the three months ended
September 30, 2003. The decrease was primarily due to the decrease in carrier
costs associated with decreased telecommunications service revenues of $479,449
for the three months ended September 30, 2004. In addition, for the three
months ended September 30, 2004, the costs associated with Internet services
decreased $115,100 and the costs associated with BPO services increased $28,728.
As a percentage of revenue, cost of sales decreased to 47.6% from 49.7%,
primarily as a result of the decrease in internet cost of sales as a percentage
of internet revenues to 26.9% in the three months ended September 30, 2004 from
79.5% (due to monthly minimum purchase requirements with MCI) in the three
months ended September 30, 2003, offset partially by the increase in
telecommunications cost of sales as a percentage of telecommunications revenues
to 49.1% in the three months ended September 30, 2004 from 47.6% in the three
months ended September 30, 2003 (see Change In Primary Supplier below). This
results in a gross margin of 52.4% as compared to 50.3% for the three months
ended September 30, 2004 and 2003, respectively.

For the three months ended September 30, 2004, Perfexa incurred third-party cost
of sales of $28,728. Perfexa had no cost of sales in prior years.

OPERATING EXPENSES - Operating expenses decreased by $292,351 or 16.3% to
$1,504,155 in the three months ended September 30, 2004 from $1,796,506 in the
three months ended September 30, 2003 primarily due to the Company's shift of
customer service and information technology development to its Perfexa
subsidiary.

-16-

Operating expenses, individually net of Perfexa related costs, for the three
months ended September 30, 2004 were comprised primarily of $250,307 in payroll
and related expenses paid to employees; billing related costs of $156,828; rent
of $41,039; bad debt of $43,058; depreciation expense of $34,052; amortization
of previously issued options to employees valued at approximately $27,563; and
$363,759 of other operating expenses, primarily sales commissions, internal
telephone usage, costs of third party verification for newly acquired customers,
internet support costs and audit and legal costs.

Perfexa related operating expenses for the three months ended September 30, 2004
were comprised primarily of $345,139 in payroll and related expenses paid to
employees; rent of $62,799; depreciation expense of $45,354; and $134,257 of
other operating expenses, primarily corporate expense allocations, and office
maintenance and supplies.

Operating expenses, individually net of Perfexa related costs, for the three
months ended September 30, 2003 were comprised primarily of $402,086 in payroll
and related expenses paid to employees; billing related costs of $174,630; rent
of $61,956; bad debt of $72,999; depreciation expense of $25,030; amortization
of previously issued options to employees valued at approximately $27,563; and
$95,626 of other operating expenses, primarily sales commissions, costs of third
party verification for newly acquired customers, internet support costs and
audit and legal costs.

Perfexa related operating expenses for the three months ended September 30, 2003
were comprised primarily of $361,556 in payroll and related taxes paid to
employees; rent of $60,189; depreciation expense of $39,524; and $475,347 of
other operating expenses, primarily corporate expense allocations, and office
maintenance and supplies.

INTEREST EXPENSE - Net interest expense increased by $173,366 to $288,203 for
the three months ended September 30, 2004 from $114,837 for the three months
ended September 30, 2003. The increase was primarily due to the interest owed
on notes payable, and the interest owed on outstanding balances due to WorldCom,
including accrued interest of approximately $620,000 owed on default of the
WorldCom note.

NET LOSS - Net loss increased $369,484 to $693,920 or $0.03 loss per common
share for the three months ended September 30, 2004, from a net loss of
$324,436, or $0.02 loss per common share, for the three months ended September
30, 2003.

ASSETS AND LIABILITIES - Assets decreased by $175,083 to $1,409,403 as of
September 30, 2004 from $1,584,486 as of June 30, 2004. The decrease was due to
net decreases in accounts receivable of $72,777, cash of $73,072, deposits of
$580, prepaid expenses of $498, and property and equipment of $29,940, net of an
increase in other assets of $1,784. Liabilities increased by $493,954 to
$9,831,623 as of September 30, 2004 from $9,337,669 as of June 30, 2004. The
increase was due to increases in accounts payable and accrued expenses of
$539,814, primarily for amounts owed to WorldCom (associated with customer
usage), net of decreases in payroll and payroll related liabilities of $36,580,
obligations under capital lease of $4,541, and notes payable of $4,739 due
primarily to principal repayments, associated with the decrease in
telecommunications service costs, internet service provider access fees and
customer services operations as a result of the decrease in customers.

-17-

STOCKHOLDERS' DEFICIT - Stockholders' deficit increased by $651,807 to
$8,447,808 as of September 30, 2004 from $7,796,001 as of June 30, 2004. The
increase was attributable to net loss of $693,920 in the three months ended
September 30, 2004, and a cumulative translation adjustment of $5,526; net of
increases in amortization of compensation expense related to previously issued
options to employees in the amount of $27,563; the fair market value of stock
issued pursuant to notes payable of $20,076.

CHANGE IN PRIMARY SUPPLIER

As previously reported, on July 7, 2004 the Company initiated a system wide
conversion of its underlying long distance provider from MCI to Sprint (the
"Conversion"). As a consequence of the Conversion, a not yet determined number
of the Company's long distance customers have either left the Company or were
not successfully converted due to technical issues. As a result, the Company
has experienced an approximate 16% reduction in its call volumes and
corresponding revenues. The Company is attempting to resolve all outstanding
technical issues relating to the Conversion and will continue to market its
services in order to re-acquire or add new customers. There can be no
assurances that the Company will be able to re-acquire or add sufficient numbers
of customers to compensate for the reduction incurred by the Conversion.

Additionally, the cost of Sprint's services to the Company are higher than those
of MCI's and will affect the Company's future gross margins. The Company is
attempting to renegotiate more favorable pricing terms with Sprint.
Alternatively the Company is re-examining the rates it charges its customers.
There can be no assurances that the Company will be able to negotiate more
favorable rates with Sprint. Also, an increase in the Company's rates to
end-users may have a detrimental effect in customer acquisition and retention.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL - The Company does not have sufficient cash to fund its outstanding
debts and contingent liabilities. Over the past year, the Company has relied
upon short-term financings to meet its cash requirements. Currently, the
Company has short-term debt of approximately $5,863,146. The Company will need
to either restructure this debt on more favorable terms or increase revenues in
order to meet these obligations. Additionally, as a result of the Conversion,
the Company has experienced a 16% decline in revenues. As a result, the Company
may not have sufficient cash flow to fully support daily operations and will
need to increase revenues and customers or acquire alternate financing.

CASH FLOWS FROM OPERATING ACTIVITIES - Net cash used in operating activities of
$8,800 for the three months ended September 30, 2004 was primarily due to net
loss of $693,920, offset partially by changes in operating assets and
liabilities, principally increases in accounts receivable and other current
assets of $29,013, and accounts payable and accrued expenses of $539,814, and a
decrease in accrued payroll and related taxes of $36,580; and minority interest
of $17,230; offset partially by the amortization of previously issued options
vesting to employees in the current period of $27,563; the fair market value of
stock issued in connection with a note payable of $20,076; depreciation and
amortization expense of $79,406; and the increase in bad debt expense related to
accounts receivable of $43,058.

CASH FLOWS FROM INVESTING ACTIVITIES - Net cash used in investing activities of
$8,237 for the three months ended September 30, 2004 funded purchases of
property and equipment.

CASH FLOWS FROM FINANCING ACTIVITIES - Net cash used in financing activities of
$50,509 in the three months ended September 30, 2004 was primarily due to
principal repayments on notes payable of $45,968, and principal repayments under
capital lease obligations of $4,541.

INTERCOMPANY ACTIVITIES - Since inception, Perfexa-U.S. and its Indian
subsidiary Perfexa-India have relied upon its parent, GTC Telecom Corp. for
funding and for administrative services required in the development of its
business plan. Perfexa is obligated to reimburse GTC for such advances and its
share of such expenses. As of September 30, 2004, the Company has advanced
Perfexa-U.S. $3,858,526 in cash and equipment, of which $661,504 was for the
purchase of equipment and $3,197,022 for operating expenses. In addition, the
Company has allocated $2,080,503 of shared administrative expenses to
Perfexa-U.S. Cash and equipment advances accrue interest of 10% per annum and
are due upon demand. Shared administrative expenses accrue no interest and are
also due upon demand.

-18-

Pursuant to a Master Services Agreement between Perfexa-US and GTC, Perfexa
provides call center and IT development services to GTC on a cost plus 5% basis.
As of September 30, 2004, Perfexa-U.S. has billed GTC $1,606,610 for such
services.

As of September 30, 2004, Perfexa-U.S. owes GTC $4,170,519, net of $161,900
repaid by Perfexa-U.S. from funds raised and $1,606,610 in amounts billed for
services rendered.

SHORT-TERM DEBT - On February 12, 2004, the Company borrowed $450,000 for
working capital purposes from an unrelated third party. The note is to be
repaid plus interest of $48,000 upon maturity at June 11, 2004. In the event of
default, the investor shall be entitled to 100,000 shares of the Company's
restricted common stock. In addition, the Company issued to the third party
150,000 shares of the Company's restricted common stock valued at $11,688 (based
on the market price on the date of grant and the related pro-rata value of the
common stock). The Company recorded the value of the common stock to interest
expense in February 2004. On May 5, 2004, the note, as amended, was extended to
July 15, 2004. In consideration of the extension, the Company has agreed to pay
an additional $13,280 in interest and issue an additional 300,000 shares of the
Company's restricted common stock valued at $45,000 (based on the market price
on the date of grant). The Company recorded the value of the common stock to
interest expense in May 2004.

On November 5, 2003, the Company borrowed $350,000 for working capital purposes
from an unrelated third party. The note was to be repaid plus interest of
$37,333 upon maturity at March 5, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 20,000 shares of the
Company's restricted common stock valued at $2,581 (based on the market price on
the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in November
2003. On March 5, 2004, the Company defaulted on the note and issued 100,000
shares of the Company's restricted common stock valued at $8,000 (based on the
market price on the date of issuance) in accordance with the default terms of
the note. The note was renegotiated and $75,000 of the note plus interest of
$37,333 were repaid. The new note of $275,000 is to be repaid plus interest of
$14,667 upon maturity at May 5, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 275,000 shares of the
Company's restricted common stock valued at $20,370 (based on the market price
on the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in March
2004. On May 5, 2004, the note, as amended, was extended to July 15, 2004. In
consideration of the extension, the Company has agreed to pay an additional
$15,448 in interest and issue an additional 100,000 shares of the Company's
restricted common stock valued at $15,000 (based on the market price on the date
of grant). The Company recorded the value of the common stock to interest
expense in May 2004.

On August 18, 2004, these two (2) notes, as amended, were combined into one note
totaling $816,395, incorporating principal of $725,000 and interest owed of
$91,395, and extended to November 30, 2004. In consideration of the extension,
the Company has agreed to pay an additional $73,350 in interest and issue an
additional 250,000 shares of the Company's restricted common stock valued at
$17,133 (based on the market price on the date of grant). The Company will
record the value of the common stock to interest expense in August 2004.

On December 9, 2003, the Company borrowed $200,000 for working capital purposes
from an unrelated third party. The note is to be repaid plus interest of
$21,333 upon maturity at April 8, 2004. In the event of default, the investor
shall be entitled to 100,000 shares of the Company's restricted common stock.
In addition, the Company issued to the third party 40,000 shares of the
Company's restricted common stock valued at $4,305 (based on the market price on
the date of grant and the related pro-rata value of the common stock). The
Company recorded the value of the common stock to interest expense in December
2003. On May 17, 2004, the note, as amended, was extended to July 19, 2004. In
consideration of the extension, the Company has agreed to pay an additional
$18,667 in interest and issue an additional 200,000 shares of the Company's
restricted common stock valued at $22,000 (based on the market price on the date
of grant). The Company recorded the value of the common stock to interest
expense in May 2004. As of June 30, 2004, the Company has repaid $100,000. The
principal balance due at June 30, 2004 is $100,000. The note is in default and
the Company is currently in discussions to restructure the terms of the note.

-19-

On October 2, 2002, and amended on April 1, 2004, the Company renegotiated a
previous note payable (the "Previous Note") due to an unrelated third party into
a new note payable (the "New Note"). The Previous Note had an outstanding
balance of $45,000 on the date of renegotiation. The New Note, as amended, pays
simple interest of 12% per annum with principal and interest due upon maturity
at May 21, 2004. In addition, the Company issued to the third party 45,000
shares of the Company's restricted common stock valued at $4,821 (based on the
market price on the date of grant and the related pro-rata value of the common
stock). The Company recorded the value of the common stock to interest expense
in April 2004. On July 21, 2004, the note, as amended, calls for payments of
$20,000 due on July 21, 2004, $15,000 due on August 21, 2004, and $10,000 due on
September 21, 2004. In consideration of the extension, the Company has agreed
to issue an additional 45,000 shares of the Company's restricted common stock
valued at $2,944 (based on the market price on the date of grant). The Company
will record the value of the common stock to interest expense in July 2004. As
of the date of this filing, the Company has not made the August 21 and September
21 payments pursuant to the extension. The Company is currently in discussions
to restructure the terms of the note.

On September 30, 2002, and amended on May 30, 2003, the Company renegotiated a
previous note payable due to MCI into a new note payable (the "New Note"). As
of June 30, 2004, the New Note has an outstanding balance of $4,925,437. On
July 1, 2004, the Company received notice from MCI that it was in default of the
terms of the above note as well as the Telecommunications Services Agreement and
Data Services Agreement ("TSA") between MCI and GTC. The total outstanding
balance due MCI was approximately $7,172,370 at September 30, 2004, including
$4,925,437 due on the New Note, $619,984 of accrued interest on the New Note,
and $1,626,949 owed on the TSA and included in accounts payable in the
accompanying condensed consolidated balance sheet at September 30, 2004. The
Company is attempting to resolve its outstanding balance and the amounts past
due with MCI. However, there can be no guarantees that the Company will be
successful in its efforts to reach an amicable resolution with MCI regarding the
amounts past due. Failure to successfully restructure the amounts due MCI will
have a material adverse effect on the Company's operations.

The Company maintains a revolving line of credit of $20,000 to finance the
purchase of computer equipment. The revolving line of credit provides for the
Company to make monthly payments of $451, including interest at a rate of
12.99%. The total outstanding balance on the revolving line of credit was
$16,684 and is included in notes payable in the accompanying consolidated
balance sheet at September 30, 2004. As of the date of this report, the Company
has made all payments as required in the revolving line of credit.

CONTINGENT LIABILITIES - In September 2001, the Company entered into a common
stock purchase agreement ("Agreement") with Bluefire Capital, Inc. ("Bluefire").
The Agreement entitles the Company to issue and sell common stock to Bluefire in
the form of draws for up to an aggregate of $20,000,000, as defined in the
Agreement, from time to time during a three year period beginning on the date of
the filing of an effective registration statement. On November 20, 2001, the
Company filed a registration statement under the Securities Act with the
Securities and Exchange Commission ("SEC") for 15,000,000 shares available to be
issued to Bluefire under the Agreement should the Company choose to draw down on
these shares and on January 23, 2002, the registration statement was declared
effective. Pursuant to the Agreement, the Company must draw a minimum of
$500,000 by January 23, 2005, or the Company shall pay liquidated damages equal
to one-half of the amount not drawn-down. As of the date of this filing, the
Company has not drawn under this Agreement.

-20-

PERFEXA SOLUTIONS

In its continuing efforts to reduce operating expenses as well as locate new
revenue opportunities, the Company in 2002 began exploring various options to
reduce its labor and overhead costs as well as explore new markets. The Company
determined that by developing a call center and IT development center in India,
the Company could take advantage of India's highly skilled but vastly lower
labor and operating costs thereby allowing for the reduction of a significant
portion of the Company's operating overhead. Despite significant start-up costs
associated with the development of its Perfexa subsidiary, the Company believes
that its Perfexa operations will result in significant savings for the Company.
Additionally, the Company's Perfexa operations were designed to provide
additional revenue opportunities for the Company in the Business Process
Outsourcing Services market (see below).

The Company's Perfexa operations provide inbound call center management
solutions with future plans for outbound call center management solutions,
Information Technology ("IT") management solutions and business operations
management solutions. Perfexa's initial solution is to: 1) Capitalize on
India's highly educated, English speaking workforce; 2) utilize the inherent
cost and labor availability advantages within India; and 3) take advantage of
the low employee turnover rates in India, which will enable Perfexa to
capitalize on its significant investment in ongoing employee training and
development programs which will dramatically improve the quality of the customer
care experience. Future plans are to expand into other low cost countries as
business develops.

Perfexa currently provides customer service for the Company's approximately
85,800 telecommunication and Internet users. Perfexa's IT group currently
develops IT solutions for GTC's customer care needs and the integration of GTC's
customer care system with those of Perfexa's New Delhi Center. Perfexa has
recently begun offering its services to third parties and plans to focus on
marketing its outsourced call center services to U.S. based companies.
Perfexa's IT group will work initially to ensure the integration of Perfexa's
systems with those of Perfexa's clients. Subsequently, the IT group will
develop customized software solutions for third parties.

ACQUISITIONS

On April 23, 2004, the Company entered into an agreement for the acquisition of
Telspan, Inc., a California corporation ("Telspan"). Pursuant to the
Reorganization and Stock Purchase Agreement (the "Acquisition Agreement")
entered into between the Company, Telspan, Inc. and its shareholders, the
Company agreed to acquire 100% of the outstanding capital stock of Telspan in
exchange for that number of shares of the Company's common stock which would
equate to 84% of the outstanding capital stock of the Company on a fully diluted
basis following the acquisition. Closing of the acquisition was conditioned
upon various events, including the approval of the Company's stockholders and
upon Telspan's successful acquisition of certain telecommunications assets. On
October 1, 2004, pursuant to the terms of the agreement, the Company elected to
terminate the agreement.

CAPITAL EXPENDITURES

The Company expects to purchase approximately $200,000 of additional equipment
on top of the purchases already made in connection with the expansion of its
business. In addition, as previously discussed, the Company expanded its
operations into the Republic of India through its Perfexa subsidiary. The
Company expects to continue funding this expansion with an additional $200,000
to Perfexa primarily for leasehold improvements, equipment (computer and
telephone), furniture and fixtures, and deposits. Because the Company presently
does not have the capital for such expenditures, it will have to raise these
funds. (See Financing in this section).

2001 STOCK INCENTIVE PLAN

During the three months ended September 30, 2004, the Company issued no options
pursuant to the Company's 2001 Stock Incentive Plan.

-21-

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not currently have any off-balance sheet arrangements.

SUBSIDIARIES

The Company has formed four wholly owned subsidiaries, of which two are inactive
(see below), that offer different products and services. They are managed
separately because each business requires different technology and/or marketing
strategies.

The four subsidiaries are: CallingPlanet.com, Inc., ecallingcards.com, Inc.,
Curbside Communications, Inc., and Perfexa Solutions, Inc.

CallingPlanet.com, Inc. was set up to offer international calling using a PC to
phone connection. It is currently inactive. ecallingcards.com, Inc. offers
prepaid calling cards purchased over the internet, and Curbside Communications,
Inc., currently inactive, has been set up for future strategic purposes which
the Company is currently in the planning process. Perfexa Solutions, Inc.
offers business process outsourcing services.

GOING CONCERN

The Company's independent certified public accountants have stated in their
report included in the Company's 2004 Form 10-KSB, that the Company has incurred
operating losses in the last two years, has a working capital deficit and a
significant stockholders' deficit. These conditions, among others, raise
substantial doubt about the Company's ability to continue as a going concern.

INFLATION

Management believes that inflation has not had a material effect on the
Company's results of operations.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Company's condensed consolidated financial statements
and the accompanying notes. The amounts of assets and liabilities reported on
our balance sheet and the amounts of revenues and expenses reported for each of
our fiscal periods are affected by estimates and assumptions, which are used
for, but not limited to, the accounting for revenue recognition, accounts
receivable, doubtful accounts and inventories. Actual results could differ from
these estimates. The following critical accounting policies are significantly
affected by judgments, assumptions and estimates used in the preparation of the
financial statements:

REVENUE AND RELATED COST RECOGNITION - The Company recognizes revenue during the
month in which services or products are delivered, as follows:

TELECOMMUNICATIONS RELATED SERVICES

The Company's long distance telecommunications service revenues are
generated when customers make long distance telephone calls from their
business or residential telephones or by using any of the Company's
telephone calling cards.

Telecommunication services cost of sales consists of the cost of long
distance service provided by Sprint and other carriers.

INTERNET RELATED SERVICES

Internet service revenues consist of monthly fees charged to subscribers
for Internet access and are recognized in the period service access is
provided. Internet service cost of sales consists of the cost of providing
Internet access.

-22-

BPO SERVICES

BPO service revenues consist of amounts billed each month based on a client
contract that provides for either a dedicated or per minute rate as the
services are rendered. BPO service cost of sales consists of labor and its
related support costs directly associated with a service contract.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the basic
criteria that must be met to recognize revenue and provide guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. Management believes the Company's revenue recognition policies
conform to SAB 101.

STOCK-BASED COMPENSATION - The Company accounts for stock-based compensation
issued to employees using the intrinsic value based method as prescribed by
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Under the intrinsic value based method, compensation is
the excess, if any, of the fair value of the stock at the grant date or other
measurement date over the amount an employee must pay to acquire the stock.
Compensation, if any, is recognized over the applicable service period, which is
usually the vesting period.

SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" if fully
adopted, changes the method of accounting for employee stock-based compensation
plans to the fair value based method. For stock options and warrants, fair
value is determined using an option pricing model that takes into account the
stock price at the grant date, the exercise price, the expected life of the
option or warrant and the annual rate of quarterly dividends. Compensation
expense, if any, is recognized over the applicable service period, which is
usually the vesting period.

SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition
and Disclosure, an amendment of FASB Statement No. 123," was issued in December
2002 and is effective for fiscal years ending after December 15, 2002. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value method of accounting for stock-based employee compensation. In addition,
this Statement amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.

The adoption of the accounting methodology of SFAS 123 is optional and the
Company has elected to continue accounting for stock-based compensation issued
to employees using APB 25; however, pro forma disclosures, as if the Company
adopted the cost recognition requirements under SFAS 123, are required to be
presented.

TRANSLATION OF FOREIGN CURRENCIES - GTC uses the U.S. dollar as its functional
currency while the Company's foreign subsidiary uses the Indian Rupee as its
functional currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at year-end or period-end exchange rates, and
revenues and expenses are translated at average rates prevailing during the year
or other period presented. In accordance with SFAS No. 52, "Foreign Currency
Translation", net exchange gains or losses resulting from such translation are
excluded from net loss, but are included in comprehensive loss and accumulated
in a separate component of stockholders' deficit.

ITEM 3. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, Management carried out an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(c) and
15d-15(c) which includes inquiries made to certain other of our employees. Based
on the foregoing, the Principal Executive Officer and Principal Financial
Officer concluded that the Company's disclosure controls and procedures are
effective to timely alert them to any material information relating to the
Company, including its consolidating subsidiaries, that must be included in the
Company's periodic SEC filings. In addition, there have been no significant
changes in the Company's internal controls over financial reporting that
occurred during the fiscal quarter covered by this quarterly report that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

-23-

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation which it believes could
have a materially adverse effect on its financial condition or results of
operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2004, the Company issued the
following unregistered securities:

On August 18, 2004, two (2) notes, as amended, were combined into one note
totaling $816,395, incorporating all principal and interest owed, and extended
to November 30, 2004. In consideration of the extension, the Company has agreed
to pay an additional $73,350 in interest and issue an additional 250,000 shares
of the Company's restricted common stock valued at $17,133 (based on the market
price on the date of grant). The Company will record the value of the common
stock to interest expense in August 2004 (see Item 6. Management's Discussion
and Analysis or Plan of Operation - Short-term Debt). The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the Securities Act of 1933.

On July 21, 2004, a note payable of $45,000, as amended, was extended to allow
for payments of $20,000 due on July 21, 2004, $15,000 due on August 21, 2004,
and $10,000 due on September 21, 2004. In consideration of the extension, the
Company has agreed to issue an additional 45,000 shares of the Company's
restricted common stock valued at $2,944 (based on the market price on the date
of grant). The Company will record the value of the common stock to interest
expense in July 2004 (see Item 6. Management's Discussion and Analysis or Plan
of Operation - Short-term Debt). The issuance was an isolated transaction not
involving a public offering pursuant to Section 4(2) of the Securities Act of
1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

As previously discussed, at March 31, 2004, the Company has a note payable to
WorldCom in the amount of $4,925,437. At the time of this filing, the Company
is $375,000 in arrears on payments due. Although WorldCom has not notified the
Company that it is in default on the note, the Company is currently in
discussions with WorldCom to restructure the terms of the note. However, there
can be no guarantees that the Company will be successful in its efforts to
re-negotiate the terms of the Note. Failure to successfully restructure the
note will have a material adverse effect on the Company's operations.

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

No matters were submitted to the security holders for a vote during the three
month period ended September 30, 2004.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

31.1 Rule 13a-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a) Certification of Chief Financial Officer

32.1 Section 1350 Certification of Chief Executive Officer

32.2 Section 1350 Certification of Chief Financial Officer

(b) Reports on Form 8-K

On October 4, 2004, the Company filed a Current Report on Form 8-K regarding the
termination of its Reorganization and Stock Purchase Agreements with Telspan,
Inc. and InfoSpan, Inc.

-24-

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.

GTC TELECOM CORP.

By: /s/ S. Paul Sandhu
S. Paul Sandhu
Chief Executive Officer
(Principal Executive Officer)

By:/s/ Gerald A. DeCiccio
Gerald A. DeCiccio
Chief Financial Officer
(Principal Accounting Officer)

Dated: November 2, 2005

-25-