**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB/A**




(Mark
      One)


x
            ANNUAL
                REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                FOR THE FISCAL YEAR ENDED DECEMBER 31,
                2005.




 ̈
            TRANSITION
                REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                FOR THE TRANSITION PERIOD FROM ______ TO
                ________





**Commission
      File No.** 0-24829





FTS
                GROUP, INC.(Exact
                name of issuer as specified in its
                charter)





**Nevada**
            
            84-1416864(
                State or other jurisdiction of incorporation or
                organization)
            
            (I.R.S.
                Employer Identification No.)7610
                West Hillsborough Ave., Tampa, Florida
            
            33615(Address
                of principal executive offices)
            
            (Zip
                Code)





Registrant’s
      telephone number, including area code: (813) 868-3600





Securities
                registered under Section 12(b) of the Exchange Act:
            
            **None.**Securities
                registered under Section 12(g) of the Exchange Act:
            
            **Common
                stock, par value $0.001 per share.**(Title
                of class)


Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  ̈




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past twelve months (or 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  ̈




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.  ̈




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




State
      issuer’s revenues for its most recent fiscal year: $1,310,731.




The
      aggregate market value of the 3,456,402 shares of common stock held by
      non-affiliates of the issuer as of February 15, 2006 was $449,332 based upon
      the
      sale price of the common stock of $0.036 per share on February 15,
      2006.





State
      the
      number of shares outstanding of each of the registrant’s classes of common stock
      as of February 15,, 2006: 114,589,131




Documents
      incorporated by reference: None.




Transitional
      Small Business Disclosure Format (Check One): Yes  ̈ No x








-1-














FTS
      GROUP, INC.


FORM
      10-KSB/A





TABLE
      OF
      CONTENTS








PART
                I
            
            PAGE
                NO.ITEM
                1.
            DESCRIPTION
                OF BUSINESS.
            3ITEM
                2.
            DESCRIPTION
                OF PROPERTY.
            8ITEM
                3.
            LEGAL
                PROCEEDINGS.
            8ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS.
            8PART
                IIITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
            10ITEM
                6.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
            10ITEM
                7.
            FINANCIAL
                STATEMENTS.
            F-1ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE.20ITEM
                8A.
            CONTROLS
                AND PROCEDURES.
            20ITEM
                8B.
            OTHER
                INFORMATION.
            20PART
                IIIITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT.
            20ITEM
                10.
            EXECUTIVE
                COMPENSATION.
            22ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS.
            23ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS.
            24ITEM
                13.
            EXHIBITS.
            24ITEM
                14.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES.
            28





SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
      report contains forward-looking statements that involve risks and uncertainties.
      We generally use words such as "believe," "may," "could," "will," "intend,"
      "expect," "anticipate," "plan," and similar expressions to identify
      forward-looking statements. You should not place undue reliance on these
      forward-looking statements. Our actual results could differ materially from
      those anticipated in the forward-looking statements for many reasons, including
      the risks described below and elsewhere in this report. Although we believe
      the
      expectations reflected in the forward-looking statements are


reasonable,
      they relate only to events as of the date on which the statements are made,
      and
      our future results, levels of activity, performance or achievements may not
      meet
      these expectations. We do not intend to update any of the forward-looking
      statements after the date of this document to conform these statements to actual
      results or to changes in our expectations, except as required by
      law.





-2-












PART
      I





ITEM
      1.
      DESCRIPTION OF BUSINESS.





HISTORY





We
      organized as Full Tilt Sports, Inc. in 1997 as a Colorado corporation to develop
      and market a line of young men's casual apparel. We own several U.S. trademarks
      relating to that business. Effective August 23, 2000, we changed our name to
      FTS
      Apparel, Inc. Our attempts to build a profitable apparel business were
      unsuccessful and the prior management team was unable to raise the required
      funds to continue in the apparel business. As a result, we exited the apparel
      business. In January 2002, we experienced a change in management. Effective
      January 11, 2002, Scott Gallagher became our new Chairman and Chief Executive
      Officer and we appointed three new directors. The new Chairman agreed to
      purchase 1,861,618 shares of our common stock owned by two of the former
      officers and directors and other shareholders. The new management team initially
      developed a strategic plan to acquire and develop cash flow positive businesses.
      After an analysis of the market, management determined to primarily focus on
      building a diversified wireless business. FTS Wireless Inc., a wholly owned
      subsidiary, was organized as a Florida corporation in February 2003 to acquire
      and develop a chain of retail wireless locations in the Gulf Coast market of
      Florida. On January 26, 2004, we changed our name to FTS Group, Inc. to reflect
      the change in our operations. Additionally, on that date, we changed our state
      of incorporation from Colorado to Nevada. In January 2006, we acquired See
      World
      Satellites, Inc., a regional service provider for Dish Networks, Inc., as a
      wholly owned subsidiary.




BUSINESS




We
      develop, invest in, and acquire cash-flow positive businesses and viable
      business projects, primarily in the wireless industry. Through our wholly-owned
      susidiary FTS Wireless, Inc., we are engaged in a targeted, strategic
      development strategy to consolidate the highly fragmented cellualr phone and
      services industry. As of March 1, 2006, we operated nine retail wireless
      locations in the Florida market. Over the past twenty-four months we have grown
      our business by developing and acquiring additional retail locations, as well
      as
      adding new products and services in all of our existing locations.





We
      operate our business as a "Bricks and Clicks" model. On the "Bricks" side of
      our
      business we operate a chain of nine retail wireless locations in the Gulf Coast
      market of Florida. We distribute wireless products and services from three
      of
      the nation's largest wireless carriers, Cingular Wireless, Sprint PCS and
      Nextel, in the Gulf Coast market of Florida and selected markets around the
      country. In addition we distribute handsets and sell service plans for
      Dallas-based Metro PCS. Metro PCS is a leading regional wireless carrier
      offering unlimited rate plans and unlimited text messaging plans from $35
      dollars a month to customers without the need of a credit check or signing
      of an
      annual contract. Metro customers pay their wireless bill at any Metro PCS
      approved location for a service charge. As of March 1, 2006 six of our retail
      locations were approved to sell Metro PCS products and services.





On
      the
      "Clicks" side of our business model we own and operate two Internet based
      e-commerce wireless businesses; www.FTSWireless.com , and www.CellChannel.com . We
      drive traffic to these businesses by offering in store specials and discounts
      in
      our retail stores as well as traditional online advertising. FTSWireless.com
      is
      focused on renting and selling wireless accessories and Global Star satellite
      wireless products and services to retail and business customers. CellChannel.com
      primarily markets and distributes wireless accessories, products and content
      such as custom MP3 ring tones, wallpaper and games primarily to retail and
      Internet customers.





-3-

















We
      constantly re-evaluate our product portfolio to stay current with industry
      trends and meet the needs of our customers. We also continuously evaluate how
      new technologies such as Wi-Fi and Voice over Internet, or VoIP, will affect
      our
      business. We believe these new communication technologies will provide us and
      distributors like us with new opportunities as the technologies become more
      widely adopted and next generation products and services are developed and
      increase in demand.





THE
      MARKET FOR OUR PRODUCTS AND SERVICES





According
      to the semi-annual wireless industry survey released in June 2005 by the
      Cellular Telecommunications & Internet Association, or CTIA, 2005 was the
      highest growth year to date, with subscriber growth up 25 million to 194.5
      million subscribers. According to a trends study from Deloitte Research, by
      the
      close of 2005, wireless subscriptions should hit nearly 2 billion on a world
      wide basis, with cellular mobile dominating the wireless technology field.
      Another key industry indicator is Minutes of Usages, or MOU, which rose 30.1%
      year over year in 2005. According to the CTIA, wireless penetration rates in
      the
      U.S. were over 65 percent.





We
      believe the increase in wireless subscribers and the substantial increase in
      MOU
      validates our business model and represents a significant opportunity for us
      to
      continue to gain market share and increase our retail and Internet distribution
      channels within the markets in which we operate. We have targeted our marketing
      and product mix towards certain niche sectors of the industry. In the third
      quarter of 2005, a new wireless carrier called Metro PCS entered our key market
      of Tampa/St. Petersburg. As of March 1, 2006, we had six retail locations that
      are approved to market and distribute Metro PCS products and services. Metro
      PCS
      offers customers unlimited service plans starting at $35 per month. The key
      differentiator is that customers do not have to enter into an annual contract
      or
      go through a credit check of any kind. The business model has been very well
      received in our market and Metro currently has more than 2 million subscribers.
      Our expansion plans for 2006 include opening additional Metro PCS approved
      locations as they roll out new markets during the second half of
      2006.





STRATEGIC
      PARTNERS AND CONTRACTS





POST-PAID





We
      activate wireless services through agreements with companies known as "Master
      Agents." A Master Agent has the ability to pay us a higher per activation
      commission than we could receive if we dealt directly with the major wireless
      carriers. Their commission tier is based on the consolidated monthly activations
      of all of their dealers. These companies pay us a commission for each new
      cellular customer who signs a one or two year cellular contract with the
      carrier. However, if that customer deactivates their cellular service within
      the
      180-day period after signing the contract, the commission paid to us is charged
      back to our account and not paid. We have set up a reserve for possible
      activation charge-backs.





-4-

















For
      Cingular Wireless we have an agreement in place with Philadelphia-based Master
      Agent Digital Communications Warehouse to market and sell Cingular products
      and
      services in approximately 19 markets around the country. For Sprint PCS we
      have
      an agreement in place with Colorado-based Master Agent Wireless Channels, Inc.
      to market and sell Sprint/NEXTEL products and services anywhere in the United
      States.





We
      activate and rent satellite phones through an agreement with GlobalStar.
      GlobalStar is one of the largest satellite communications providers in the
      world.





PRE-PAID





We
      have
      marketing and distribution rights from a number of national pre-paid wireless
      carriers known as Mobile Virtual Network Operators, or MVNOs. MVNOs resell
      airtime from the national carriers. We resell products and services from a
      number of other MVNOs such as Air Voice Wireless, Virgin Mobile, STI-Mobile
      and
      Boost Mobile through agreements with our third parties service providers. We
      are
      generally able to market and sell products and services from the MVNO in any
      market the MVNO operates. We derive revenue from the sale of wireless handsets
      and the sale of prepaid wireless airtime.





METRO
      PCS





Metro
      PCS
      is a regional wireless carrier based in Dallas, Texas with more than 2 million
      subscribers in various markets around the U.S. including Miami, Tampa, Atlanta
      and Sacramento. We distribute Metro PCS wireless handsets and service plans
      at
      six of our Metro PCS approved retail wireless locations in the Tampa/ St.
      Petersburg market. Metro PCS owns its own network and is therefore not
      considered an MVNO. Since Metro PCS owns its network it has the ability to
      offer
      its customers superior rate plans in its local market. Metro markets unlimited
      anytime minute plans, unlimited long distance and unlimited text messaging
      plans
      beginning at $35 per month with no credit check or service contract
      required.





COMPETITION





We
      operate in a highly competitive environment. We principally compete with other
      independent retailers, privately held chains that offer a broad range of
      products, and carrier owned and operated stores with more name recognition
      and
      brand identity than us. We believe that success in the industry is based on
      maintenance of product quality, competitive pricing, delivery efficiency,
      customer service and satisfaction levels, maintenance of satisfactory dealer
      relationships, and the ability to anticipate technological changes and changes
      in customer preferences.





CARRIERS
      CORPORATE OWNED STORES





We
      compete against stores owned by service carriers including:





-
      Sprint/NEXTEL;


-
      Cingular;


-
      T-Mobile;


-
      Verizon
      Wireless and


-
      Metro
      PCS.





-5-

















The
      carrier-owned corporate stores generally sell only their own wireless products
      and services. We believe our product offerings are superior to corporate stores
      because we offer customers service from multiple carriers and provide the best
      solution for each customer's individual needs. In addition, we offer wireless
      content, accessories, Wi-Fi access, Satellite phones and service.





LARGE
      NATIONAL RETAILERS





We
      compete against large national retailers including:





-
      Radio
      Shack;


-
      Best
      Buy;


-
      Staples; and


-
      Office
      Depot.





These
      retailers promote wireless-boxed products with limited customer support. We
      believe we offer a higher level of customer service and product knowledge to
      our
      customers as compared to large national retailers. We also believe our customer
      service is superior because we focus only on wireless products and services,
      which are only a part of the business of the above-mentioned retailers. However,
      due to scale of purchasing power, number of locations and advertising budgets,
      large national retailers can sometimes offer discounts superior to
      ours.





LOCAL
      WIRELESS RETAILERS





We
      compete with a variety of smaller independent retailers. Our main competitors
      are:





-
      Beepers
      N Phones, which operates approximately 25 stores in the state of Florida and
      promotes several brands of wireless products.





-
      PCC
      Wireless, which operates approximately 10 stores in the state of Florida and
      promotes several brands of wireless products and services.





-
      GCS
      Wireless which operates approximately 10 stores in Florida and primarily
      promotes products and services from only one wireless carrier.





We
      also
      compete with a variety of smaller, independent retailers operating less than
      three stores. We compete against these retailers by offering a broad product
      range and superior customer service.





MARKETING





We
      depend
      on advertising and marketing to attract new customers. We currently advertise
      in
      local print publications, including daily newspapers and weekly publications,
      advertise on the Internet, Radio and in flyers. Additionally, we run in store
      product related promotions including a referral program geared at generating
      new
      business through our existing customer base. We currently spend between $3,000
      and $5,000 per month on advertising depending on the placement of our ads.
      During times of increased advertising, we spend approximately $5,000 to $7,500
      or more per month on new product roll-outs and marketing campaigns including
      print, Internet and television media advertising. We believe our advertising
      campaigns have increased foot traffic in our stores and increased our overall
      name recognition.





-6-

















SUPPLIERS





We
      buy
      wireless handsets from our Master Agents and other designated distributors.
      We
      purchase all of our Metro PCS handsets from Bright Point, one of the largest
      handset distributors in the world. For Sprint/Nextel we purchase our handsets
      from our Master agent, Wireless Channels. For Cingular we purchase our handsets
      from DCW.





We
      purchase accessories from various dealers depending on price and product
      availability.





We
      purchase satellite supplies directly from Echostar Satellite, LLC for the
      regional service provider side of our business and from All Systems, Inc. a
      national master agent for the retail side of our business.





INVESTMENTS





In
      March
      2003, we acquired 30,000 shares of preferred stock in Vidyah, Inc., a private
      technology company, for $15,000 in cash. Holders of the Vidyah preferred stock
      have the same voting rights as holders of the common stock. The preferred stock
      has liquidation rights and is convertible, at the holder's option, into an
      equivalent number of shares of common stock, subject to certain adjustments.
      Vidyah provides comprehensive technology learning solutions, certification
      programs, and customized learning for a variety of Fortune 1000 companies,
      including, Disney, Sony, Microsoft, IBM, Cisco Systems, Harvard


University,
      etc. We purchased an interest in Vidyah.com because we believe Vidyah represents
      an attractive investment that will increase in value over time.





In
      November 2005, we acquired a 40% stake in Bucharest, Romania-based mobile game
      developer Maxim Software SRL for $5,000 in cash. Maxim creates, develops and
      markets mobile games in the Asian and European markets. As part of the
      agreement, we acquired exclusive U.S. distribution rights to Maxims portfolio
      of
      mobile games. Maxim will also develop a proprietary wireless content software
      product for us to be implemented on CellChannel.com.





SEASONALITY





The
      wireless industry typically generates a higher number of subscriber additions
      and handset sales in the fourth quarter of each year, as compared to the
      remaining quarters. This is due to the use of retail distribution, which is
      dependent on the holiday shopping season; timing of new products and service
      introductions; and aggressive marketing and sales promotions. To date, we have
      not experienced any seasonality in our sales, although we may in the future
      as
      we expand our retail operations.





-7-














EMPLOYEES




As
      of
      December 31, 2005, we had twelve full time employees. Two of our employees
      are
      at the corporate level, our Chairman and Chief Executive Officer and Interim
      CFO
      Scott Gallagher and our Chief Operating Officer, Dave Rasmussen. In connection
      with our cellular phones and accessories business, we employ eleven full time
      individuals and one part time individual to run our Florida stores.




We
      expect
      to hire additional employees over the next twelve months as our business grows.
      From time-to-time, we engage the services of outside consultants to assist
      in
      our business, including attorneys, accountants, and marketing and advertising
      personnel. We may engage the services of additional individuals in the future
      as
      our business needs dictate and our financial resources permit.




ITEM
      2.
      DESCRIPTION OF PROPERTY.





As
      of
      March 1, 2006, we have nine leases for our retail stores and our corporate
      facilities in Tampa, Florida. Our retail stores are located in the counties
      of
      Hillsborough and Pinellas, generally within 30 miles of Tampa, Florida. The
      retail stores vary in size from 500 to 2,000 square feet. Our principal office
      is located in approximately 1,500 square feet of the leased facilities in Tampa,
      Florida. The minimum aggregate monthly rental commitment for the retail stores
      is $9,429. The terms of the leases vary from month to month to three years
      with
      a three-year option.




ITEM
      3.
      LEGAL PROCEEDINGS.





Neither
      we, nor any of our officers or directors in their capacities as such, are
      subject to any material legal proceedings, and we do not know of any potential
      or threatened legal proceeding.




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





No
      matters were submitted to a vote of security holders during the fourth quarter
      of the year covered by this Annual Report.




PART
      II




ITEM
      5.
      MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.





Our
      common stock has traded over the counter and has been quoted in the OTC Bulletin
      Board since March 18, 1999. The stock currently trades under the symbol
      "FLIP."





The
      following table sets forth the range of high and low bid quotations as reported
      by the National Association of Securities Dealers for the common stock of the
      Company for the last two fiscal years. Quotations represent prices between
      dealers, do not include retail markups, markdowns or commissions and do not
      necessarily represent prices at which actual transactions were
      effected.





-8-





















Year
                Ended
            
            High
            
            Low2004March
                31
            
            $
            .40
            
            $
            .15June
                30
            
            $
            .27
            
            $
            .15September
                30
            
            $
            .17
            
            $
            .09December
                31
            
            $
            .18
            
            $
            .092005March
                31
            
            $
            .23
            
            $
            .10June
                30
            
            $
            .13
            
            $
            .075September
                30
            
            $
            .095
            
            $
            .046December
                31
            
            $
            .05
            
            $
            .0212006April
                15*
            
            $
            .138
            
            $
            .029





*
      Through
      April 15, 2006.





We
      had
      approximately 157 record holders of our common stock as of February 15,
      2006.





DIVIDEND
      POLICY





Holders
      of common stock are entitled to receive such dividends as may be declared by
      the
      Board of Directors. In July 2004, our Board of Directors approved a 10% warrant
      dividend to stockholders of record on August 28, 2004. The warrant allows
      stockholders of record to purchase one new share of common stock at $.25 for
      each ten common shares owned. The warrant expires in three years. No cash
      dividends on the common stock have been paid or declared by the Board to date.
      We do not anticipate any cash dividends being paid out in the near
      future.





TRANSFER
      AGENT





Our
      transfer agent is Securities Transfer Corporation, located at 2591 Dallas
      Parkway Suite 102, Frisco, Texas 75034. Their phone number is (469)
      633-0101.





RECENT
      SALES OF UNREGISTERED SECURITIES





FINANCING





In
      December we agreed to issue 35,520,424 restricted shares to a group of
      institutional investors relating to the purchase of notes. We also agreed to
      issue 68,275,900 warrants at prices of $.0239 and $.02868.





STOCK
      ISSUANCE TO OFFICERS AND DIRECTORS





During
      November 2005, we issued 1,500,000 restricted shares of common stock to secure
      an employment contract with Scott Gallagher, our Chief Executive
      Officer.





-9-














EQUITY
      LINE OF CREDIT





During
      the first quarter we issued 2,085,426 shares under our equity line of credit
      for
      proceeds of $270,994.





No
      shares
      were issued during the second and third quarter under our equity line of
      credit.





During
      the fourth quarter we issued 5,474,880 shares under our equity line of credit
      for proceeds of approximately $144,852.





The
      primary use of proceeds from funds raised throughout the year of our Equity
      Line
      of Credit was to repay notes from Dutchess Private equities and
      officers.




The
      securities issued in the foregoing transactions were made in reliance upon
      an
      exemption from registration under Rule 701 promulgated under Section 3(b) of
      the
      Securities Act. Alternatively, these issuances of securities were undertaken
      under Rule 506 of Regulation D under the Securities Act of 1933, as amended,
      by
      the fact that:





-
      the
      sale was made to a sophisticated or accredited investor;





-
      we gave
      the purchaser the opportunity to ask questions and receive answers concerning
      the terms and conditions of the offering and to obtain any additional
      information which we possessed or could acquire without unreasonable effort
      or
      expense that is necessary to verify the accuracy of information
      furnished;





-
      at a
      reasonable time prior to the sale of securities, we advised the purchaser of
      the
      limitations on resale in the manner contained in Rule 502(d)2;





-
      neither
      we nor any person acting on our behalf sold the securities by any form of
      general solicitation or general advertising; and





-
      we
      exercised reasonable care to assure that the purchaser of the securities is
      not
      an underwriter within the meaning of Section 2(11) of the Securities Act of
      1933
      in compliance with Rule 502(d).




ITEM
      6.
      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





OVERVIEW





Historically
      and through the year ended December 31, 2001, we operated exclusively in the
      apparel industry. In January 2002, we experienced a management change after
      the
      prior management team was unable to raise the required funds to continue in
      the
      apparel business. Our business now focuses on developing and acquiring cash-flow
      positive businesses and viable business projects, primarily those in the
      wireless and technology industries. As of March 15, 2005, we operated a total
      of nine retail locations. Due to continuing losses from operations, the
      independent registered public accountant that audited our financial statements
      for the year ended December 31, 2005 assessed that there was substantial doubt
      about our ability to continue as a going concern.





-10-















RESULTS
      OF OPERATIONS





Sales
      revenues for the year ended December 31, 2005   increased $598,449, or
  84%, to $1,310,731, as compared to $712,282 for the year ended December
      31, 2004.   The increase in sales revenues was primarily related to the
      acquisition and development of new stores and opening of new retail
      outlets.





Cost
      of
      Goods Sold for the year ended December 31, 2005, increased   $588,985 to
      $1,110,645, as compared to $521,660 for the year ended December 31, 2004.  
The increase in Cost of Goods Sold is primarily related to the overall growth
      of
      our business and increased buying levels of wireless handsets, airtime, devices,
      and accessories.





Selling,
      General and Administrative expense for the year ended December 31, 2005
      decreased $424,274 to $1,767,563 as compared to $2,191,837 for the year December
      31, 2004. The decrease in Selling, General and Administrative expenses were
      primarily related to more efficient operating cost as well as reduced investor
      relations and public relations services and reduced cost’s incurred in the area
      of capital raising.





Interest
      expense increased to   $422,259   for the year ended December 31, 2005
  from $212,638 for the year ended December 31, 2004. The increase was due
      mainly to the accrual of interest on promissory notes as part of the capital
      raised during the year ended December 31, 2005.





We
      had a
      net loss of $3,627,067 for the fiscal year ended December 31, 2005, as compared
      to net loss of $2,328,353 for the fiscal year ended December 31, 2004. The
      increase in our net loss was primarily related to expenses and fair valuing
      of
      investment vehicles such as convertible debt and warrants as required by GAAP
      and expenses due to lowered consulting fees, financing-related expenses, new
      store openings and increased operating expenses.





As
      of
      December 31, 2005, we had an accumulated deficit of $11,935,593.





LIQUIDITY
      AND CAPITAL RESOURCES





As
      of
      December 31, 2005, total current assets increased to $1,323,143 versus $175,862
      as of December 31, 2004. Current assets consisted of $243,079 of unrestricted
      cash, $560,000 of restricted of cash, $12,201 of accounts receivable, $33,180
      of
      inventories and $474,683 of prepaid expenses and current assets.





As
      of
      December 31, 2005, total current liabilities increased to $1,551,531 from
      $648,724 as of December 31, 2004. Current liabilities consisted of $468,185
      of
      accounts payable and accrued expenses, notes payable to related parties of
      $80,850, and current portion of convertible debentures of
      $1,002,496.





We
      will
      require additional capital to support strategic acquisitions and our current
      expansion plans. We raised funds from institutional investors during 2005
      through the sale convertible promissory notes, equity securities and the
      issuance of warrants. During 2005 we had an equity line of credit with Dutchess
      Private Equities Fund. This facility provides us with access to a maximum of
      $6
      million in financing subject to certain terms and conditions. Additionally,
      we
      raise funds through private placements of our equity that may involve dilution
      to our existing shareholders.





-11-














Our
      currently anticipated levels of revenues and cash flow are subject to many
      uncertainties. Until we generate cash flow from operations that will be
      sufficient to satisfy our cash requirements, we will continue to seek
      alternative means for financing our operations and capital expenditures and/or
      postpone or eliminate certain investments or expenditures. Potential alternative
      means for financing may include accessing our Equity Line of Credit with
      Dutchess Private Equities Fund or obtaining additional debt or equity financing.
      When needed, additional financing may not be available, or available on
      acceptable terms. The inability to obtain additional financing or generate
      sufficient cash from operations could require us to reduce or eliminate
      expenditures for acquiring or developing new retail locations or marketing
      our
      products, or otherwise curtail or discontinue our operations, which could have
      a
      material adverse effect on our business, financial condition and results of
      operations. Furthermore, if we raise funds through the sale of additional equity
      securities, the common stock currently outstanding will be diluted.





SUBSEQUENT
      EVENTS





On
      January 3, 2006, we acquired See World Satellites, Inc., a Pennsylvania
      corporation. We paid $500,000 at the closing of the transaction on January
      3,
      2006. We agreed to pay an additional $500,000 into an escrow account to be
      held
      until all material contracts held by See World have been executed, amended
      or
      modified to acknowledge our acquisition of See World and/or to make us a party
      to each agreement such that we have full benefit of the agreements.





At
      the
      closing, we also issued to See World a two year secured promissory note in
      the
      sum of $3,500,000. The Note does not pay interest. Pursuant to the terms of
      the
      Note, we agreed to pay to See World seven equal cash installments of $250,000.
      The initial installment is payable 90 days after closing and the remaining
      installments are payable every three months thereafter. We also agreed to make
      additional payments of $1,000,000 on January 3, 2007 and $750,000 on April
      3,
      2008. The Note is secured against the assets of See World.





We
      also
      agreed to issue to Richard Miller $1,000,000 worth of our convertible preferred
      stock within three days of the completion of our 2005 audit. The value of the
      shares will be based on the closing price of our stock on January 3,
      2006.




NEW
      ACCOUNTING PRONOUNCEMENTS





In
      December 2004, the FASB issued Statement of Financial Accounting Standards,
      or
      SFAS, No. 123R "Share-Based Payment." SFAS No. 123R establishes standards for
      the accounting for transactions in which an entity exchanges its equity
      instruments for goods or services. This Statement focuses primarily on
      accounting for transactions in which an entity obtains employee services in
      share-based payment transactions. SFAS No. 123R requires that the fair value
      of
      such equity instruments be recognized as an expense in the historical financial
      statements as services are performed. SFAS 123R, replaces SFAS 123, Accounting
      for Stock Based Compensation and Supercedes APB opinion No.25, Accounting for
      Stock Issued to Employees. This guidance is effective as of the first interim
      or
      annual reporting period after December 15, 2005 for Small Business Filers.
      The
      adoption of SFAS 123 (R) is not expected to have a material effect on our
      financial position or operations.





-12-














In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets,
      an Amendment of APB Opinion No. 29." The guidance in Accounting Principles
      Board, APB, ("APB") Opinion No. 29, "Accounting for Nonmonetary Transactions,"
      is based on the principle that exchanges of nonmonetary assets should be
      measured based on the fair value of the assets exchanged. The guidance in APB
      Opinion No. 29, however, included certain exceptions to that principle. SFAS
      No.
      153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary
      exchanges of similar productive assets and replaces it with a general exception
      for exchanges of nonmonetary assets that do not have commercial substance.
      A
      nonmonetary exchange has commercial substance if the future cash flows of the
      entity are expected to change significantly as a result of the exchange. The
      provisions of SFAS No. 153 will be applied prospectively to nonmonetary asset
      exchange transactions in fiscal year 2006. The adoption of SFAS No. 153 is
      not
      expected to have a significant effect on our consolidated financial
      statements.





In
      January 2003, the FASB issued Interpretation No. 46 "Consolidation of Variable
      Interest Entities", and interpretation of Accounting Research Bulletin No.
      51
      "Consolidated Financial Statements." FIN No. 46 prescribes how to identify
      variable interest entities and how an enterprise assesses its interests in
      a
      variable interest entity to decide whether to consolidate that
      entity.




This
      interpretation requires existing unconsolidated variable interest entities
      to be
      consolidated by their primary beneficiaries if the entities do not effectively
      disperse risks among parties involved. FIN 46 was scheduled to be effective
      for
      variable interest entities created after January 31, 2003. On December 24,
      2003,
      the FASB published FIN No. 46(R), a revision to FIN No. 46. FIN No. 46(R)
      clarifies certain provisions of FIN No. 46 and exempts certain entities from
      its
      requirements. For interests in variable interest entities acquired prior to
      January 31, 2003, the provisions of FIN No. 46(R) have been applied on March
      31,
      2004. We determined the adoption of FIN 46(R) did not have a material effect
      on
      our financial position or results of operations.




**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      judgments and estimates.




We
      believe the following critical accounting policies affect our more significant
      judgments and estimates used in the preparation of our consolidated financial
      statements.




**REVENUE
      RECOGNITION**




We
      recognize net revenues from wholesale product sales upon the transfer of title
      and risk of ownership to customers. Allowances for estimated returns, discounts
      and doubtful accounts are provided when sales are recorded. Shipping and
      handling costs are included in the cost of sales. We also recognize revenue
      from
      the sale and activation of wireless handsets and related
      accessories.





-13-












ACCOUNTS
      RECEIVABLE





Accounts
      receivable consist primarily of trade receivables, net of a valuation allowance
      for doubtful accounts.





CASH
      AND
      CASH EQUIVALENTS





For
      purposes of the statement of cash flows, we consider all short-term debt
      securities with maturity of three months or less to be cash
      equivalents.





PROPERTY
      AND EQUIPMENT





Property
      and equipment are recorded at cost. Maintenance and repairs are charged to
      expense when incurred; major renewals and betterment are capitalized. When
      property or equipment is sold or retired, the related cost and accumulated
      depreciation is removed from the accounts and any gain or loss is included
      in
      the results of operations. Depreciation is calculated using the straight line
      method over the estimated useful lives of the respective assets.





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 disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could vary from those
      estimates.





GOODWILL
      AND INTANGIBLE ASSET IMPAIRMENT





We
      periodically review the carrying amount of property and equipment. We determine
      whether current events or circumstances warrant adjustments to carrying amounts
      of long lived assets. If an impairment adjustment is deemed necessary, such
      loss
      is measured by the amount that the carrying value of such assets exceeds their
      fair market value. Considerable judgment is necessary for estimating the fair
      value of assets; accordingly, actual results could vary significantly from
      such
      estimates. Assets to be disposed of are carried at the lower of their financial
      statement carrying amount or fair value less costs to sell.





INVENTORIES




Inventories
      are stated at the lower of cost (determined on a first in first out method)
      or
      market value.





RISK
      FACTORS





An
      investment in our common stock involves a high degree of risk. You should
      carefully consider the following risk factors and information in our periodic
      reports filed with the SEC. If any of the following risks actually occur, our
      business, financial condition, or results of operations could be materially
      and
      adversely affected and you may lose some or all of your investment.





-14-












WE
      HAD A
      LOSS FOR THE YEAR ENDED DECEMBER 31, 2005 THERE IS A RISK WE MAY NEVER BECOME
      PROFITABLE.





We
      had a
      net loss of $2,328,353 for the year ended December 31, 2004 and a net loss
      of
      $3,627,067 for the year ended December 31, 2005. Our future operations may
      not
      be profitable if we are unable to develop and expand our wireless business
      and
      our Internet operations. Revenues and profits, if any, will depend upon various
      factors, including whether we will be able to receive funding to advertise
      our
      products or find additional businesses to operate and/or acquire. We may not
      achieve our business objectives and the failure to achieve such goals would
      have
      an adverse impact on us.





THERE
      IS
      SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO
      RECURRING LOSSES AND WORKING CAPITAL SHORTAGES, WHICH MEANS THAT WE MAY NOT
      BE
      ABLE TO CONTINUE OPERATIONS UNLESS WE OBTAIN ADDITIONAL FUNDING.





Our
      audited financial statements for the fiscal year ended December 31, 2005,
      reflect a net loss of $3,627,067 and stockholders' deficit of ($1,636,955)
      as of
      December 31,2005. These conditions raise substantial doubt about our ability
      to
      continue as a going concern if sufficient additional funding is not acquired
      or
      alternative sources of capital are not developed to meet our working capital
      needs. If we can not obtain additional funding as needed, our   business
      may fail.





WE
      MAY,
      IN THE FUTURE, ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WHICH WOULD REDUCE
      INVESTORS PERCENT OF OWNERSHIP AND MAY DILUTE OUR SHARE VALUE.





Our
      articles of incorporation authorize the issuance of 150,000,000 shares of common
      stock. As of February 15, 2006 we have 114,589,131 shares of our common stock
      issued and outstanding. We are also authorized to issue 150,000 shares of our
      Series A 10% convertible preferred stock of which no shares are issued or
      outstanding and 4,850,000 undesignated preferred shares of which no shares
      are
      issued or outstanding. The future issuance of all or part of our remaining
      authorized common stock may result in substantial dilution in the percentage
      of
      our common stock held by our then existing shareholders. We may value any common
      stock issued in the future on an arbitrary basis. The issuance of common
      stock


for
      future services or acquisitions or other corporate actions will have the effect
      of diluting the value of the shares held by our investors, and might have an
      adverse effect on any trading market for our common stock.





WE
      ONLY
      RECENTLY ACQUIRED OUR OPERATING UNIT AND HAVE BEEN SELLING WIRELESS
      COMMUNICATIONS AND NETWORKING PRODUCTS AND SERVICES FOR A SHORT PERIOD OF TIME
      AND WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS.





We
      began
      our retail wireless operations in February 2003 with our acquisition of selected
      assets of Simply Cellular, Inc. Since we have just begun operations in this
      industry, we may not find commercial acceptance of our products and services.
      We
      have no way of predicting whether our marketing efforts will be successful
      in
      attracting new customers and acquiring market share. We may not be able to
      acquire products and technologies that will attract customers without which
      we
      cannot operate profitably.





-15-














OUR
      OPERATING RESULTS HAVE FLUCTUATED SIGNIFCANTLY IN THE PAST AND WE BELIEVE THEY
      WILL FLUCTUATE SIGNIFICANTLY FOR THE FORESEEABLE FUTURE. INVESTORS MAY PREFER
      STABLE AND PREDICTIBLE OPERATING RESULTS AND MAY SELL OUR STOCK IF OUR OPERATING
      RESULTS CONTINUE TO FLUCTUATE OR DO NOT MEET THEIR EXPECTATIONS FOR GROWTH.
      AS A
      RESULT YOUR INVESTMENT IN OUR STOCK MAY LOSE VALUE.





Our
      quarterly results of operations have varied in the past and are likely to
      continue to vary significantly from quarter to quarter. Our operating expenses
      are based on expected future revenues and are relatively fixed in the short
      term. If our revenues are lower than expected, our results of operations could
      be lower than expected. Additionally, we are unable to forecast our future
      revenues with certainty because our business plan contemplates the acquisition
      of new enterprises, which may not occur. Many factors can cause our financial
      results to fluctuate, some of which are outside of our control.
      Quarter-to-quarter comparisons of our operating results may not be meaningful
      and you should not rely upon them as an indication of our future performance.
      In
      addition, during certain future periods our operating results likely will fall
      below the expectations of public market analysts and investors. In this event,
      the market price of our common stock likely would decline.





WE
      NEED
      ADDITIONAL CAPITAL TO GROW OUR BUSINESS AND IF WE DO NOT FIND SUCH CAPITAL
      ON
      ACCEPTABLE TERMS, WE WILL NOT BE ABLE TO FULLY IMPLEMENT OUR BUSINESS
      PLAN.





We
      believe we must grow our operations to generate enough revenue to cover our
      operating and overhead costs. Therefore, our business plan contemplates the
      acquisition of new enterprises. The proceeds from our existing financial
      arrangement may not be sufficient to fully implement our business plan.
      Additionally, we may not be able to generate sufficient revenues from our
      existing operations to fund our capital requirements. Accordingly, we may
      require additional funds to enable us to operate profitably. Such financing
      may
      not be available on terms acceptable to us. We currently have no bank borrowings
      or credit facilities, and we may not be able to arrange any such debt
      financing.


Additionally,
      we may not be able to successfully consummate additional offerings of stock
      or
      other securities in order to meet our future capital requirements. If we cannot
      raise additional capital through issuing stock or bank borrowings, we may not
      be
      able to sustain or grow our business.





TO
      BECOME
      PROFITABLE AND GROW, WE MUST SUCCESSFULLY INTEGRATE NEW BUSINESSES.





Our
      success depends upon our ability to identify and acquire undervalued businesses.
      Although we have identified certain companies available for potential
      acquisition that are undervalued and might offer attractive business
      opportunities, we may not be able to negotiate profitable acquisitions. If
      we do
      make business acquisitions, we must continue to implement and improve our
      operational, financial and management information systems. We must also hire,
      train and retain additional qualified personnel, continue to expand and upgrade
      core technologies, and effectively manage our relationships with customers,
      suppliers, and other third parties. If we expand as anticipated, expansion
      could
      place a significant strain on our current services and support operations,
      sales
      and administrative personnel, capital resources, and other company resources.
      If
      we fail to effectively manage our growth, our expenses may increase which could
      lower our earnings or prevent us from becoming profitable. Failure to
      effectively manage our growth could also result in us failing to generate
      sufficient revenues to become profitable.





-16-












WE
      DEPEND
      ON MR. SCOTT GALLAGHER, OUR CHIEF EXECUTIVE OFFICER, AND IF HE LEAVES US, WE
      MAY
      NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.





Our
      success in achieving our growth objectives depends upon the efforts of our
      top
      management team including the efforts of Mr. Scott Gallagher. The loss of Mr.
      Gallagher's services would negatively affect our ability to implement our
      business plan, and, as a result, our financial condition, including our cash
      position, ability to obtain funding and generate revenues would be harmed.
      Although we intend to apply for key-man life insurance, we do not currently
      maintain key life insurance policies for Mr. Gallagher.





OUR
      STOCK
      PRICE IS VOLATILE AND YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT A PRICE HIGHER
      THAN WHAT YOU PAID.





The
      market for our common stock is highly volatile. Our common stock has
      experienced, and is likely to experience in the future, significant price and
      volume fluctuations. As a result, the market price of our common stock could
      decrease without regard to our operating performance. In addition, we believe
      factors such as quarterly fluctuations in our financial results, announcements
      of technological innovations or new products by our competitors or us, changes
      in prices of our products and services or our competitors' products and
      services, changes in our product mix and changes in the overall economy or
      the
      condition of the financial markets could cause the price of our common stock
      to
      fluctuate substantially. If our stock price fluctuates, you may not be able
      to
      sell your shares at a price higher than what you paid.





THE
      LIMITED TRADING VOLUME OF OUR STOCK MAY DEPRESS THE PRICE OF OUR STOCK OR CAUSE
      IT TO FLUCTUATE SIGNIFICANTLY.





There
      has
      been a limited public market for our common stock and an active trading market
      for our common stock may not develop. As a result, you may not be able to sell
      your common stock in short time periods, or possibly at all.





WE
      MUST
      COMPLY WITH PENNY STOCK REGULATIONS WHICH COULD EFFECT THE LIQUIDITY AND PRICE
      OF OUR STOCK.





The
      Securities and Exchange Commission has adopted rules that regulate broker-dealer
      practices in connection with transactions in "penny stocks." Penny stocks
      generally are equity securities with a price of less than $5.00, other than
      securities registered on certain national securities exchanges or quoted on
      NASDAQ, provided that current price and volume information with respect to
      transactions in such securities is provided by the exchange or system. Prior
      to
      a transaction in a penny stock, a broker-dealer is required to: Deliver a
      standardized risk disclosure document prepared by the SEC; Provide the customer
      with current bid and offers quotations for the penny stock; Explain the
      compensation of the broker-dealer and its salesperson in the transaction;
      Provide monthly account statements showing the market value of each penny stock
      held in the customer's account; Make a special written determination that the
      penny stock is a suitable investment for the purchaser and receives the
      purchaser's; and Provide a written agreement to the transaction. These
      requirements may have the effect of reducing the level of trading activity
      in
      the secondary market for our stock. Because our shares are subject to the penny
      stock rules, you may find it more difficult to sell your shares.





-17-












WE
      DEPEND
      ON THIRD PARTY VENDORS AND IF WE ARE NOT ABLE TO SECURE COST-EFFECTIVE PRODUCTS,
      WE MAY NOT BECOME OR REMAIN PROFITABLE.





Our
      performance depends on our ability to purchase products in sufficient quantities
      at competitive prices and on our vendors' ability to make and deliver high
      quality products in a cost effective, timely manner. Some of our smaller vendors
      have limited resources, production capacities, and limited operating histories.
      We have no long-term purchase contracts or other contracts that provide
      continued supply, pricing or access to new products and any vendor or
      distributor could discontinue selling to us at any time. We may not be able
      to
      acquire the products that we need in sufficient quantities or on terms that
      are


acceptable
      to us in the future. As a result, we may not become profitable.





WE
      EARN
      REVENUES BASED ON AGREEMENTS WITH CELLULAR AND SATELLITE SERVICE PROVIDERS
      AND,
      IF THE CONTRACTS ARE CANCELLED, OUR REVENUES MAY DECREASE AND WE MAY NOT BECOME
      PROFITABLE.





We
      earn
      revenues by providing cellular and satellite activations for major wireless
      carriers such as Metro PCS, Cingular, Sprint/Nextel, and GlobalStar. These
      agreements are partly based on geography and we signed contracts to earn
      revenues from activations in Florida. Our agreements may be cancelled at any
      time by either party. If any of our agreements are cancelled, we will not earn
      activations through that carrier which will cause our revenues to decrease.
      If
      we do not provide activations for a broad line of carriers, our stores will
      not
      be as competitive. As a result, our revenues may decrease and we may not become
      profitable.





WE
      MAY
      NOT BE ABLE TO SUCCESSFULLY COMPETE WITH OTHER COMPANIES WHICH WOULD NEGATIVELY
      AFFECT OUR EARNINGS AND POSSIBLY CAUSE A DECLINE IN OUR STOCK.





We
      operate in a highly competitive environment. We principally compete with other
      independent retailers, privately held chains that offer a broad range of
      products and carrier owned and operated stores with more name recognition and
      brand identity than us. We believe that success in the industry is based on
      maintenance of product quality, competitive pricing, delivery efficiency,
      customer service and satisfaction levels, maintenance of satisfactory dealer
      relationships, and the ability to anticipate technological changes and changes
      in customer preferences. Additionally, we believe competition may become more
      intense over time due to an increasing percentage of customers that already
      own
      the products we sell. If we can not compete in our markets, we will not sell
      a
      sufficient number of products to generate enough revenues to become profitable.
      Additionally, our suppliers, whose products we distribute, or major cellular
      phone manufacturers, may acquire, startup, and or expand their own distribution
      systems to sell directly to commercial and retail customers which would cause
      us
      to lose revenue which could ultimately cause a decline in the value of our
      stock.





-18-














THE
      TELECOMMUNICATIONS INDUSRY IS CONSTANTLY EVOLVING AND IF THE INDUSTRY DOES
      NOT
      REMAIN AN ATTRACTIVE INVESTMENT OPPORTUNITY FOR US WE MAY HAVE TO SHIFT OUR
      BUSINESS PLAN WHICH COULD RESULT IN LOWER OR NO EARNINGS AND OUR STOCK PRICE
      COULD DECLINE.





The
      technology that our products rely on is constantly changing. The rapid change
      in
      technology may lead to the development of wireless telecommunications services
      or alternative services that consumers prefer over traditional cellular. As
      a
      result, we must continue to stay current with new technologies and offer
      products and services that meet customer demands. It is difficult to predict
      how
      our product line will evolve over time and what our profitability margins will
      be on future products. It is also difficult to predict whether consumers will
      purchase new products to take advantage of advancements in technology. There
      is
      uncertainty as to the extent to which airtime charges and monthly recurring
      charges may continue to decline. If the technology that our products rely on
      changes in a way that reduces customer demand for our products or reduces the
      profitability of our products, we may have to adjust our business plan. If
      we
      adjust our business plan, our revenues and earnings may decrease and our stock
      price may move lower.





WE
      SELL
      PRODUCTS THAT RELY ON THIRD PARTY NETWORKS TO OPERATE. IF ANY NETWORK DISRUPTION
      OCCURS, OUR REVENUES AND EARNINGS MAY DECREASE.





The
      products we sell rely on the efficient and uninterrupted operation of cellular
      and satellite networks, which are built and maintained by third parties such
      as
      Cingular and Sprint. Any failure of these cellular or satellite systems could
      cause our products to work poorly or not at all. A failure by these third
      parties to maintain their cellular and satellite systems could result in lower
      sales of our products which could reduce our revenues and lower our earnings.
      Additionally, our customers may not understand that the failure of a cellular
      or
      satellite system is due to a third party rather than our products and our
      reputation could be harmed. If our reputation is harmed, we may have difficulty
      selling our products. We may have to increase our advertising costs to repair
      our reputation or educate consumers. As a result, a third party failure may
      result in us failing to become profitable or, if we become profitable, we may
      not be able to sustain profitability.





-19-





















ITEM
      7.
      FINANCIAL STATEMENTS.





FTS
      Group, Inc. and Subsidiary


Index
      to
      Consolidated Financial Statements




Index
                to Consolidated financials Statements
            PageReport
                of Independent Registered Public Accounting Firm
            F-2Consolidated
                Balance Sheets as of December 31,2005 and 2004
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2005 and
                2004
            F-4Consolidated
                Statements of Cash Flows for the years ended December 31, 2005 and
                2004
            F-5Consolidated
                Statements of Stockholders’ Equity (Deficiency for the Years ended
                December 31, 2005 and 2004
            F-6Notes
                to the Consolidated Financial Statements
            F-7








-F-1-


















REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders, FTS Group, Inc.





We
      have
      audited the accompanying consolidated balance sheet of FTS Group, Inc. and
      subsidiary as of December 31, 2004, and the related consolidated statements
      of
      operations, stockholders' deficiency and cash flows for the year then ended.
      These consolidated financial statements are the responsibility of the Company's
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audit.





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


financial
      statement presentation. We believe that our audit provides a reasonable basis
      for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of FTS Group,
      Inc.
      and subsidiary as of December 31, 2004, and the consolidated results of their
      operations and their cash flows for the year then ended in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As more fully described in Note
      3
      to the consolidated financial statements, the Company has a working capital
      deficit of $472,862 and a stockholders' deficit of $421,811 as of December
      31,2004. These conditions raise substantial doubt about the Company's ability
      to
      continue as a going concern. Management's plans in regard to these


matters
      are also described in Note 3. The consolidated financial statements do not
      include any adjustments that might result from the outcome of this
      uncertainty.





/s/
      Withum Smith & Brown, P.C.


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


Princeton,
      New Jersey


March
      7,
      2005, except for note 15 which is dated March 31, 2005








**R.
      E. Bassie & Co.**


***Certified
      Public Accountants***










6671
                Southwest Freeway, Suite 550Houston,
                Texas 77074-2220Tel:
                (713) 272-8500E-Mail:
                Rebassie@aol.com








**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








To
      the
      Board of Directors and Stockholders


FTS
      Group, Inc.:





We
      have
      audited the accompanying consolidated balance sheet of FTS Group, Inc. and
      subsidiary as of December 31, 2005, and the related consolidated statements
      of
      operations, stockholders' equity and cash flows for the year ended December
      31,
      2005. These consolidated financial statements are the responsibility of the
      Company’s management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audit.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of FTS Group, Inc. and
      subsidiary as of December 31, 2005, and the results of their operations and
      their cash flows for the year ended December 31, 2005, in conformity with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in Note 14 to the
      financial statements, the Company has suffered recurring losses from operations.
      These factors raise substantial doubt about the Company’s ability to continue as
      a going concern. Management’s plans in regard to this matter are also discussed
      in Note 14.  The consolidated financial statements do not include any
      adjustments that might result from the outcome of these
      uncertainties.




As
      discussed in Note 2 to the financial statements,
      the 2005 consolidated financial statements have been restated to properly
      account for warrants issued in connection with a financing closed on December
      29, 2005.




/s/
      R. E.
      Bassie & Co.


Houston,
      Texas


April
      26,
      2007





-F-2-





















FTS
      GROUP, INC. AND SUBSIDIARY


CONSOLIDATED
      BALANCE SHEETS


DECEMBER
      31, 2005 AND 2004




Assets
            
            2005
            
            2004(Restated)Current
                assets:Cash
                and cash equivalents
            
            $
            243,079
            $
            7,949Restricted
                cash
            
            
            
            560,000Accounts
                receivable
            
            
            
            12,201
            
            87,485Inventories
            
            
            
            33,180
            
            44,998Prepaid
                expenses and current assets
            
            474,683
            
            35,430Total
                current assets
            
            
            1,323,143
            
            175,862Property
                and equipment, net of accumulated depreciation
            
            208,210
            
            124,555Unamortized
                discount on convertible debt
            
            380,690
            
            -Unamortized
                debt issuance costs
            
            
            46,313
            
            -Investment
                in private entity
            
            
            
            -
            
            7,500Deposits
            
            
            
            
            16,139
            
            19,489Total
                assets
            
            
            $
            1,974,495
            $
            327,406Liabilities
                and Stockholders' EquityCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            468,185
            
            259,723Current
                portion of notes payable to related partiesConvertible
                debentures-current portion
            
            782,961
            
            -Notes
                payable to individuals
            
            
            -
            
            37,250Notes
                payable to related parties, net of discount
            
            80,850
            
            111,751Note
                payable - Dutchess Advisors
            
            -
            
            240,000Total
                current liabilities
            
            
            1,331,996
            
            648,724Fair
                vaue of derivative liabilities
            
            
            1,849,366
            
            -Convertible
                debentures, net of current portion
            
            430,088
            
            100,493Total
                liabilities
            
            
            
            3,611,450
            
            749,217Stockholders'
                equity:10%
                Convertible preferred stock, Series A, $0.01 par value:150,000
                shares authorized; 0 shares issued and outstanding
            
            -
            
            -Preferred
                stock, $0.01 par value, 4,850,000 undesignatedshares
                authorized, none issued
            
            -
            
            -Common
                stock, $.001 par value. Authorized 150,000,000 shares:102,098,756
                shares issued and outstanding at December 31, 2005,37,882,183
                shares issued and outstanding at December 31, 2004
            
            102,099
            
            37,882Additional
                paid-in capital
            
            
            10,196,539
            
            7,848,833Accumulated
                deficit
            
            
            
            (11,935,593)
            
            (8,308,526)Total
                stockholders' equity (deficit)
            
            (1,636,955)
            
            (421,811)Commitments
                and contingent liabilities
            
            -Total
                liabilities and stockholders' equity
            $
            1,974,495
            $
            327,406See
                accompanying notes to consolidated financial statements.








-F-3-

















FTS
      GROUP, INC. AND SUBSIDIARY


CONSOLIDATED
      STATEMENTS OF OPERATIONS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 AND 2004




2005
            
            2004(Restated)Revenues
            
            
            $
            1,310,731
            $
            712,282Costs
                and expenses:Cost
                of sales
            
            
            
            1,110,645
            
            521,660Selling,
                general and administrative
            
            1,767,563
            
            2,191,837Impairment
                loss
            
            
            
            
            
            107,000Total
                costs and expenses
            
            
            2,878,208
            
            2,820,497Operating
                loss
            
            
            
            (1,567,477)
            
            (2,108,215)Other
                income (expenses):Change
                in fair value of derivative liabilities
            
            (1,629,831)
            
            -Unrealized
                loss on investments
            
            (7,500)
            
            (7,500)Interest
                expense
            
            
            
            (422,259)
            
            (212,638)Total
                other income (expenses)
            
            (2,059,590)
            
            (220,138)Net
                loss from operations before taxes
            
            (3,627,067)
            
            (2,328,353)Provision
                for income taxes
            
            
            -
            
            -Net
                loss applicable to common shareholders
            $
            (3,627,067)
            $
            (2,328,353)Net
                loss applicable to common shareholders:Basic
                and diluted
            
            
            $
            (0.06)
            $
            (0.08)Weighted
                average common shares:Basic
                and diluted
            
            
            
            55,986,790
            
            27,459,250See
                accompanying notes to consolidated financial statements.








-F-4-

















FTS
      GROUP, INC. AND SUBSIDIARY


CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIENCY


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 AND 2004





Additional
            
            
            
            
            
            TotalPreferred
                Stock
            
            Common
                Stock
            
            paid-in
            
            Accumulated
            
            Deferred
            
            stockholders'shares
            
            amount
            
            shares
            
            amount
            
            capital
            
            deficit
            
            compensation
            
            equityBalance,
                December 31, 2003
            -
            $
            -
            
            18,141,564
            $
            18,142
            $
            5,465,030
            $
            (5,943,196)
            $
            (146,550)
            $
            (606,574)Issuance
                of common shares for cash
            -
            
            -
            
            6,000,000
            
            6,000
            
            411,341
            
            -
            
            -
            
            417,341Issuance
                of common shares for services
            -
            
            -
            
            7,994,720
            
            7,994
            
            1,212,207
            
            -
            
            -
            
            1,220,201Conversion
                of debentures in shares of commonstock
            -
            
            -
            
            3,570,030
            
            3,570
            
            346,521
            
            -
            
            -
            
            350,091Issuance
                of common shares for acquisitionof
                assets
            -
            
            -
            
            30,000
            
            30
            
            2,070
            
            -
            
            -
            
            2,100Issuance
                of common shares for through equity line
            -
            
            -
            
            2,145,869
            
            2,146
            
            374,687
            
            -
            
            -
            
            376,833Amortization
                of deferred compensation
            -
            
            -
            
            -
            
            -
            
            -
            
            -
            
            146,550
            
            146,550Issuance
                of stock warrants as dividends oncommon
                shares
            -
            
            -
            
            -
            
            -
            
            36,977
            
            (36,977)
            
            -
            
            -Net
                loss
            -
            
            -
            
            -
            
            -
            
            -
            
            (2,328,353)
            
            -
            
            (2,328,353)Balance,
                December 31, 2004
            -
            
            -
            
            37,882,183
            
            37,882
            
            7,848,833
            
            (8,308,526)
            
            -
            
            (421,811)Issuance
                of common shares for cash
            -
            
            -
            
            13,461,300
            
            13,461
            
            868,837
            
            -
            
            -
            
            882,298Issuance
                of common shares for services
            -
            
            -
            
            6,572,500
            
            6,573
            
            624,277
            
            -
            
            -
            
            630,850Conversion
                of debentures in shares ofcommon
                stock
            -
            
            -
            
            522,086
            
            522
            
            50,494
            
            -
            
            -
            
            51,016Issuance
                of common shares through equity line
            -
            
            -
            
            8,140,263
            
            8,140
            
            451,513
            
            -
            
            -
            
            459,653Issuance
                of common shares on convertible debt
            -
            
            -
            
            35,520,424
            
            35,521
            
            352,585
            
            -
            
            -
            
            388,106Net
                loss, restated
            -
            
            -
            
            -
            
            -
            
            -
            
            (3,627,067)
            
            -
            
            (3,627,067)Balance,
                December 31, 2005, restated
            -
            $
            -
            
            102,098,756
            $
            102,099
            $
            10,196,539
            $
            (11,935,593)
            $
            -
            $
            (1,636,955)See
                accompanying notes to consolidated financial statements.





-F-5-


















FTS
      GROUP, INC. AND SUBSIDIARY


CONSOLIDATED
      STATEMENTS OF CASH FLOWS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2005 AND 2004





2005
            
            2004(Restated)Cash
                flows from operating activities:Net
                loss
            
            
            
            
            
            $
            (3,627,067)
            $
            (2,328,353)Adjustments
                to reconcile net income to net cashused
                in operating activities:Depreciation
                and amortization
            
            
            35,974
            
            15,851Impairment
                of long-lived assets
            
            
            -
            
            107,000Common
                shares issued for services
            
            630,850
            
            1,220,201Unrealized
                loss on investment in private entity
            
            7,500
            
            7,500Decrease
                in deferred compensation
            
            -
            
            146,550Amortization
                of debt discount
            
            
            180,893
            
            98,107Change
                in fair value of derivative liabilities
            
            1,629,831
            
            -(Increase)
                decrease in operating assets:Accounts
                receivable
            
            
            
            75,284
            
            (83,580)Inventories
            
            
            
            11,818
            
            (37,239)Prepaid
                expenses
            
            
            
            747
            
            (33,918)Other
                assets
            
            
            
            10,850
            
            (1,839)Increase
                (decrease) in operating liabilities:Accounts
                payable and accrued expenses
            
            322,011
            
            (24,954)Net
                cash used in operating activities
            
            (721,309)
            
            (914,674)Cash
                flows from investing activities:Capital
                expenditures for property and equipment
            
            (119,629)
            
            (194,729)Funding
                restricted for investment in acquisition
            
            (560,000)
            
            -Net
                cash used in investing activities
            
            (679,629)
            
            (194,729)Cash
                flows from financing activities:Proceeds
                from issuance of stock
            
            
            
            882,298
            
            417,341Proceeds
                for stock to be issued
            
            
            
            -
            
            54,765Proceeds
                from convertible debentures
            
            
            1,263,000
            
            -Proceeds
                from stock issued under equity line
            
            -
            
            376,833Proceeds
                from note payable to Dutchess Advisors
            
            560,000
            
            450,500Proceeds
                from notes payable to individuals
            
            -
            
            98,250Repayments
                of note payable to Dutchess Advisors
            
            (921,022)
            
            (266,485)Repayments
                of debenture loan
            
            
            
            (26,876)
            
            -Repayments
                of notes payable to individuals
            
            (37,250)
            
            (61,000)Increase
                in amounts due to related parties
            
            84,000
            
            140,235Repayment
                of loans from related parties
            
            (168,082)
            
            (99,974)Net
                cash provided by financing activities
            
            1,636,068
            
            1,110,465Net
                increase in cash
            
            
            
            235,130
            
            1,062Cash
                at beginning of year
            
            
            
            7,949
            
            6,887Cash
                at end of year
            
            
            $
            243,079
            $
            7,949Supplemental
                schedule of cash flow information:Interest
                paid
            
            
            
            $
            93,133
            $
            188,344Supplemental
                disclosure of non-cash investing and financing activities:Stock
                issued in exchange for convertible debentures
            $
            51,016
            $
            350,091Stock
                issued in exchange for acquisition of assets
            $
            -
            $
            2,100See
                accompanying notes to consolidated financial statements.





-F-6-

















FTS
      GROUP, INC.


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
      31, 2005




**(1)**
            **Summary
                of Significant Accounting
                Policies**




**ORGANIZATION,
      OWNERSHIP AND BUSINESS**




FTS
      Group, Inc. (the "Company"), was incorporated under the laws of the State of
      Nevada. The Company is engaged in the acquisition and development of a chain
      of
      full service retail wireless stores. The Company's primary business is the
      marketing, sale and activation of cellular and satellite handsets, satellite
      television activations and installations, cellular accessories and other related
      wireless products such as Wi-Fi service and related access equipment for
      residential or business purposes.




**PRINCIPLES
      OF CONSOLIDATION**




The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiary: FTS Wireless, Inc. All significant intercompany
      transactions and balances have been eliminated in consolidation.




**ACCOUNTS
      RECEIVABLE**




Accounts
      receivable consist primarily of trade receivables, net of a valuation allowance
      for doubtful accounts.




**INVENTORIES**




Inventories
      are valued at the lower-of-cost or market on a first-in, first-out
      basis.




**INVESTMENT
      SECURITIES**




The
      Company accounts for its investments in accordance with Statement of Financial
      Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
      Equity Securities." Management determines the appropriate classification of
      its
      investments in marketable securities at the time of purchase and reevaluates
      such determination at each balance sheet date. Securities that are bought and
      held principally for the purpose of selling them in the near term are classified
      as trading securities. Debt securities for which the Company does not have
      the
      intent or ability to hold to maturity and equity securities not classified
      as
      trading securities are classified as available-for-sale. The cost of investments
      sold is determined on the specific identification or the first-in, first-out
      method. Trading securities are reported at fair value with unrealized gains
      and
      losses recognized in earnings, and available-for-sale securities are also
      reported at fair value but unrealized gains and losses are shown in the caption
      "unrealized gains (losses) on shares available-for-sale" included in
      stockholders' equity. Management determines fair value of its investments based
      on quoted market prices at each balance sheet date.





-F-7-















**PROPERTY,
      EQUIPMENT AND DEPRECIATION**




Property
      and equipment are recorded at cost less accumulated depreciation. Upon
      retirement or sale, the cost of the assets disposed of and the related
      accumulated depreciation are removed from the accounts, with any resultant
      gain
      or loss being recognized as a component of other income or expense. Depreciation
      is computed over the estimated useful lives of the assets (3-20 years) using
      the
      straight-line method for financial reporting purposes and accelerated methods
      for income tax purposes. Maintenance and repairs are charged to operations
      as
      incurred.




**INTANGIBLE
      ASSETS**




SFAS
      No.
      142 eliminates the amortization of goodwill, and requires annual impairment
      testing of goodwill and introduces the concept of indefinite life intangible
      assets. The Company adopted SFAS No. 142 effective January 1, 2002. Goodwill
      and
      indefinite lived intangible asset impairment is always assessed based upon
      a
      comparison of carrying value with fair value.




**IMPAIRMENT
      OF LONG-LIVED ASSETS**




Realization
      of long-lived assets, including goodwill, is periodically assessed by the
      management of the Company. Accordingly, in the event that facts and
      circumstances indicate that property and equipment, and intangible or other
      assets may be impaired, an evaluation of recoverability would be performed.
      If
      an evaluation is required, the estimated future undiscounted cash flows
      associated with the asset are compared to the asset's carrying amount to
      determine if a write-down to market value is necessary. In management's opinion,
      there was no impairment of such assets at December 31, 2005. When the Company
      completed its impairment testing for the year ended December 31, 2004, it
      determined that the value of assets acquired related to certain store locations
      were impaired in the amount of $107,000.




**REVENUE
      RECOGNITION**




We
      recognize revenue from the activation of new wireless customers and the sale
      of
      wireless handsets, airtime and accessories at the time of activation or
      sale.




Net
      revenues from wireless activations are recognized during the month the
      activation is performed. Allowances for charge backs, returns, discounts and
      doubtful accounts are provided when sales are recorded. Shipping and handling
      costs are included in cost of sales.




Although
      our post-paid activations are subject to possible charge-back of commissions
      if
      a customer deactivates service within the allowable 180-day period after signing
      the contract, we still recognize the activation in the period of the activation.
      We have set up a reserve for possible activation charge-backs. Based on SFAS
      No.
      48, this is permitted if reliable estimates of the expected refunds can be
      made
      on a timely basis, the refunds are being made for a large pool of homogeneous
      items, there is sufficient company-specific historical basis upon which to
      estimate the refunds, and the amount of the commission specified in the
      agreement at the outset of the arrangement is fixed, other than the customer's
      right to request a refund.




**INCOME
      TAXES**




The
      Company is a taxable entity and recognizes deferred tax assets and liabilities
      for the future tax consequences attributable to differences between the
      financial statement carrying amounts of existing assets and liabilities and
      their respective tax basis. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to be in effect when the temporary differences
      reverse. The effect on the deferred tax assets and liabilities of a change
      in
      tax rates is recognized in income in the year that includes the enactment date
      of the rate change. A valuation allowance is used to reduce deferred tax assets
      to the amount that is more likely than not to be realized.





-F-8-















**RESTRICTED
      CASH**




Restricted
      cash of $560,000 represents funds held in escrow by Grushko & Mittman to be
      utilized at the closing of the acquisition of See World Satellites in January,
      2006. The source of the funds was from the December 2005 issuance of promissory
      notes designed for the purpose of raising funds for this acquisition. The funds
      are contractually restricted and to be remitted directly towards settlement
      of
      the acquisition.




**EARNINGS
      PER SHARE**




The
      basic
      net earnings (loss) per common share is computed by dividing the net earnings
      (loss) by the weighted average number of shares outstanding during a period.
      Diluted net earnings (loss) per common share is computed by dividing the net
      earnings, adjusted on an as if converted basis, by the weighted average number
      of common shares outstanding plus potential dilutive securities. For the years
      ended December 31, 2005 and 2004, potential dilutive securities that had an
      anti-dilutive effect were not included in the calculation of diluted net
      earnings (loss) per common share. These securities include options to purchase
      shares of common stock.




**ADVERTISING
      COSTS**




Advertising
      costs are expensed as incurred. Advertising expense was $23,631 and $17,792
      for
      the years ended December 31, 2005 and 2004 respectively.




**MANAGEMENT'S
      ESTIMATES AND ASSUMPTIONS**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities, disclosure of contingent
      assets and liabilities at the date of the financial statements, and the reported
      amounts of revenues and expenses. Actual results could differ from these
      estimates.




**STOCK-BASED
      COMPENSATION**




The
      Company has chosen to continue to account for stock-based compensation using
      the
      intrinsic value method prescribed in Accounting Principles Board Opinion No.
      25,
      "Accounting for Stock Issued to Employees", and related Interpretations and
      to
      elect the disclosure option of SFAS No. 123, "Accounting for Stock-Based
      Compensation". Accordingly, compensation cost for stock options issued to
      employees is measured as the excess, if any, of the quoted market price of
      the
      Company's stock at the date of the grant over the amount an employee must pay
      to
      acquire the stock.




**FAIR
      VALUE OF FINANCIAL INSTRUMENTS**




The
      Company estimates the fair value of its financial instruments using available
      market information and appropriate valuation methodologies. However,
      considerable judgment is required in interpreting market data to develop the
      estimates of fair value. Accordingly, the Company estimates of fair value are
      not necessarily indicative of the amounts that the Company could realize in
      a
      current market exchange. The use of different market assumption and/or
      estimation methodologies may have a material effect on the estimated fair value
      amounts. The interest rates payable by the Company on its notes payable
      approximate market rates. The Company believes that the fair value of its
      financial instruments comprising accounts receivable, notes receivable, accounts
      payable, and notes payable approximate their carrying amounts.





-F-9-















**NEW
      ACCOUNTING STANDARDS**




In
      May
      2005, the Financial Accounting Standards Board ("FASB") issued Statement of
      Financial Accounting Standard ("SFAS") No. 154, Accounting Changes and Error
      Corrections. SFAS No. 154 replaces Accounting Principles Board Opinion No.
      20,
      Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Internal
      Financial Statements, and changes the requirements for the accounting for and
      reporting of a change in accounting principle. SFAS No. 154 requires
      retrospective application of changes in accounting principle to prior periods'
      financial statements, unless it is impracticable to determine either the
      period-specific effects or the cumulative effect of the change. SFAS No. 154
      is
      effective for accounting changes and corrections of errors made in fiscal years
      beginning after December 15, 2005. We will adopt SFAS No. 154 on January 1,
      2006. Any impact on the Company's consolidated results of operations and
      earnings per share will be dependent on the amount of any accounting changes
      or
      corrections of errors whenever recognized.




In
      December 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 153. This statement addresses the measurement
      of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29,
      "Accounting for Nonmonetary Transactions," is based on the principle that
      exchanges of nonmonetary assets should be measured based on the fair value
      of
      the assets exchanged.




The
      guidance in that opinion; however, included certain exceptions to that
      principle. This statement amends Opinion 29 to eliminate the exception for
      nonmonetary exchanges of similar productive assets and replaces it with a
      general exception for exchanges of nonmonetary assets that do not have
      commercial substance. A nonmonetary exchange has commercial substance if the
      future cash flows of the entity are expected to change significantly as a result
      of the exchange. This statement is effective for financial statements for fiscal
      years beginning after June 15, 2005. Earlier application is permitted for
      nonmonetary asset exchanges incurred during fiscal years beginning after the
      date of this statement is issued. Management believes the adoption of this
      statement will have no impact on the financial statements of the
      Company.




In
      December 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 152, which amends FASB statement No. 66,
      "Accounting for Sales of Real Estate," to reference the financial accounting
      and
      reporting guidance for real estate time-sharing transactions that is provided
      in
      AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing
      Transactions." This statement also amends FASB Statement No. 67, "Accounting
      for
      Costs and Initial Rental Operations of Real Estate Projects," to state that
      the
      guidance for (a) incidental operations and (b) costs incurred to sell real
      estate projects does not apply to real estate time-sharing transactions. The
      accounting for those operations and costs is subject to the guidance in SOP
      04-2. This statement is effective for financial statements for fiscal years
      beginning after June 15, 2005. Management believes the adoption of this
      statement will have no impact on the financial statements of the
      Company.





-F-10-














In
      November 2004, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards No. 151, *“Inventory
      Costs— an amendment of ARB No. 43, Chapter 4.”* This
      statement amends the guidance in ARB No. 43, Chapter 4, *“Inventory
      Pricing,”* to
      clarify the accounting for abnormal amounts of idle facility expense, freight,
      handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
      4, previously stated that *“under
      some circumstances, items such as idle facility expense, excessive spoilage,
      double freight, and rehandling costs may be so abnormal as to require treatment
      as current period charges.”* This
      statement requires that those items be recognized as current-period charges
      regardless of whether they meet the criterion of *“so
      abnormal.”* In
      addition, this statement requires that allocation of fixed production overheads
      to the costs of conversion be based on the normal capacity of the production
      facilities. This statement is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005 . Management does not believe the
      adoption of this statement will have any immediate material impact on the
      Company .




**Reclassifications**




Certain
      2004 amounts have been reclassified to conform to the 2005
      presentation.




**(2)**
              **RESTATEMENT**
  The
        Company has restated its financial statements for the year ended December
        31,
        2005 to amend and restate the accounting for warrants issued in connection
        with
        a financing closed December 29, 2005. These security components were originally
        treated as equity transactions associated with the issuance of secured,
        convertible promissory notes. However, at the time of the issuance, the Company
        had an insufficient number of authorized shares to settle the contract after
        considering all other commitments that may require the issuance of stock
        during
        the maximum period the contract could remain outstanding. Based on this
        shortage, EITF-0019 requires initial balance sheet classification of the
        warrants as a liability until such time that an increase in authorized shares
        sufficient to cover the shortage is approved by the shareholders. If the
        classification required under this Issue changes as a result of events during
        the period, the contract should be reclassified as of the date of the event
        that
        caused the reclassification. EITF 00-19 requires the treatment of these warrants
        as derivative liabilities, with an adjustment at each reporting period to
        mark
        the liability to market. Also being restated in relation to this financing
        is
        the split between the current and long term components of the associated
        liabilities per closer review of the contract terms.
 
 The
        restatement will also reclassify the restricted portion of cash to a separate
        line item on the Balance Sheet with a corresponding correction to the Statement
        of Cash Flows to reflect the restriction.
 
 There
        were also related adjustments to the Company’s consolidated statement of cash
        flows and consolidated statement of stockholders' equity.
 
 The
        effect of the restatement on specific amounts provided in the consolidated
        financial statements is as follows:
  Consolidated
                  Balance Sheet
              
              
              Previously
                  Reported
              
              Increase
                  (Decrease)
              
              RestatedCash,$560,000
                  restricted at 12/31/05
              
              $
              803,079
              $
              (560,000)
              $
              243,079Restricted
                  Cash
              
              
              $
              -
              $
              560,000
              $
              560,000Convertible
                  debentures-current portion
              
              $
              -
              $
              782,961
              $
              782,961Convertible
                  debentures
              
              
              $
              1,213,049
              $
              (782,961)
              $
              430,088Fair
                  value of derivative liabilities
              
              $
              -
              $
              1,849,366
              $
              1,849,366Additional
                  paid in capital
              
              
              $
              10,416,074
              $
              (219,535)
              $
              10,196,539Accumulated
                  deficit
              
              
              $
              (10,305,762)
              $
              (1,629,831)
              $
              (11,935,593)Total
                  stockholder's equity (deficit)
              
              $
              212,411
              $
              (1,849,366)
              $
              (1,636,955)Consolidated
                  Income StatementChange
                  in fair value of derivative liabilities
              $
              -
              $
              1,629,831
              $
              1,629,831Net
                  Income (loss)
              
              
              $
              (1,811,423)
              $
              (1,629,831)
              $
              (3,627,067)
 
 In
        addition, the Company has included restatements to reflect certain
        clarifications made in connection with management's further review during
        the
        restatement process. These restatements include expanded clarification on
        business operations in general as well as expanded clarification on revenue
        recognition policies, liquidity considerations, critical accounting policies,
        and changes to the Notes to Consolidated Financial Statements.


**(3)**
            **Property
                and Equipment**





Major
      classes of property and equipment together with their estimated useful lives,
      consisted of the following:





December
                31Years
            
            2005
            
            2004Leasehold
                improvements
            
            5
            
            $
            180,937
            
            $
            -Furniture
                and fixtures
            
            5
            
            
            54,208
            
            
            19,460Equipment
            
            3-5
            
            
            20,890
            
            
            5,273Vehicles
            
            3
            
            
            11,927
            
            
            2,100Construction
                in progress
            
            5
            
            
            -
            
            
            121,500Total
                property and equipment
            
            
            
            
            267,962
            
            
            148,333Less
                accumulated depreciation and amortization
            
            
            
            
            59,752
            
            
            23,778Net
                property and equipment
            
            
            
            
            $
            208,210
            
            $
            124,555








Depreciation
      expense for the years ended December 31, 2005 and 2004 was $35,974 and $15,851
      respectively.





-F-11-















(4)
      **CONVERTIBLE DEBT**




During
      2005 the Company raised a total of $1,820,690 from the issuance of $1,896,551
      Secured Convertible Promissory Notes with selected subscribers. The Notes were
      issued at an original discount of 21%. On December 29, 2005, the Company
      received $1,000,000 of the proceeds and a further $470,000 in January, 2006.
      Both amounts were after discount, but before expenses. The Company agreed to
      issue 100 class A, and 50 class B warrants for each 100 shares on the closing
      date of the issuance of the Notes, assuming complete conversion. The Company
      also agreed to issue 35,520,424 shares of common stock to be distributed pro
      rata to purchasers of the Notes (the common stock was issued effective December
      29, 2005 and is included in the number of shares issued and outstanding at
      December 31, 2005). The Conversion prices of the Notes, class A warrants, and
      class B warrants as stated on the Notes are $0.04, $0.02868 and $0.0239
      respectively.




The
      company accounted for the issuance of stocks and warrants under the
      convertible notes in line with the provisions of EITR 00-27 which states that
      when a debt instrument includes detachable instruments such as warrants, the
      proceeds of the issuance should be allocated to the convertible instrument
      and
      the detachable instruments in proportion to their relative fair market values.
      Accordingly, the Company calculated fair value of the stock based on current
      market price and fair value of the warrants using the Black-Scholes pricing
      model. Total proceeds from the funding were then allocated among debt and equity
      based on their relative fair values.




As
      discussed in footnote #2, a restatement was necessary as the $219,535 allocated
      to warrants was initially classified as equity. Due to an insufficient number
      of
      authorized and unissued shares available at the date of the issue to cover
      complete conversion, the warrant portion if the allocation is being reclassified
      to liability with an adjustment at each reporting period to mark the liability
      to market.




(5)
      **CONVERTIBLE DEBENTURES**




During
      February 2003 the Company completed an additional debenture offering. Pursuant
      to a subscription agreement with Dutchess Private Equities Fund, LP ("Dutchess")
      the Company received $212,500 from the sale of 6% secured convertible
      debentures. The terms of the debentures provide for payment by February 14,
      2007
      with the debentures being convertible into the Company's common stock at any
      time at the lesser of (i) 80% of the average of the five lowest closing bid
      prices during the 15 days prior to conversion or (ii) 100% of the average of
      the
      closing bid prices for the 20 trading days immediately preceding the closing
      date. The Company has registered the underlying shares on Form SB-2. As of
      December 31, 2005 and 2004 the amount of debentures outstanding was $0 and
      $100,493 respectively. During 2004 Dutchess converted $350,093 worth of
      debentures into 3,570,030 shares of stock.




During
      the year ended December 31, 2004 the Company issued approximately 3,570,030
      shares to Dutchess Private Equities Fund, LP to reduce its balance by $350,091.
      At December 31, 2004 the outstanding unconverted debenture totaled $100,493,
      which has since been converted into approximately 1,004,930 shares of stock
      of
      Dutchess.




(6)
      **EQUITY LINE OF CREDIT**




The
      Company entered into an investment agreement in 2004 for an equity line of
      credit with Dutchess Private Equities Fund. The agreement provides for a maximum
      of $6,000,000 with 15,000,000 shares of common stock registered and available
      to
      repay credit line advances. Shares are convertible based on 93% of the three-day
      average of the lowest three out of five days subsequent to a put for funds.
      At
      December 31, 2004, 12,854,131 shares were available under the terms of the
      equity line agreement. During 2004, the Company raised $376,833 from the equity
      line of credit.




(7)
      **NOTES PAYABLE TO RELATED PARTIES**




During
      June 2004, we entered into a note agreement with our then Chief Financial
      Officer, Linda Ehlen. Ms. Ehlen extended us a loan for $61,200 bearing interest
      of 8% per annum and a face amount premium of 20%, or $12,240. The note also
      included a stipulation that this related party would receive 307,000 shares
      of
      common stock as an inducement for providing the financing. The proceeds of
      $61,200 were allocated $43,200 to notes payable and $18,000 to the value of
      the
      common stock to be issued, based on their relative fair values. The difference
      between the amount to be repaid of $73,440 and the $43,200 represents a debt
      discount in the amount of $30,240 which was recorded by the company. This amount
      was amortized over the life of the loan. For the year ended December 31, 2004,
      the Company had amortized $13,829 leaving an unamortized debt discount of
      $16,411 at December 31, 2004. Unpaid principal remained at December 31, 2004
      in
      the amount of $63,440 for a net balance due of $47,029. This loan was paid
      in
      full and the debt discount fully amortized during 2005.




During
      September 2004, we entered into a note agreement with our Chief Executor
      Officer, Scott Gallagher. Mr. Gallagher extended us a loan for $125,000 bearing
      interest of 8% per annum and a face amount premium of 20%, or $25,000. The
      note
      also included a stipulation that this related party would receive 625,000 shares
      of common stock as an inducement for providing the financing. The proceeds
      of
      $125,000 were allocated $88,235 to notes payable and $36,765 to the value of
      the
      common stock to be issued, based on their relative fair values. The difference
      between the amount to be repaid of $150,000 and the $88,235 represents a debt
      discount in the amount of $61,765 which was recorded by the company. This amount
      was amortized over the life of the loan. For the year ended December 31, 2004,
      the Company had amortized $28,245 leaving an unamortized debt discount of
      $33,520 at December 31, 2004. Unpaid principal remained at December 31, 2004
      in
      the amount of $98,242 for a net balance due of $64,722. This loan was paid
      in
      full and the debt discount fully amortized during 2005. Additional funds of
      $8,800 were advanced by and repaid to Scott Gallagher during the course of
      the
      year in 2004.




During
      the quarter ended September 30, 2005, our Chief Executive Officer advanced
      additional funds totaling $70,661 to us. During the fourth quarter, these
      advances were converted to a note with an interest rate of 20% per annum. The
      note must be repaid by August 2007. Mr. Gallagher was issued 1,000,000 shares
      of
      restricted stock as inducement for providing this financing.







-F-12-













**(8)**
            **Note
                Payable - Dutchess Equities
                Fund**







The
      Company signed a short-term Note payable to Dutchess Equities Fund, II L.P.
      in
      the amount of $500,000 which was due in May of 2005. The loan bears interest
      at
      a rate of 12% per annum, it includes a 20% premium. The premium in the amount
      of
      $100,000 has been charged to the interest expense for 2005. The loan was paid
      back timely.




750,000
      shares of common stock were issued to Dutchess as inducement for entering into
      the financing.




During
      the year ended December 31, 2005, the Company also borrowed, under short term
      loan agreements, $60,000 from Dutchess Private Equities Fund bearing an interest
      rate of 12% per annum, it includes a 20% premium. The entire balance was repaid
      during 2005.





**(9)**
            **Income
                Taxes**







The
      Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes",
      which requires use of the liability method. SFAS 109 provides that deferred
      tax
      assets and liabilities are recorded based on the differences between the tax
      bases of assets and liabilities and their carrying amounts for financial
      reporting purposes, referred to as temporary differences. Deferred tax assets
      and liabilities at the end of each period are determined using the currently
      enacted tax rates and liabilities are expected to be settled or
      realized.




2005
              
              
              2004Net
                  income (losses) before taxes
              
              $
              (3,627,067
              )
              $
              (2,328,353
              )Times
                  the statutory tax rates
              
              
              34.00
              %
              
              34.00
              %(1,233,203
              )
              $
              (791,640
              )Temporary
                  differencesDerivative
                  (income) expense
              
              
              554,143
              
              
              -Goodwill
                  amortization
              
              
              -
              
              
              -Net
                  operating losses
              
              
              679,060
              
              
              791,640$
              -
              
              $
              -Deferred
                  Tax Assets
              
              $
              3,448,607
              
              $
              2,215,404Less
                  valuation allowance
              
              
              (3,448,607
              )
              
              (2,215,404
              )$
              -
              
              $
              -







The
      net
      operating loss carryforward of approximately $10,000,000 will expire through
      2024.





At
      December 31, 2005, the Company provided a 100% valuation allowance for the
      deferred tax asset because given the volatility of the current economic climate,
      it could not be determined whether it was more likely than not that the deferred
      tax asset/(liability) would be realized.





-F-13-














**(10)**
            **Operating
                Leases**







The
      Company leases real property for its seven retail locations. Five of the
      locations have lease terms ranging from six months to three years while two
      locations are on a month-to-month basis.




Future
      minimum payments due on the non-cancelable leases are as follows:


Year
            
            
            AnnualEnding
            
            
            Payments2006
            
            
            
            $
            95,4392007
            
            
            
            
            53,8072008
            
            
            
            
            633$
            149,879





Rent
      expense was $165,392 and $135,447 for the years ended December 31, 2005 and
      2004, respectively.





**(11)**
            **Concentration
                of Credit Risk**







The
      Company's concentrations of credit risk consist principally of Accounts
      Receivable and Accounts Payable. The Company purchases approximately 90% of
      their telephone supplies from two vendors. Additionally, these same two vendors
      are also major customers of the Company who provide over 60% of
      revenue.





**(12)**
            **Stock**







During
      July 2003, the Company filed Form SB-2 Registration Statement with the
      Securities and Exchange Commission to register 5,600,000 shares of common stock.
      In conjunction with this registration statement the Company incurred legal
      and
      accounting costs of approximately $35,000. The SB-2 Registration statement
      was
      declared effective by the Securities and Exchange Commission in October of
      2003.




During
      January of 2004, the Company filed Form SB-2 Registration Statement with the
      Securities and Exchange Commission to register 15,000,000 shares of common
      stock. In conjunction with this registration statement the Company incurred
      legal and accounting costs of approximately $25,000. The SB-2 Registration
      statement was declared effective by the Securities and Exchange Commission
      in
      February of 2004.




During
      June of 2005, the Company filed Form SB-2 Registration Statement with the
      Securities and Exchange Commission to register 47,501,563 shares of common
      stock. In conjunction with this registration statement the Company incurred
      legal and accounting costs of approximately $25,000. The SB-2 Registration
      statement was declared effective by the Securities and Exchange Commission
      in
      August of 2005.





-F-14-















On
      January 17th 2005 the Company closed a private placement and agreed to issue
      12,200,050 shares of common stock to a group of accredited investors in private
      placements at an average price of $0.08 per share for gross proceeds of $769,460
      after 10% commission and 3% expense fee. In accordance with the subscription
      agreement, the investors will receive two classes of warrants, called Series
      A
      and Series B warrants, for each share of common stock purchased. The A warrants
      have an exercise price of $0.08 and B warrants have an exercise price of $0.12.
      The Company filed the terms and conditions of the financing and registration
      rights in March of 2005 on Form 8-K. The funds raised in the private placement
      were primarily used for working capital, costs related to the opening of new
      locations and to reduce outstanding liabilities.




During
      the three months ended March 31, 2005, $51,017 worth of debentures was converted
      into 1,004,930 shares of stock relating to the Company's convertible debenture
      with Dutchess Private Equities Fund. The convertible debenture was fully
      extinguished during the period.




During
      the three months ended March 31, 2005, 2,085,426 shares of stock were issued
      relating to the Company's equity line of credit for proceeds of $270,994. Funds
      were used to repay outstanding notes.




The
      Company signed a short-term note payable to Dutchess Equities Fund, II L.P.
      in
      the amount of $500,000 plus a $100,000 premium. The note, dated January 10th,
      2005 matures on August 10, 2005. The note bears interest at 12% per annum.
      The
      note carries certain restrictions relating to additional financing and
      registration rights to certain shares issued to Dutchess. As of May 5th, 2005,
      the note and interest have been paid in full.




The
      note
      contained a stipulation that the Company would deliver 500,000 shares of common
      stock with "Piggy-Back" registration rights. In addition, the Company issued
      250,000 shares of restricted common stock in March 2005 relating to loan
      inducements for a loan in 2004.




During
      January 2005, the Company issued 2,030,000 shares of common stock for services
      pursuant to a Form S-8 registration. The shares were valued at fair market
      on
      the date it was agreed that the shares would be issued. The non-stock
      compensation expense of $294,350 has been charged to operations during the
      period and reported under Selling, General and Administrative
      Expenses.




On
      June
      15th, 2004 the Company borrowed $61,200 from its CFO Linda Ehlen. On September
      25, 2004 the Company borrowed $133,800 from its Chairman and CEO Scott
      Gallagher. The loans bear an interest rate of 8% per annum and due in June
      and
      September of 2005. Two of the notes carried a 20% premium in the aggregate
      amount of $37,240. The funds were primarily used to fund acquisitions and to
      repay loans from Dutchess Private Equities Fund II, LP.




The
      two
      notes received from related parties, Mr. Gallagher and Mrs. Ehlen required
      the
      Company to issue 932,000 (625,000 restricted common shares to Mr. Gallagher
      and
      307,000 restricted shares to Mrs. Ehlen) of common stock as an inducement to
      provide the financing. On March 3, 2005 we issued 932,000 restricted common
      shares. Proceeds in the amount of $186,200 borrowed from two of its officers
      have been allocated $131,435 to notes payable and $54,765 to the value of the
      common stock to be issued to the individuals based on their relative fair
      values. The difference between the amount to be repaid aggregating $223,440
      and
      the $131,435 represents a debt discount in the amount of $92,005 which was
      recorded by the Company. This amount is being amortized over the life of the
      loans. For the year ended December 31, 2004, the Company has amortized $42,073
      leaving an unamortized debt discount of $49,931 at December 31,
      2004.





-F-15-















On
      January 15 th , 2006
      the Company issued 1,500,000 restricted common shares to Scott Gallagher
      relating to a two year employment agreement entered into on November 15,
      2005.




During
      the quarter ended December 31, 2005 warrants were exercised at $0.03 per share
      by eight accredited investors for the purchase of 762,500 shares of common
      stock.







During
      the quarter ended December 31, 2005 the Company issued 5,474,880 shares to
      Dutchess Private Equities Fund II, LP, under our equity line of credit for
      proceeds of $134,575 after fees.




During
      the quarter ended December 31, 2005, the Company issued 35,520,424 shares of
      common stock to a group of ten accredited investors relating to a financing
      closed on December 29, 2005. An 8-K detailing this issuance was filed with
      the
      Securities and Exchange Commission on January 5, 2006.





**(13)**
            **Warrants
                and Options**





(13)
      A-Options




The
      Company has a Non-Qualified Stock Option and Stock Grant Plan (the "Plan"),
      adopted in July 1997. For the year ended December 31, 2005 the Company has
      not
      granted any options. Under the Company's Plan, the Company's Board of Directors
      has reserved 2,500,000 shares that may be granted at the Board of Directors'
      discretion. No option may be granted after July 27, 2007 and the maximum term
      of
      the options granted under the Plan is ten years. The effect of applying SFAS
      123
      on a pro forma basis was $0 for the year ended December 31, 2005 and 2004
      because all of the options were granted and fully vested prior to 2003. Changes
      in options outstanding under the plan are summarized as follows:


Number
                of shares
            
            Weighted
                Average Exercise PriceOptions
                Outstanding at December 31, 2005
            
            
            598,000
            
            $
            1.50Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Forfeited
            
            
            -
            
            
            -Options
                Outstanding at December 31, 2005
            
            
            598,000
            
            $
            1.50


The
      exercise price for all options is at or above the market value of the common
      stock as of the date of grant.





The
      following table summarizes information about fixed price stock
      options:





-F-16-




















OPTIONS
      OUTSTANDING AND EXERCISABLE





Weighted
            
            Weighted
            
            Weighted
            
            WeightedAverage
            
            Average
            
            Average
            
            AverageExercise
            
            Number
            
            Contractual
            
            ExercisePrice
            
            Outstanding
            
            Life
            
            Price0.81-1.38
            
            4,000
            
            2.1
                years
            
            $
                1.141.50-2.75
            
            594,000
            
            2.7
                years
            
            $
                1.50





(13)
      B-
      WARRANTS




The
      following details warrants outstanding as of December 31, 2005:




The
      Company had 3,000,000 warrants outstanding relating to a dividend declared
      to
      stockholders of record on August 27, 2004. The warrants have an exercise price
      of $0.25 and expire on August 7, 2007. The Company does not expect these
      warrants to be exercised in the near future because the exercise price exceeds
      the current stock price.




In
      accordance with the subscription agreement relating to the private placement
      the
      Company closed during the period ending March 31, 2005. The Company issued
      the
      following warrants. Investors received two classes of warrants, Series A and
      Series B warrants, for each share of common stock purchased. The B warrants
      have
      an exercise price of $0.08 and A warrants have an exercise price of $0.12.
      The
      Company filed the terms and conditions of the financing and registration rights
      in March of 2005 on Form 8-K. The funds raised in the private placement were
      primarily used for working capital, costs related to the opening of new locations
      and to reduce outstanding liabilities.




2005
            
            2005Underlying
            
            ExerciseShares
            
            PriceWarrants
                issued during 2000
            
            
            1,036,000
            
            $
            1.50Warrants
                issued during 2004(10%
                Warrant Div)
            
            
            3,000,000
            
            $
            0.25Warrants
                issued during 2004 and 2005A
                Warrants
            
            
            15,431,250
            
            $
            .10B
                Warrants
            
            
            14,170,250
            
            $
            .03




On
      September 28, 2005, our Board of Directors reduced the exercise price of the
      A
      warrants from $0.12 to $0.10. Additionally, our Board of Directors reduced
      the
      exercise price of the B warrants from $0.08 to $0.03.




In
      accordance with the subscription agreement relating to the private placement
      closed on December 29, 2005 the Company issued the following warrants. Investors
      received two classes of warrants, called Series A and Series B warrants, for
      each share of common stock purchased. The A warrants have an exercise price
      of
      $0.02868 and the B warrants have an exercise price of $.0239. The Company filed
      the terms and conditions of the financing and registration rights in January
      of
      2006 on Form 8-K. The funds raised in the private placement were primarily
      used
      for the acquisition of the Companies wholly owned subsidiary See World
      Satellites, Inc.




As
      discussed in footnote #2, a restatement was necessary as the $219,535 allocated
      to warrants was initially classified as equity. Due to an insufficient number
      of
      authorized and unissued shares available at the date of the issue to cover
      complete conversion, the warrants are being reclassified as derivative
      liabilities, with an adjustment at each reporting date to mark the liabilities
      to market..




As
      discussed in footnote #4, the warrants associated with this Issue, along with
      the related stock, were allocated based on their relative fair values, with
      the
      fair value of the warrant component determined using the Black-Scholes pricing
      model considering market factors at December 29,2005. The fair value calculation
      for this grouping of warrants was performed independently of any other issue.
      Therefore, the reduction to the exercise prices for Series A and B warrants
      on
      September 28,2005 and July 7, 2006 did not impact the fair value measurement
      of
      the warrants associated with the December 29, 2005 financing.


-F-17-












2005
            
            2005Underlying
            
            ExerciseShares
            
            PriceWarrants
                issued in December 2005A
                Warrants
            
            
            45,517,250
            
            $
            .02868B
                Warrants
            
            
            22,758,650
            
            $
            .0239








-F-18-

















**(14)**
            **Going
                Concern**





The
      Company's financial statements are presented on a going concern basis, which
      contemplates the realization of assets and satisfaction of liabilities in the
      normal course of business. The Company's ability to continue as a going concern
      is contingent upon its ability to expand its operations and secure additional
      financing. Failure to secure financing or expand operations may result in the
      Company not being able to continue as a going concern. The financial statements
      do not include any adjustments to reflect the possible future effects of the
      recoverability and classification of assets or the amounts and classification
      of
      liabilities that may result from the possible inability of the Company to
      continue as a going concern.





**(15)**
            **Subsequent
                Events**





On
      January 3, 2006, the Company acquired See World Satellites, Inc., a Pennsylvania
      corporation. The Company paid $500,000 at the closing of the transaction on
      January 3, 2006. The Company agreed to pay an additional $500,000 into an escrow
      account to be held until all material contracts held by See World have been
      executed, amended or modified to acknowledge our acquisition of See World and/or
      to make us a party to each agreement such that we have full benefit of the
      agreements.





At
      the
      closing, the Company also issued to See World a two year secured promissory
      note
      in the sum of $3,500,000. The Note does not pay interest. Pursuant to the terms
      of the Note, the Company agreed to pay to See World seven equal cash
      installments of $250,000. The initial installment is payable 90 days after
      closing and the remaining installments are payable every three months
      thereafter. The Company also agreed to make additional payments of $1,000,000
      on
      January 3, 2007 and $750,000 on April 3, 2008. The Note is secured against
      the
      assets of See World.





The
      Company also agreed to issue to Richard Miller $1,000,000 worth of our
      convertible preferred stock within three days of the completion of the 2005
      audit. The value of the shares will be based on the closing price of our stock
      on January 3, 2006.





-F-19-














ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.





Changes
      in accountants were previously reported on Form 8-K. We had no disagreements
      with our accountants in 2004 or 2005.




ITEM
      8A.
      CONTROLS AND PROCEDURES.





EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES





Our
      management evaluated, with the participation of our Chief Executive
      Officer/Interim Chief Financial Officer, the effectiveness of our disclosure
      controls and procedures as of the end of the period covered by this Annual
      Report on Form 10-KSB. Based on this evaluation, our Chief Executive
      Officer/Interim Chief Financial Officer has concluded that our disclosure
      controls and procedures are effective to ensure that information we are required
      to disclose in reports that we file or submit under the Securities Exchange
      Act
      of 1934 (i) is recorded, processed, summarized and reported within the time
      periods specified in Securities and Exchange Commission rules and forms, and
      (ii) is accumulated and communicated to our management, including our Chief
      Executive Officer/Interim Chief Financial Officer, as appropriate to allow
      timely decisions regarding required disclosure. Our disclosure controls and
      procedures are designed to provide reasonable assurance that such information
      is
      accumulated and communicated to our management. Our disclosure controls and
      procedures include components of our internal control over financial reporting.
      Management's assessment of the effectiveness of our internal control over
      financial reporting is expressed at the level of reasonable assurance that
      the
      control system, no matter how well designed and operated, can provide only
      reasonable, but not absolute, assurance that the control system's objectives
      will be met.





CHANGES
      IN INTERNAL CONTROLS





There
      was
      no change in our internal control over financial reporting that occurred during
      the fourth quarter covered by this Annual Report on Form 10-KSB that materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.


In
        connection with the restatement and the filing of this Form 10-KSB/A, our
        management, with the participation of our Chief Executive Officer/Interim
        Chief
        Financial Officer, re-evaluated the effectiveness of our disclosure controls
        and
        procedures as of the end of the period covered by this report. Based on the re-evaluation,
        the Chief Executive Officer/Interim Chief Financial Officer concluded that
        the
        disclosure controls and procedures as of the end of the period covered by
        this
        report were effective. Specifically, our Chief Executive Officer/Interim
        Chief
        Financial Officer evaluated the effects of EITF 00-19, FASB Statement 133
        and
        APB 14 relating to the issuance of certain warrants. Even though our Chief
        Executive Officer/Interim Chief Financial Officer believed that our controls
        and
        procedures were effective and that the initial treatment of warrants was
        correct
        based on our findings at the time, upon further review and consultations
        with
        industry professionals, management determined that in order to be compliant
        with
        GAAP accounting it would be necessary to restate certain financials to include
        fair value accounting of certain outstanding warrants. Management believes
        that
        its controls and procedures are effective and the restatement is due to complex
        and evolving changes to accounting methods relating to derivatives.
 
 Despite
        the restatement, as of April 26, 2007, there were no changes in our internal
        control over financial reporting that materially affected, or is reasonably
        likely to materially affect, our internal control over financial
        reporting.




ITEM
      8B.
      OTHER INFORMATION.





None.


PART
      III


ITEM
      9.
      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
      SECTION 16(A) OF THE EXCHANGE ACT.





The
      following individuals presently serve as officers and directors of the
      Company.


Name
            
            Age
            
            PositionScott
                Gallagher
            
            39
            
            Chairman
                of the Board of Directors, Chief Executive Officer and
                PresidentDavid
                R. Rasmussen
            
            39
            
            Director,
                Chief Operating Officer








All
      directors hold office until the next annual meeting of stockholders and until
      their successors are elected. Officers are elected to serve, subject to the
      discretion of the Board of Directors, until their successors are
      appointed.





SCOTT
      GALLAGHER. Mr. Gallagher has been Chairman of the Board of Directors and our
      Chief Executive Office since January of 2002. Prior to joining us, Mr. Gallagher
      was the founder and President of About-Face Communications, LLC, a
      privately-held business consulting firm located in Yardley, Pennsylvania. Prior
      to founding About-Face Communications, LLC, Mr. Gallagher was the Chief
      Investment Officer and a general partner with the Avalon Investment Fund, a
      private hedge fund based in New York City and Philadelphia. Mr. Gallagher
      previously held S.E.C. licenses series 7, 63 and 24 all of which were retired
      in
      good standing.





-20-














DAVID
      R.
      RASMUSSEN. Mr. Rasmussen has served on our board of directors since February
      10,
      2002. On February 1, 2006, Mr. Rasmussen became our Chief Operation Officer
      and
      the Chief Executive Officer of our wholly-owned subsidiary, See World
      Satellites, Inc. Prior to joining us, Mr. Rasumussen was employed with ERC,
      Inc., a subsidiary of General Electric as an IT project Manager. In that
      position, he was charged with providing IT solutions that enable business to
      drive core processes and grow profitable relationships. Mr. Rasmussen received
      a
      Bachelor's degree in Computer Technology from Rockhurst University in Kansas
      City Missouri. He was in the United Sates Air Force and Reserves for eight
      years
      as a communications specialist.





INVOLVEMENT
      IN CERTAIN LEGAL PROCEEDINGS





We
      are
      not aware of any material legal proceedings that have occurred within the past
      five years concerning any director, director nominee, or control person which
      involved a criminal conviction, a pending criminal proceeding, a pending or
      concluded administrative or civil proceeding limiting one's participation in
      the
      securities or banking industries, or a finding of securities or commodities
      law
      violations.





AUDIT
      COMMITTEE





Our
      full
      Board of Directors performs the functions usually designated to an Audit
      Committee. As of December 31, 2005, we did not have a director on our board
      that
      met the definition of “audit committee expert” as set forth in Item 401(e)(2) of
      Regulation S-B. We are currently searching for a director that meets such
      requirements. We employee an outside firm to advise and consult management
      and
      the Board on all matters relating to our financial statements.





COMPLIANCE
      WITH SECTION 16(A).





Section
      16(a) of the Exchange Act, as amended, requires our executive officers,
      directors and persons who beneficially own more than 10% of our common stock
      to
      file reports of their beneficial ownership and changes in ownership (Forms
      3, 4
      and 5, and any amendment thereto) with the SEC. Executive officers, directors,
      and greater-than-ten percent holders are required to furnish us with copies
      of
      all Section 16(a) forms they file. Based on our review of the activity of our
      officers and directors for the fiscal year ended December 31, 2004, we believe
      Forms 3, 4 and 5 were timely filed.





CODE
      OF
      ETHICS





We
      have
      adopted a Code of Ethics. A copy of our Code of Ethics was filed with our Form
      10-KSB for the period ending December 31, 2003. We will provide a copy of our
      Code of Ethics to any shareholder without charge upon a written
      request.





-21-









ITEM
      10.
      EXECUTIVE COMPENSATION.





The
      following table presents a summary of the compensation paid to our Chief
      Executive Officer during the last three fiscal years. No other executive officer
      received compensation in excess of $100,000 during 2005. Except as listed below,
      there are no bonuses, other annual compensation, restricted stock awards or
      stock options/SARs or any other compensation paid to the executive
      officers.





Summary
      Compensation Table


Annual
      Compensation


Other
                AnnualName
                and Position
            
            Year
            
            Salary
            
            CompensationScott
                Gallagher
            
            2005
            
            $
            100,000
            (3)
            $
            50,000Chairman
                and CEO
            
            2004
            
            $
            100,000
            (2)
            $
            25,0002003
            
            $
            100,000
            (1)
            $
            25,000








(1)
      In
      2003, Mr. Gallagher was issued 1,000,000 common shares in lieu of cash. Mr.
      Gallagher’s contract includes an annual bonus of at least $25,000.





(2)
      n
      2004, Mr. Gallagher was issued 625,000 restricted common shares in lieu of
      cash.
      Mr. Gallagher’s annual bonus for 2004 was $25,000.





(3)
      In
      2005 Mr. Gallagher was granted an annual bonus of $50,000. At December 31,
      2005
      the bonus remained unpaid.





COMPENSATION
      AGREEMENTS





We
      have
      three-year employment agreements with our Chief Executive Officer and our Chief
      Operating Officer as follows:




On
      February 1, 2006, the Company entered into an employment agreement with Mr.
      Scott Gallagher to serve as the Company’s Chief Executive Officer and as
      Chairman of the Board of Directors. Under the terms of such agreement, Mr.
      Gallagher will receive an initial grant of 1,500,000 restricted shares of common
      stock of the Company. For an initial term of 3 years, Mr. Gallagher is to
      receive a base salary of $200,000 per year. Mr. Gallagher will also be eligible
      for cash and stock bonuses annually depending upon the performance of the
      Company.




On
      February 1, 2006, the Company entered into an employment agreement with Mr.
      David R. Rasmussen to act as the Company’s Chief Operating Officer and as Chief
      Executive Officer of the Company’s wholly-owned subsidiary, See World
      Satellites, Inc. Under the terms of such agreement, Mr. Rasmussen will receive
      an initial grant of 1,500,000 restricted shares of common stock of the Company.
      For an initial term of 2 years, Mr. Rasmussen is to receive a base salary
      of $150,000 per year. Mr. Rasmussen will also be eligible for cash and stock
      bonuses annually depending upon the performance of the Company.




We
      do not
      currently have any outside directors. In 2005, we paid our directors who are
      also our employees, $2,000 per quarter. In February 2006, we eliminated board
      compensation for 2006




We
      did
      not grant stock options in 2004 or 2005. Additionally, no stock options were
      exercised by any of the named executive officers in 2004 or 2005.





-22-















ITEM
      11.
      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.





The
      following table sets forth certain information as of the date of this Report
      regarding the beneficial ownership of our common stock held by each of our
      executive officers and directors, individually and as a group and by each person
      who beneficially owns in excess of five percent of the common stock. In general,
      beneficial ownership includes those shares that a person has the power to vote,
      sell, or otherwise dispose. Beneficial ownership also includes that number
      of
      shares, which an individual has the right to acquire within 60 days (such as
      stock options) of the date this table was prepared. Two or more persons may
      be
      considered the beneficial owner of the same shares. The inclusion in this
      section of any shares deemed beneficially owned does not constitute an admission
      by that person of beneficial ownership of those shares.





The
      shareholders listed below have sole voting and investment power. The address
      of
      each of the beneficial owners is 7610 West Hillsborough Ave. Tampa, Fl. 33615,
      unless otherwise indicated. All ownership of securities is direct ownership
      unless otherwise indicated.





AMOUNT
                ANDNATURE
                OFBENEFICIAL
            
            PERCENTAGENAME
                AND ADDRESS OF BENEFICIAL OWNER(1)
            
            OWNERSHIP
            
            OF
                CLASS(2)Scott
                Gallagher
            
            
            11,581,451
            
            
            10.1
            %David
                R. Rasmussen
            
            
            1,637,500
            
            
            1.4
            %Alpha
                Capital Aktiengesellschaft (3)
            
            
            4,850,866
            
            
            4.2
            %Pradafant
                7, Furstentums 9490Vaduz,
                LiechtensteinLeRoyLandhuis
                (4)
            
            
            7,825,518
            
            
            6.8
            %212
                N. Wahsatch Avenue,Suite
                301Colorado
                Springs, CO80903All
                directors and current executive officers as a group (5
                persons)
            
            
            25,895,335
            
            
            22.6
            %





*
      Less
      than 1% of outstanding shares of Common Stock.





(1)
      The
      address of all individual directors and executive officers is c/o FTS Group,
      Inc., 7610 West Hillsborough Ave., Tampa, Florida 33615.





(2)
      The
      number of shares of common stock issued and outstanding as of February 15,
      2006
      was 114,589,131 shares. The calculation of percentage ownership for each listed
      beneficial owner is based upon the number of shares of common stock issued
      and
      outstanding on as of February 15, 2006, plus shares of common stock subject
      to
      options and warrants held by such person on February 15, 2006 and exercisable
      within 60 days thereafter. The persons and entities named in the table have
      sole
      voting and investment power with respect to all shares shown as beneficially
      owned by them, except as noted below.





-23-














(3)
      This
      information is based on a 13G filed on February 9, 2006 by Alpha Capital
      Aktiengesellschaft.





(4)
      This
      information is based on a 13G filed on December 3, 2002 by Mr.
      Landhuis.




ITEM
      12.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





During
      the quarter ended September 30, 2005, our Chief Executive Officer advanced
      additional funds totaling $70,661 to us. During the fourth quarter, these
      advances were converted to a note with an interest rate of 20% per annum. The
      note must be repaid by August 2007.Mr. Gallagher was issued 1,000,000 shares
      of
      restricted stock relating to the loan agreement.








ITEM
      13.
      EXHIBITS.





2.1
      Agreement and Plan of Merger between the Company and FTS Apparel, Inc., dated
      December 23, 2003 (included as Attachment A to the Definitive Proxy on Form
      DEF
      14A filed January 9, 2004, and incorporated herein by reference).





3.1
      Articles of Incorporation dated December 23, 2003 (included as Attachment B
      to
      the Definitive Proxy on Form DEF 14A filed January 9, 2004, and incorporated
      herein by reference).





3.2
      Bylaws (included as Attachment C to the Definitive Proxy on


Form
      DEF
      14A filed January 9, 2004, and incorporated herein by reference).





3.3
      Amendment to the Articles of Incorporation (included as exhibit 10.1 to the
      Form
      8-K filed March 13, 2006, and incorporated herein by reference).





4.1
      Form
      of Certificate for Common Shares (included as exhibit


4.1
      to
      the Registrant's Annual Report on Form 10-KSB for the fiscal year ended December
      31, 1998 and incorporated herein by this reference).





4.2
      Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
      February 24, 2003, and incorporated herein by reference).





4.3
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      L.P., dated February 14, 2003 (included as exhibit 10.2 to the Form 8-K filed
      February 24, 2003, and incorporated herein by reference).





4.4
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, L.P., dated February 14, 2003 (included as exhibit 10.3 to the Form 8-K
      filed February 24, 2003, and incorporated herein by reference).





4.5
      Debenture Exchange Agreement between the Company and Dutchess Private Equities
      Fund, L.P., dated February 14, 2003 (included as exhibit 10.5 to the Form 8-K
      filed February 24, 2003, and incorporated herein by reference).





-24-














4.6
      Addendum to the Subscription Agreement, dated July 21, 2003 (included as Exhibit
      10.1 to the Form 8-K filed July 22, 2003, and incorporated herein by
      reference).





4.7
      Amended Debenture between the Company and Dutchess Private Equities Fund, L.P.,
      dated February 14, 2003 (included as Exhibit 10.2 to the Form 8-K filed July
      22,
      2003, and incorporated herein by reference).





4.8
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, L.P., dated January 9, 2004 (filed as Exhibit 10.16 to the Form SB-2
      filed
      January 28, 2004, and incorporated herein by reference).





4.9
      Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
      March 24, 2005, and incorporated herein by reference).





4.10
      A
      Warrant Form (included as exhibit 4.1 to the Form 8-K filed March 24, 2005,
      and
      incorporated herein by reference).





4.11
      B
      Warrant Form (included as exhibit 4.2 to the Form 8-K filed March 24, 2005,
      and
      incorporated herein by reference).





4.12
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      L.P., dated October 27, 2004 (included as exhibit 4.11 to the Form SB-2 filed
      June 17, 2005, and incorporated herein by reference).





4.13
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      L.P., dated January 10, 2005 (included as exhibit 4.12 to the Form SB-2 filed
      June 17, 2005, and incorporated herein by reference).





4.14
      A
      Warrant Form (included as Exhibit 4.1 to the Form 8-K filed January 5, 2006,
      and
      incorporated herein by reference).





4.15
      B
      Warrant Form (included as Exhibit 4.2 to the Form 8-K filed January 5, 2006,
      and
      incorporated herein by reference).





10.1
      Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
      February 24, 2003, and incorporated herein by reference).





10.2
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      LP,
      dated February 14, 2003 (included as exhibit 10.2 to the Form 8-K filed February
      24, 2003, and incorporated herein by reference).





10.3
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, LP, dated February 14, 2003 (included as exhibit 10.3 to the Form 8-K
      filed February 24, 2003, and incorporated herein by reference).





10.4
      Escrow Agreement between the Company and Dutchess Private Equities Fund, LP,
      dated February 14, 2003 (included as exhibit 10.4 to the Form 8-K filed February
      24, 2003, and incorporated herein by reference).





-25-














10.5
      Debenture Exchange Agreement between the Company and Dutchess Private Equities
      Fund, LP, dated February 14, 2003 (included as exhibit 10.5 to the Form 8-K
      filed February 24, 2003, and incorporated herein by reference).





10.6
      Addendum to the Subscription Agreement, dated July 21, 2003 (included as Exhibit
      10.1 to the Form 8-K filed July 22, 2003, and incorporated herein by
      reference).





10.7
      Amended Debenture between the Company and Dutchess Private Equities Fund, LP,
      dated February 14, 2003 (included as Exhibit 10.2 to the Form 8-K filed July
      22,
      2003, and incorporated herein by reference).





10.8
      Memorandum of Understanding between the Company and Malsha Imports, Inc., dated
      February 28, 2003 (included as Exhibit 10.11 to the Form SB-2/A filed September
      15, 2003, and incorporated herein by reference).





10.9
      Confidentiality and No Conflict Agreement between the Company and American
      Connections, LLC, dated February 28, 2003 (included as Exhibit 10.12 to the
      Form
      SB-2/A filed September 15, 2003, and incorporated herein by
      reference).





10.10
      Authorized Subcontractor Agreement between the Company and American Connections,
      LLC, dated February 28, 2003 (included as Exhibit 10.13 to the Form SB-2/A
      filed
      September 15, 2003, and incorporated herein by reference).





10.11
      Lease Agreement between the Company and American Connections Florida, LLC,
      dated
      May 22, 2003 (included as Exhibit 10.14 to the Form SB-2/A filed September
      15,
      2003, and incorporated herein by reference).





10.12
      Investment Agreement between the Company and Dutchess Private Equities Fund,
      LP,
      dated January 9, 2004 (included as exhibit 10.15 to the Form SB-2 filed January
      28, 2004, and incorporated herein by reference).





10.13
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, LP, dated January 9, 2004 (included as Exhibit 10.16 to the Form SB-2
      filed January 28, 2004, and incorporated herein by reference).





10.14
      Placement Agent Agreement between the Company, Dutchess Private Equities Fund,
      LP, and Charleston Capital Securities, dated January 9, 2004 (included as
      Exhibit 10.17 to the Form SB-2 filed January 28, 2004, and incorporated herein
      by reference).





10.15
      Consulting Agreement between the Company and W. Scott McBride, dated January
      15,
      2004 (included as exhibit 99.1 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





-26-














10.16
      Corporate Consulting Agreement between the Company and Theodore J. Smith, Jr.,
      dated January 28, 2004 (included as exhibit 99.2 to the Form S-8 filed February
      3, 2004, and incorporated herein by reference).





10.17
      Consulting Agreement between the Company and Mike DeGirolamo, dated January
      5,
      2004 (included as exhibit 99.3 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





10.18
      Consulting Agreement between the Company and Jeff Teischer, dated January 5,
      2004 (included as exhibit 99.4 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





10.19
      Consulting Agreement between the Company and David Taylor, dated December 12,
      2003 (included as exhibit 99.5 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





10.20
      Consulting Agreement between the Company and Pablo Oliva, dated November 12,
      2003 (included as exhibit 99.6 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





10.21
      Consulting Agreement between the Company and Tommy Hollman, dated January 27,
      2004 (included as exhibit 99.7 to the Form S-8 filed February 3, 2004, and
      incorporated herein by reference).





10.22
      Compensation Agreement between the Company, W. Scott McBride, David Rasmussen,
      James H. Gilligan, and Scott Gallagher, dated January 29, 2004 (included as
      exhibit 99.8 to the Form S-8 filed February 3, 2004, and incorporated herein
      by
      reference).





10.23
      Lease Agreement between the Company and Investments Limited, dated August 25,
      2004 (included as exhibit 10.1 to the Form 8-K filed September 9, 2004, and
      incorporated herein by reference).





10.24
      Consulting Agreement between the Company and Pablo Oliva, dated October 26,
      2004
      (included as exhibit 99.1 to the Form S-8 filed January 11, 2005, and
      incorporated herein by reference).





10.25
      Corporate Consulting Agreement between the Company and Theodore J. Smith, Jr.,
      October 26, 2004 (included as exhibit 99.2 to the Form S-8 filed January 11,
      2005, and incorporated herein by reference).





10.26
      Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
      March 24, 2005, and incorporated herein by reference).





10.27
      Promissory Note between the Company and Alpha Capital Aktiengesellschaft
      (included as Exhibit 10.1 to the Form 8-K filed January 5,2006, and incorporated
      herein by reference).





10.28
      Subscription Agreement between the Company and certain subscribers, dated
      December 29, 2005 (included as Exhibit 10.2 to the Form 8-K filed January 5,
      2006, and incorporated herein by reference).





-27-














10.29
      Guaranty Agreement between the Company and certain lenders, dated December
      29,
      2005 (included as Exhibit 10.3 to the Form 8-K filed January 5, 2006, and
      incorporated herein by reference).





10.30
      Security Agreement between the Company and certain lenders, dated December
      29,
      2005 (included as Exhibit 10.4 to the Form 8-K filed January 5, 2006, and
      incorporated herein by reference).





10.31
      Security and Pledge Agreement between the Company and certain lenders, dated
      December 29, 2005 (included as Exhibit 10.5 to the Form 8-K filed January 5,
      2006, and incorporated herein by reference).





10.32
      Collateral Agent Agreement between the Company and certain lenders (included
      as
      Exhibit 10.6 to the Form 8-K filed January 5, 2006, and incorporated herein
      by
      reference).





10.33
      Promissory Note between the Company and Richard E. Miller, dated January 3,
      2006
      (included as Exhibit 10.1 to the Form 8-K filed January 9, 2006, and
      incorporated herein by reference).





10.34
      Stock Purchase Agreement between the Company and Richard E. Miller, dated
      January 3, 2006 (included as Exhibit 10.2 to the Form 8-K filed January 9,
      2006,
      and incorporated herein by reference).





10.35
      Stock Escrow Agreement between the Company, Richard E. Miller, and Lambert
&
Martineau, attorneys at law, dated January 3, 2006 (included as Exhibit 10.3
      to
      the Form 8-K filed January 9, 2006, and incorporated herein by
      reference).





14.1
      Corporate Code of Conduct and Ethics (filed as exhibit 14.1 to the Form 10-KSB
      filed April 14, 2004, and incorporated herein by reference).





21.1
      Subsidiaries of the Registrant (filed as exhibit 21.1 to the Form 10-QSB filed
      November 14, 2005, and incorporated herein by reference).





31.1
      Certification of the Chief Executive Officer and Interim Chief Financial Officer
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1
      Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES.





AUDIT
      FEES





During
      2004 we paid Withum, Smith & Brown $53,000 in audit related
      fees’





For
      their
      audit of our annual financial statements and for their review of our Quarterly
      Reports on Form 10-QSB, R.E. Bassie and Co. entered into an annual agreement
      whereby we pay a fixed annual rate of $45,000 for substantially all of our
      annual SEC related accounting fees during 2005. For the year ending December
      31,
      2005 we paid approximately $7,500 to Withum Smith + Brown, P.C. in fees related
      to our first two quarterly 10-QSB filings.


-28-











AUDIT-RELATED
      FEES





None.





TAX
      FEES





For
      their
      review of tax matters, Gibson & Mayer, P.C. billed us a total of $1,250 in
      the fiscal year ended December 31, 2005. During 2004, we paid our principal
      accountant $0 related to tax.





**The
      Board of Directors Pre-Approval Policy and Procedures**





We
      do not
      have a separate Audit Committee. Our full Board of Directors performs the
      functions of an Audit Committee. During fiscal year 2005, the Board of Directors
      adopted policies and procedures for the pre-approval of audit and non-audit
      services for the purpose of maintaining the independence of our independent
      auditors. We may not engage our independent auditors to render any audit or
      non-audit service unless either the service is approved in advance by the Board
      of Directors or the engagement to render the service is entered into pursuant
      to
      the Board of Director's pre-approval policies and procedures. On an annual
      basis, the Board of Directors may pre-approve services that are expected to
      be
      provided to us by the independent auditors during the following 12 months.
      At
      the time such pre-approval is granted, the Board of Directors must (1) identify
      the particular pre-approved services in a sufficient level of detail so that
      management will not be called upon to make judgment as to whether a proposed
      service fits within the pre-approved services and (2) establish a monetary
      limit
      with respect to each particular pre-approved service, which limit


may
      not
      be exceeded without obtaining further pre-approval under the
      policy.





The
      Board
      has considered whether the provision of the services described above under
      the
      caption "All Other Fees" is compatible with maintaining the auditor's
      independence.





SIGNATURES





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


FTS
                GROUP, INC.By:
            /s/ Scott
                GallagherScott
                Gallagher, Chairman of the Board,
              Chief
                Executive Officer and PresidentDate:
                April 26, 2007




By:
            /s/ David
                R. RasmussenDavid
                R. Rasmussen, Chief Operating Officer and DirectorDate:
                April 26, 2007