**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**




(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,
                2006.




 ̈
            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. མ




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
མ




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. མ




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




State
      issuer’s revenues for its most recent fiscal year: $6,678,076.




The
      aggregate market value of the 3,456,402 shares of common stock held by
      non-affiliates of the issuer as of February 15, 2007 was $114,061 based upon
      the
      sale price of the common stock of $0.036 per share on February 15,
      2007.





State
      the
      number of shares outstanding of each of the registrant’s classes of common stock
      as of December 31, 2006: 137,650,469




Documents
      incorporated by reference: None.




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









**FTS
      GROUP, INC.**


**FORM
      10-KSB**





**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 AND CORPORATE
                GOVERNANCE; 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, AND DIRECTOR
                INDEPENDENCE.
            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 in our “Risk Factor” section, elsewhere in this report
      and in our SEC filings from time to time. 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.








**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. On January 3, 2006, we acquired See
      World Satellites, Inc., a regional service provider for Dish Networks, Inc.,
      as
      a wholly-owned subsidiary.




**BUSINESS**





Our
      business model is to develop, invest in and acquire cash-flow positive
      businesses and viable business projects, primarily in the Wireless, Internet
      and
      Technology Industries for the benefit of our Company and our stockholders.
      Since
      changing our management and business model in 2002 from a pure apparel company
      we have acquired a profitable business with significant cash-flow relative
      to
      our size in See World Satellites, Inc. Additionally since 2003 we have acquired
      and developed a retail wireless business based in the Gulf Coast market of
      Florida through our wholly-owned subsidiary FTS Wireless, Inc.





Through
      our wholly-owned subsidiaries, See World Satellites, Inc. and FTS Wireless,
      Inc., we have created a diversified wireless distribution business. Our
      subsidiary, FTS Wireless, Inc., distributes wireless communications products
      such as cell phones, PDAs and related communication devices and accessories
      through our chain of retail locations to customers in the Gulf Coast region
      of
      Florida and nationally over the Internet. Our subsidiary See World Satellites,
      Inc. is a Regional Service Provider, or RSP, and retail distributor of satellite
      television systems and services for DISH Networks. On the RSP side of our
      business we install satellite television systems sold by DISH networks and
      are
      paid a commission for each installation completed. On the retail side of our
      business we market, sell and install satellite systems for DISH Networks through
      our retail location in Indiana, Pennsylvania.





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 2006 by the
      Cellular Telecommunications & Internet Association, or CTIA, 2006 was a very
      strong year for the industry as U.S. wireless users grew 25 million to 219
      million. This increase comes after the record growth posted during the same
      period of 2005 when wireless users grew by 25.7 million to 194.5 million
      subscribers. In addition, the 2006 semi-annual survey found that wireless
      carriers reported a 72% jump in year over year text messaging for the month
      of
      June. Carriers reported delivering 12.5 billion text messages in the month
      of
      June 2006 versus 7.3 billion for June of 2005. Also noted in the survey was
      the
      increase in wireless minutes used. Wireless customers used more than 850 billion
      minutes during the first half of 2006, up 27% over the first half of 2005,
      the
      survey reported.





On
      the
      satellite side of our business, the overall industry had a very strong year.
      In
      its quarterly report for the third quarter of the 2006 fiscal year, our primary
      satellite television vendor DISH Networks reported more than 12.7 million
      subscribers as of September 30, 2006 for an 8.9% year over year increase from
      11.7 million subscribers as of September 30, 2005. DISH later reported that
      its
      subscriber base as of the end of 2006 surpassed 13 million.





The
      market for both our retail wireless business and satellite installation business
      remains very strong as evidenced by the key metrics identified above. Both
      of
      our operating subsidiaries consistently rank as one of the top 3 operators
      in
      their respective markets. FTS Wireless is consistently ranked in the top 3
      dealers for Metro PCS in the Tampa market and top 10 overall in the Gulf Coast
      market. Metro PCS is a regional wireless carrier with more than 2 million
      subscribers. See World Satellites, Inc. has been consistently ranked as the
      top
      RSP in terms of installation percentage by DISH Networks versus 21 to 23 total
      RSP’s in the nation. Over the last five years, DISH Networks is the fastest
      growing US satellite television provider. We believe by effectively operating
      our business at high level in our key markets both vendors will offer us
      additional growth opportunities at some point in the future.





**STRATEGIC
      PARTNERS**





METRO
      PCS





Since
      October of 2005, Metro PCS has become the leading vendor for FTS Wireless,
      Inc.
      accounting for 90% of all wireless handset sales completed during 2006. 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,
      Orlando, Atlanta and Sacramento. We have secured additional licenses for Los
      Angeles, New York, Philadelphia and other key markets around the US. 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 a Mobile Virtual
      Network Operator, or MVNO. Since Metro PCS owns its network it has the ability
      to offer its customers superior rate plans in its local market. Metro PCS
      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.





ECHOSTAR/DISH
      NETWORKS





DISH
      Networks is owned by EchoStar Communications, Inc. and is the primary vendor
      for
      our subsidiary See World Satellites, Inc. DISH Networks has more than 13 million
      subscribers and states that it is the fastest growing pay television provider
      since 2000 having added more than 7.74 million net new subscribers over the
      past
      six years. In June 2006 our subsidiary See World Satellites, Inc signed a new
      five year agreement to continue providing RSP-related services in the western
      Pennsylvania market. See World also markets, sells and installs DISH systems
      and
      services to retail customers in the western Pennsylvania market.





**COMPETITION**





Both
      of
      our wholly-owned subsidiaries operate in a highly competitive environment.
      FTS
      Wireless principally competes with other independent retailers and privately
      held chains that offer a broad range of products, and carrier owned and operated
      stores with more name recognition and brand identity than it has. We believe
      that success in the industry is based on maintenance of product quality and
      inventory management, competitive pricing, delivery efficiency, customer service
      and satisfaction levels, maintenance of satisfactory vendor relationships,
      the
      ability to anticipate industry changes and changes in customer
      preferences.





The
      See
      World Satellites RSP side of our business operates in a less competitive
      environment due to the RSP relationship with DISH Networks. Since we perform
      installation and fulfillment functions for DISH, we are not as dependent on
      conducting our own marketing and advertising programs and generating business.
      However, on the retail side of our business, the environment is much more
      competitive because we must compete with other local and national retailers
      as
      well as marketers of Direct TV satellite services and the cable
      companies.





**CARRIERS
      CORPORATE OWNED STORES**





We
      compete against stores owned by wireless carriers and large national retailers
      that promote both wireless communication products as well as satellite
      television products including:





-
      Sprint/NEXTEL;


-
      Cingular;


-
      T-Mobile;


-
      Verizon
      Wireless and


-
      Metro
      PCS.








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 small 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**





FTS
      Wireless competes with a variety of smaller independent retailers. Our main
      competitors in the Gulf Coast market are:





-
      Wireless Toyz, which operates approximately 53 stores in the state of Florida
      and promotes several brands of wireless products.





-
      The
      Mobile Zone, which operates approximately 17 stores in the state of Florida
      and
      promotes several brands of wireless products and services.





-
      PCS
      Partners which operates approximately 21 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**





Our
      wireless retail business depends 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 and mailers. 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 $15,000 and $25,000 per
      month
      on advertising depending on the placement of our ads and the time of year.
      During times of increased advertising, we spend approximately $20,000 to $35,000
      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.








**SUPPLIERS**





FTS
      Wireless, Inc. purchases Metro PCS wireless handsets from Bright Point. Bright
      Point is one of the largest handset distributors in the U.S. See World
      Satellites purchases satellite equipment directly from EchoStar. We also
      purchase related installation supplies from a variety of small manufacturers.
      We
      purchase the majority of our wireless accessories from Mega Cell, Inc. based
      out
      of Miami, Florida. For certain specialized products, we will purchase from
      other
      suppliers based on supply and demand.





**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 and Harvard University.
      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, a Romania-based mobile
      game
      developer of 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 Maxim’s portfolio
      of mobile games. Maxim will also develop a proprietary wireless content software
      product for us to be implemented on our web site www.CellChannel.com .





In
      December 2006, we acquired a 25% stake in an Internet Media venture, Elysium
      Internet. Elysium Internet is a development stage emerging direct navigation
      Internet advertising, marketing and media venture. Elysium sells targeted
      advertising to business customers through its network of direct navigation
      webs
      sites and portals. Our total investment into Elysium Internet as of December
      30,
      2006 was $92,505.





**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.







**EMPLOYEES**




As
      of
      December 31, 2006, we had forty nine full-time employees and three part time
      employees working under our two wholly-owned subsidiaries. FTS Group employs
      three individuals at the corporate level, our Chairman, Chief Executive Officer
      and Interim Chief Financial Officer, Scott Gallagher and our Chief Operating
      Officer, Dave Rasmussen and a part-time HR/Sales and marketing
      employee.




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, 2007, we have seven leases for FTS Wireless retail stores and our
      FTS
      Group corporate facilities in Tampa, Florida. We have one lease for our See
      World Satellites satellite installation business in Indiana, Pennsylvania.
      Our
      retail stores for FTS Wireless 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.
      Our
      location in Indiana, Pennsylvania for See World Satellites, Inc. is
      approximately 5,000 square feet. The minimum aggregate monthly rental commitment
      for the retail stores is $12,582. 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.**





On
      October 20, 2006 we held our 2006 annual meeting. At the meeting two proposals
      were passed by our shareholders. Our shareholders re-elected our two directors
      Scott Gallagher and David Rasmussen. Our shareholders also approved an increase
      in the amount of authorized shares from 150,000,000 to 855,000,000. The results
      were as follows:





1.
      Election of Directors:


FOR    AGAINST  ABSTAIN


SCOTT
      GALLAGHER   76,600,556    0    140,000


DAVID
      R.
      RASMUSSEN   76,565,556   0    175,000





2.
      Proposal to increase the Company's authorized shares of common stock from 150
      million shares to 855 million shares.





FOR 74,815,571


AGAINST  1,918,985


ABSTAIN    6,200




**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 our common stock 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.








Year
                Ended
            
            High
            
            Low2005March
                31
            
            $0.23
            
            $0.10June
                30
            
            $
            0.13
            
            $
            0.075September
                30
            
            $
            0.095
            
            $
            0.046December
                31
            
            $
            0.05
            
            $
            0.0212006March
                31
            
            $
            0.065
            
            $
            0.035June
                30
            
            $
            0.13
            
            $
            0.075September
                30
            
            $
            0.075
            
            $
            0.045December
                31
            
            $
            0.07
            
            $
            0.0492007March
                31*
            
            $
            0.055
            
            $
            0.021





*
      Through
      March 31, 2007.





**HOLDERS
      OF RECORD**





We
      had
      approximately 2,557 holders of record of our common stock as of March 1,
      2007.





**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 $0.25 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 expect to retain our future earnings, if any, to invest in our Company.
      We do
      not anticipate any cash dividends being paid out in the foreseeable
      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**





During
      the three months ended June 30, 2006, we agreed to issue 11,458,338 restricted
      common shares relating to warrants priced at $0.0239 that were exercised by
      four
      accredited investors for total proceeds of $273,854.28.


At
      September 30, 2006, we issued 1,185,350 restricted shares due to one of the
      investors as that investor’s shares remained unissued. 11,458,338 new warrants
      were issued to the investors under the same terms other than the exercise price
      which was increased to $0.04.





On
      October 6, 2006 we issued 250,000 restricted shares to Alpha Capital as an
      inducement to enter into a short term loan in the amount of
      $75,000.





On
      November 8, 2006, we issued 788,000 shares at $0.04 per share to an investor
      for
      proceeds of $32,179.








The
      securities issued in the foregoing transactions were made in reliance upon
      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, as defined in Rule
      502;





-  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).





**COMMON
      STOCK**





Holders
      of shares of common stock are entitled to one vote for each share on all matters
      to be voted on by the stockholders. Holders of common stock do not have
      cumulative voting rights. Holders of common stock have no preemptive rights
      to
      purchase our common stock. There are no conversion or redemption rights or
      sinking fund provisions with respect to the common stock. Holders of common
      stock are entitled to share ratably in dividends, if any, as may be declared
      from time to time by the our Board of Directors in our discretion from funds
      legally available therefore, subject to the rights of Preferred stockholders.
      Please refer to our discussion below under "Preferred Stock." In the event
      of a
      liquidation, dissolution or winding up, the holders of common stock are entitled
      to share pro rata all assets remaining after payment in full of all liabilities,
      subject to the rights of Preferred Stockholders.





**PREFERRED
      STOCK**





Our
      Articles of Incorporation, as amended, vests our Board of Directors with
      authority to divide our Preferred Stock into series and to fix and determine
      the
      relative rights and preferences of the shares of any such series so established
      to the full extent permitted by the laws of the State of Nevada and the Articles
      of Incorporation in respect to, among other things, (i)the number of shares
      to
      constitute such series and the distinctive designations thereof; (ii) the rate
      and preference of dividends, if any, the time of payment of dividends, whether
      dividends are cumulative and the date from which any dividend shall accrue;
      (iii)whether Preferred Stock may be redeemed and, if so, the redemption price
      and the terms and conditions of redemption;(iv)the liquidation preferences
      payable on Preferred Stock in the event of involuntary or voluntary liquidation;
      (v) sinking fund or other provisions, if any, for redemption or purchase of
      Preferred Stock; (vi)the terms and conditions by which Preferred Stock may
      be
      converted, if the preferred stock of any series are issued with the privilege
      of
      conversion; and (vii) voting rights, if any. A total of 150,000 shares were
      designated Series A Preferred Stock, however, none are currently outstanding.
      All Series A shares have an issue price and preference on liquidation equal
      to
      $1.00 per share. The Series A Preferred Shares accrue dividends at the rate
      of
      10% per annum during the first two years following issuance, which dividend
      is
      payable in cash and is cumulative. During the third through fifth year in which
      the Series A Preferred Shares are outstanding, the holders are entitled to
      3.75%
      of our net profits, also payable in cash. We may redeem this Preferred Stock
      at
      any time following notice to the holder for an amount equal to the issue price,
      plus any accrued but unpaid dividends.





The
      Series A Preferred shares are convertible into shares of our common stock at
      the
      option of the holder on a one-for-one basis at any time up to the fifth
      anniversary of the issuance. On the fifth anniversary, the Series A Preferred
      shares automatically convert into shares of our common stock. The conversion
      rate is subject to adjustment in certain events, including stock splits and
      dividends. Holders of our Preferred Stock are entitled to one vote for each
      share held of record. Holders of the Preferred Stock vote with holders of the
      common stock as one class.





In
      April
      2006, a total of 1,000,000 shares were designated Series B Preferred Stock
      and
      all 1,000,000 shares are outstanding. Upon liquidation, voluntary or otherwise,
      dissolution or winding up, holders of Series B Convertible Preferred Stock
      will
      receive their prorate share of the total value of our assets and funds to be
      distributed, assuming the conversion of Series B Convertible Preferred Stock
      to
      common stock. The holders of shares of Series B Convertible Preferred Stock
      shall not be entitled to receive dividends and shall have no voting rights.
      After June 1, 2006, the shares of Series B Convertible Preferred Stock shall
      be
      redeemable at $2.00 per share solely at our option.





Any
      shares of Series B Convertible Preferred Stock may, at any time after January
      3,
      2008, at our option or the option of the holder, be converted into fully paid
      and nonassessable shares of common stock. The number of shares of common stock
      to which a holder of Series B Convertible Preferred Stock shall be entitled
      upon
      a conversion shall be the product obtained by multiplying the number the number
      of shares of Series B Convertible Preferred Stock being converted by
      25.




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





The
      following discussion and analysis should be read in conjunction with the
      consolidated financial statements and notes thereto, and other financial
      information included elsewhere in this Form 10-KSB. This report contains
      forward-looking statements that involve risks and uncertainties. Actual results
      in future periods may differ materially from those expressed or implied in
      such
      forward-looking statements as a result of a number of factors, including, but
      not limited to, the risks discussed under the heading "Risk Factors" and
      elsewhere in this Form 10-KSB.





**OVERVIEW**





We
      own
      and operate two wholly-owned subsidiaries, FTS Wireless, Inc. and See World
      Satellites, Inc. FTS Wireless operates a retail wireless business in the Gulf
      Coast of Florida region. See World Satellites operates a satellite television
      business based out of Indiana, Pennsylvania. Although our business became
      profitable during 2006, as a result of our debt level and history of losses
      from
      operations, the independent registered public accountant that audited our
      financial statements for the year ended December 31, 2006 assessed that there
      was substantial doubt about our ability to continue as a going concern.








**RESULTS
      OF OPERATIONS**





**FULL
      YEAR PERIOD ENDED DECEMBER 31, 2006 AS COMPARED TO THE FULL YEAR**


**ENDED
      DECEMBER 31, 2005 RESULTS OF OPERATIONS**


**SEGMENT
      RESULTS FOR THE FULL YEARS ENDED DECEMBER 31, 2006**








Year
                Ended December 31, 2006FTS
            
            FTS
            
            SeeGroup
            
            Wireless
            
            WorldInc.
            
            
            Inc.
            
            
            Satellites
            
            
            TotalExternal
                Revenues
            
            $
            -
            
            $
            1,841,939
            
            $
            4,836,237
            
            $
            6,678,176Internal
                Revenues
            
            
            1,500,000
            
            
            
            
            
            
            
            
            1,500,000Segment
                Revenues
            
            
            1,500,000
            
            
            1,841,939
            
            
            4,836,237
            
            
            8,178,176Cost
                of Goods Sold
            
            
            -
            
            
            1,580,263
            
            
            788,968
            
            
            2,369,231Gross
                Profit
            
            
            1,500,000
            
            
            261,676
            
            
            4,047,269
            
            
            5,808,945Selling,
                General,and
                Administrative
            
            
            727,792
            
            
            752,485
            
            
            3,980,779
            
            
            5,461,056EBITDA
            
            
            772,208
            
            
            (490,809
            )
            
            66,490
            
            
            347,889Gain
                on change in fair value of derivative liabilities
            
            
            1,400,902
            
            
            -
            
            
            -
            
            
            1,400,902Depreciation
            
            
            (22,226
            )
            
            (40,857
            )
            
            (61,287
            )
            
            (124,370
            )Interest
            
            
            (388,611
            )
            
            (3,184
            )
            
            (1,159
            )
            
            (392,954
            )Net
                Income (Loss)
            
            
            1,762,273
            
            
            (534,850
            )
            
            4,044
            
            
            1,231,467Intersegment
                Adjustments
            
            
            (1,500,000
            )
            
            300,000
            
            
            1,200,000
            
            
            -$
            262,273
            
            $
            (234,850
            )
            $
            1,204,044
            
            $
            1,231,467








***SALES
      REVENUE***





**CONSOLIDATED**





Consolidated
      sales revenues for the year ended December 31, 2006 increased  $5,367,345,
      or  409.5%,  to
      $6,678,076, as compared to  $1,310,731
      for the year ended December 31, 2005. The increase in sales revenues was
      primarily related to the acquisition and development of new stores and opening
      of new retail outlets.





**FTS
      WIRELESS, INC.**





Sales
      revenue for the year ended December 31, 2006 increased $531,108 or 28.3% to
      $1,841,839 as compared to $1,310,731 for the year ended December 31, 2005.
      The
      increase in sales is primarily related to greater market acceptance of Metro
      PCS
      wireless phones and service and as a result of our expanded coverage to include
      the Orlando, Florida market as well as increased wireless accessory sales.
      During fiscal 2006 we generated 28% of our total sales from the operations
      of
      FTS Wireless, Inc.





**SEE
      WORLD SATELLITES, INC.**





Sales
      revenue for the year ended December 31, 2006 was $4,836,237. See World’s
      satellite television operations accounted for 72% of our total revenue during
      fiscal 2006. Our sales revenue for See World Satellites is primarily generated
      from the sales, service and installation of satellite television systems run
      by
      DISH Networks. Since See World was acquired in January of 2006 we do not have
      year over year comparisons.





***COST
      OF GOODS SOLD***





**CONSOLIDATED**





Consolidated
      Cost of Goods Sold totaled $2,369,231 for the year ended December 31, 2006.
      Since our largest subsidiary, See World Satellites generated 72% of our business
      and was acquired in January of 2006, we do not have accurate consolidated year
      over year results to be used for guidance. The segment results below discuss
      the
      year over year comparisons relating to businesses owned for more then twelve
      months as of December 31, 2006.





**FTS
      WIRELESS, INC.**





Cost
      of
      Goods Sold for the year ended December 31, 2006 increased $469,591 or 30% to
      $1,580,236 as compared to $1,110,645 for the year ended December 31, 2005.The
      increase in Cost of Goods Sold is primarily related to increased wireless
      handset sales as well as some one time charges during the year related to
      relocations as we restructured our retail operations.





**SEE
      WORLD SATELLITES, INC.**





Cost
      of
      Goods Sold for the year ended December 31, 2006 totaled $788,968. Our Cost
      of
      Goods Sold comes primarily from the purchase of satellite dishes and related
      installation products and materials. Since See World was acquired in January
      of
      2006 we do not have year over year comparisons.





***GROSS
      PROFITS***





**CONSOLIDATED**





Consolidated
      Gross Profits totaled $4,308,845 for the year ended December 31, 2006. Since
      our
      largest subsidiary, See World Satellites generated 72% of our business and
      was
      acquired in January of 2006, we do not have accurate consolidated year over
      year
      results to be used for guidance. The segment results below discuss the year
      over
      year comparisons relating to businesses owned for more then twelve months as
      of
      December 31, 2006.





**FTS
      WIRELESS, INC.**





Gross
      Profits for the year ended December 31, 2006 increased $61,490 or 32.7% to
      $261,576 as compared to $200,086 for the year ended December 31, 2005.The
      increase in Gross Profits was primarily due to improved operations efficiencies
      as well as a 28% increase in top line sales. During 2007, we believe we will
      continue to improve margins and sales resulting in continued increases in gross
      profits.





**SEE
      WORLD SATELLITES, INC.**





Gross
      Profits for the year ended December 31, 2006 totaled $4,047,269. Gross Profits
      were generated from our satellite business. Since See World was acquired in
      January of 2006 we do not have year over year comparisons. During 2007 we
      believe Gross Profits will improve due to our efforts to improve operating
      efficiencies. We also plan to expand our territory during 2007 resulting in
      increased sales and further increases in Gross Profits.





***SELLING,
      GENERAL AND ADMINISTRATIVE***





Selling,
      General and Administrative expense for the year ended December 31, 2006
      increased by $2,464,039  to
      $4,085,426 as compared to $1,767,563 for the year December 31, 2005. The
      increase in Selling, General and Administrative expenses was primarily related
      to the acquisition of See World Satellites, Inc. closed during 2006 and the
      viral growth of our subsidiary FTS Wireless, Inc.





**INTEREST
      EXPENSE**





Interest
      expense decreased to $392,954 for the year ended December 31, 2006 from $422,259
      for the year ended December 31, 2005. The decrease was due mainly to reduced
      borrowing via short term notes as part of the capital raised during the year
      ended December 31, 2006 versus 2005.





**INCOME**





We
      had
      net income of $1,231,367 for the fiscal year ended December 31, 2006, as
      compared to net loss of $3,627,067 for the fiscal year ended December 31, 2005.
      The increase in net income was primarily due to increased sales at FTS Wireless
      and improved overall operating conditions at FTS Wireless during the year ended
      December 31, 2006. The addition of the operations of See World Satellites,
      Inc.
      not included in the prior years’ operating results and an income benefit from
      the valuation of outstanding derivatives of $1,400,902 also contributed to
      the
      increase in net income.





As
      of
      December 31, 2006, we had an accumulated deficit of $10,704,226.





***LIQUIDITY
      AND CAPITAL RESOURCES***





As
      of
      December 31, 2006, total current assets decreased to $866,501 versus $1,323,143
      as of December 31, 2005. Current assets consisted of  $115,056
      of cash, $130,025 of accounts receivable, $373,734 of inventories and $247,686
      of prepaid expenses and current assets. Total assets increased to $6,719,323
      versus $1,974,495 as of December 31, 2005. Total assets consisted of $5,177,696
      of excess of cost over the net assets of business acquired, Unamortized discount
      on convertible debt of $232,925, Property and equipment, net of accumulated
      depreciation of $303,641, Deposits of $16,482 and unamortized debt issuance
      costs of $29,573





As
      of
      December 31, 2006, total current liabilities increased to $3,612,067 from
      $1,331,996 as of December 31, 2005. Current liabilities consisted of $1,820,215
      current portion of notes payable to related parties, net of discount, $1,238,321
      of convertible debentures-current portion, $548,707 of accounts payable and
      accrued expenses and $4,824 of current installment of long term debt-equipment
      loans.





We
      will
      require additional capital to support strategic acquisitions, reduce our debt
      and to facilitate our current expansion plans. We raised funds from
      institutional investors during 2006 through the issuance of equity securities
      and the issuance of warrants. Additionally, we raise funds through private
      placements of our equity securities that may involve dilution to our existing
      shareholders.




Our
      currently anticipated levels of revenues and cash flow are subject to many
      uncertainties beyond our control. Even though we have recently become
      profitable, our cash flow from operations is not adequate to satisfy our cash
      requirements related to our outstanding debt schedule and we believe we will
      be
      able to generate enough funds from the exercise of outstanding warrants to
      make
      our scheduled debt payments. However, we cannot guarantee the funds generated
      from warrants will be sufficient to meet our requirements. We will continue
      to
      seek alternative means for financing our debt repayments and control capital
      expenditures and/or postpone or eliminate certain investments or expenditures.





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.





***FINANCINGS***





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





On
      June
      15, 2004, we borrowed $61,200 from our Chief Financial Officer, Linda Ehlen.
      On
      September 25, 2004, we borrowed $133,800 from our Chairman and Chief Executive
      Officer, Scott Gallagher. The loans bear an interest rate of 8% per annum and
      were 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.
      These two notes received from related parties, Mr. Gallagher and Mrs. Ehlen
      required us to issue 932,000 shares of common stock comprised of 625,000
      restricted common shares to Mr. Gallagher and 307,000 restricted shares to
      Mrs.
      Ehlen, 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 our officers have been allocated as follows: $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 we recorded. This amount is being
      amortized over the life of the loans. For the year ended December 31, 2004,
      we
      have amortized $42,073 leaving an unamortized debt discount of $49,931 at
      December 31, 2004.





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








On
      March
      4, 2005, we closed a private placement and agreed to issue 14,493,750 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 Class A and Class
      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. We
      filed
      the terms and conditions of the financing and registration rights in March
      24,
      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 common stock relating to our 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 common stock were
      issued relating to our equity line of credit for proceeds of $270,994. Funds
      were used to repay outstanding notes.




We
      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 10, 2005 matured
      on
      August 10, 2005. The note bore interest at 12% per annum. The note carried
      certain restrictions relating to additional financing and registration rights
      to
      certain shares issued to Dutchess. As of May 5, 2005, the note and interest
      have
      been paid in full.




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




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 we 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, we 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.





During
      the three months ending March 31, 2006, we issued 2,250,000 restricted shares
      of
      common stock valued at $0.02 per share to one of our officers to reduce an
      outstanding debt obligation of $45,000.





During
      the three months ending March 31, 2006, we issued 2,500,000 restricted shares
      of
      common stock valued at $0.02 per share to one of our officers as a success
      bonus
      for 2005.





During
      the three months ending March 31, 2006, we issued 920,000 restricted shares
      of
      common stock valued at $0.02 per share to one of our consultants to reduce
      the
      $18,400 owed for consulting services relating to services rendered during
      2005.





During
      the three months ending March 31, 2006, we issued 1,000,000 shares of our Series
      B Convertible Preferred stock, valued at $1,000,000, to Mr. Richard Miller,
      the
      former owner and current President of See World Satellites, Inc. The conversion
      rate for the Series B stock is 25 shares of common stock for each share of
      Series B Convertible Preferred Stock. The shares of Series B Convertible
      Preferred Stock may be converted into common stock at any time after January
      3,
      2008, at our option or at the option of the holder. The Series B stock has
      no
      voting rights. Each share is worth $1.00.





During
      the three months ended June 30, 2006, we agreed to issue 11,458,338 restricted
      common shares relating to warrants with an excercise price of $0.0239 per share
      that were exercised by four accredited investors for total proceeds of
      $273,854.28. 11,458,338 new warrants were issued to the investors under the
      same
      terms other than the exercise price which was increased to $0.04.





During
      the three months ended September 30, 2006, relating to the exercise of warrants,
      we issued 5,600,000 shares of common stock at an exercise price of $0.045 for
      total proceeds of $252,000.





At
      September 30, 2006, 1,185,350 restricted shares due to one of the investors
      remained unissued.





On
      October 6, 2006 two investors exercised 1,750,000 warrants with an exercise
      price of $0.045 per share for proceeds of $78,750.





On
      October 6, 2006 we issued 250,000 shares as an inducement to enter into a short
      term loan in the amount of $75,000.





On
      October 16, 2006 two investors exercised 1,250,000 warrants with an exercise
      price of $0.045 per share for proceeds of $56,250.





On
      October 17, 2006 an investor exercised 312,500 warrants with an exercise price
      of $0.045 per share for proceeds of $14,062.50.





On
      November 8, 2006 we issued 788,000 shares for proceeds of
      $32,179.00.











**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.





·
            Estimating
                the fair value of our complex derivative financial instruments that
                are
                required to be carried as liabilities at fair value pursuant to Statements
                on Financial Accounting Standards No. 133*Accounting
                for Derivative Financial Instruments and Hedging Activities (FAS
                133)*




**DERIVATIVE
      FINANCIAL INSTRUMENTS**





We
      do not
      use derivative financial instruments to hedge exposures to cash-flow, market
      or
      foreign-currency risks. However, we frequently enter into certain other
      financial instruments and contracts, such as debt financing arrangements,
      preferred stock arrangements and freestanding warrants with features that are
      either (i) not afforded equity classification, (ii) embody risks not clearly
      and
      closely related to host contracts or (iii) may be net-cash settled by the
      counterparty to a financing transaction. As required by FAS 133, these
      instruments are required to be carried as derivative liabilities, at fair value,
      in our financial statements.





We
      estimate fair values of derivative financial instruments using various
      techniques, and combinations thereof, that are considered to be consistent
      with
      the objective measuring of fair values. In selecting the appropriate
      technique(s), we consider, among other factors, the nature of the instrument,
      the market risks that such instruments embody and the expected means of
      settlement. For less complex derivative instruments, such as free-standing
      warrants, we generally use the Black Scholes option valuation technique, since
      it embodies all of the requisite assumptions, including trading volatility,
      estimated terms and risk free rates, necessary to fair value these instruments.
      For complex derivative instruments, such as embedded conversion options, we
      generally use the Flexible Monte Carlo valuation technique since it embodies
      all
      of the requisite assumptions, including credit risk, interest-rate risk and
      exercise/conversion behaviors, that are necessary to fair value these more
      complex instruments. For forward contracts that contingently require net-cash
      settlement as the principal means of settlement, we project and discount future
      cash flows applying probability-weightage to multiple possible outcomes.
      Estimating fair values of derivative financial instruments requires the
      development of significant and subjective estimates that may, and are likely
      to,
      change over the duration of the instrument with related changes in internal
      and
      external market factors. In addition, option-based techniques are highly
      volatile and sensitive to changes in our trading market price which has
      high-historical volatility. Since derivative financial instruments are initially
      and subsequently carried at fair values, our income will reflect the volatility
      in these estimate and assumption changes.





**REVENUE
      RECOGNITION**




The
      Company's wholly-owned subsidiary, FTS Wireless, recognizes 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.





The
      Company's wholly-owned subsidiary, See World Satellites, Inc. recognizes revenue
      when it makes a sale within the store, completes a retail satellite receiver
      installation at the customer's home and the customer signs a contract, or
      completes a retail service provider satellite receiver installation at the
      customer's home and signs a contract.





Although
      the Company's post-paid activations both at wireless and the retail side of
      See
      World’s business are subject to possible charge-back of commissions if a
      customer deactivates service within the allowable 180-day period after signing
      the contract, they still recognize the activation in the period of the
      activation. The Company has 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 terms, 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.




**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 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 included in the results of operations. 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.





**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**





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, 2006.





**INVENTORIES**




Inventories
      are valued 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.





**WE
      HAVE A HISTORY OF GENERATING LOSES AND WE MAY NOT BE ABLE TO REMAIN
      PROFITABLE.**





We
      had an
      operating profit of $223,419 for the year ended December 31, 2006 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, 2006,
      reflect an operating profit of $223,419 and stockholders' equity of $1,654,217
      as of December 31, 2006. Based on our outstanding debt levels 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 855,000,000 shares of common
      stock. As of December 31, 2006 we have 137,650,469 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 UNITS AND HAVE BEEN SELLING
      WIRELESS**


**COMMUNICATIONS
      AND SATELLITE TELEVISION 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. At December 31, 2006 our wholly-owned subsidiary
      FTS
      Wireless generated approximately 28% of total revenue. The remaining 72% came
      from our wholly-owned subsidiary See World Satellites, Inc. acquired on January
      3, 2006.





**OUR
      OPERATING RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST AND WE
      BELIEVE**


**THEY
      WILL FLUCTUATE SIGNIFICANTLY FOR THE FORESEEABLE FUTURE. INVESTORS
      MAY**


**PREFER
      STABLE AND PREDICTABLE 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 and pay down our debt. 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
      REMAIN 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.





**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. During the past twelve months our share price has moved between
      $0.035 and $0.13, and the
      average daily trading volume has varied between 45 ,500
      shares per day and 5,589,500 shares per day.
      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.




**WE
      DEPEND ON THIRD PARTY VENDORS FOR 100% OF OUR BUSINESS AS WE DO NOT OWN
      ANY**


**WIRELESS
      NETWORKS OR MANUFACTURING CAPABILITIES. IF WE ARE NOT ABLE TO
      SECURE**


**COST-EFFECTIVE
      PRODUCTS WE MAY NOT BE ABLE TO REMAIN PROFITABLE OR SUSTAIN
      OUR**


**REVENUES
      AND MAY LOSE MONEY.**





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 REVENUE BASED ON AGREEMENTS WITH CELLULAR AND SATELLITE SERVICE PROVIDERS
      AND, IF THE CONTRACTS ARE CANCELED WE WOULD LOSE 100% OF THE REVENUE GENERATED
      FROM THESE ACTIVITIES.**





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.





**THE
      TELECOMMUNICATIONS INDUSTRY 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 A
      NETWORK**


**DISRUPTION
      OCCURS WE WOULD NO LONGER BE ABLE TO SELL THESE PRODUCTS AND
      WOULD**


**LOSE
      100% OF THE RELATED REVENUE GENERATED FROM THE SALE OF WIRELESS
      HANDSETS**


**WHILE
      THE NETWORK WAS DOWN.**





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.








**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, 2006 and 2005
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2006 and
                2005
            F-4Consolidated
                Statements of Cash Flows for the years ended December 31, 2006 and
                2005
            F-5Consolidated
                Statements of Stockholders’ Equity (Deficiency for the Years ended
                December 31, 2006 and 2005)
            F-6Notes
                to the Consolidated Financial Statements
            F-7

















**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 sheets of FTS Group, Inc. and
      subsidiaries as of December 31, 2006 and 2005, and the related consolidated
      statements of operations, stockholders' equity and cash flows for the two-year
      period ended December 31, 2006. These consolidated financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based on our
      audits.





We
      conducted our audits in accordance with 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. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. 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
      subsidiaries as of December 31, 2006 and 2005, and the results of their
      operations and their cash flows for two-year period ended December 31, 2006,
      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 4 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 4.  The consolidated financial statements do not include any
      adjustments that might result from the outcome of these
      uncertainties.




/s/
      Bassie & Co.


Houston,
      Texas


April
      11,
      2007











**FTS
      GROUP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2006 AND 2005**




Assets
            
            2006
            
            2005Current
                assets:Cash
                and cash equivalents
            
            $
            115,056
            $
            243,079Restricted
                cash
            
            
            
            -
            
            560,000Accounts
                receivable
            
            
            
            130,025
            
            12,201Inventories,
                net
            
            
            
            373,734
            
            33,180Prepaid
                expenses and current assets
            
            247,686
            
            474,683Total
                current assets
            
            
            866,501
            
            1,323,143Property
                and equipment, net of accumulated depreciation
            
            303,641
            
            208,210Unamortized
                discount on convertible debt
            
            232,925
            
            380,690Unamortized
                debt issuance costs
            
            
            29,573
            
            46,313Investments
            
            
            
            92,505
            
            -Excess
                of cost over the net assets of business acquired
            
            5,177,696
            
            -Deposits
            
            
            
            
            16,482
            
            16,139Total
                assets
            
            
            $
            6,719,323
            $
            1,974,495Liabilities
                and Stockholders' EquityCurrent
                liabilities:Accounts
                payable and accrued expenses
            $
            548,707
            $
            468,185Current
                portion of notes payable to related parties, net of
                discount
            
            1,820,215
            
            80,850Convertible
                debentures-current portion
            
            1,238,321
            
            782,961Current
                installments of long-term debt-equipment loans
            
            4,824
            
            -Total
                current liabilities
            
            
            3,612,067
            
            1,331,996Fair
                value of derivative liabilities
            
            
            453,039
            
            1,849,366Convertible
                debentures
            
            
            
            -
            
            430,088Long-term
                debt to related parties, less current installments
            
            1,000,000
            
            -Total
                liabilities
            
            
            
            5,065,106
            
            3,611,450Stockholders'
                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
            
            -
            
            -Convertible
                Preferred Stock, Series B, $0.01 par value:1,000,000
                Shares authorized, issued and outstanding at December 31 ,
                2006
            
            10,000
            
            -Common
                Stock, $.001 par value. Authorized 150,000,000 shares:137,650,469
                shares issued and outstanding at December 31, 2006,102,098,756
                shares issued and outstanding at December 31, 2005.
            
            137,650
            
            102,099Additional
                paid-in capital
            
            
            12,231,626
            
            10,196,539Accumulated
                deficit
            
            
            
            (10,704,226)
            
            (11,935,593)1,675,050
            
            (1,636,955)Commitments
                and contingent liabilities
            
            (20,833)
            
            -Total
                stockholders' equity
            
            1,654,217
            
            (1,636,955)Total
                liabilities and stockholders' equity
            $
            6,719,323
            $
            1,974,495





See
      accompanying notes to consolidated financial statements










**FTS
      GROUP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





2006
            
            2005REVENUESService
                Revenue-See World Satelltites, Inc.
            
            $
            4,836,237
            
            $
            -Product
                Retail Sales-FTS Wireless, Inc.
            
            
            1,841,839
            
            
            1,310,731**6,678,076**
            
            
            1,310,731COST
                OF GOODS SOLDService-See
                World Satelltites, Inc.
            
            
            788,968
            
            
            -Product-FTS
                Wireless, Inc.
            
            
            1,580,263
            
            
            1,110,645**2,369,231**
            
            
            1,110,645GROSS
                PROFITService-See
                World Satellites, Inc.
            
            
            4,047,269
            
            
            -Product-FTS
                Wireless, Inc.
            
            
            261,576
            
            
            200,086**4,308,845**
            
            
            200,086SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSESSelling,
                general and administrative expenses
            
            
            4,085,426
            
            
            1,767,5634,085,426
            
            
            1,767,563INCOME
                (LOSS) FROM OPERATIONS
            
            
            223,419
            
            
            (1,567,477
            )OTHER
                INCOME (EXPENSE)Change
                in fair value of Derivative Liabilities
            
            
            **1,400,902**
            
            
            (1,629,831
            )Unrealized
                loss on investments
            
            
            -
            
            
            (7,500
            )Interest
            
            
            **(392,954**
            **)**
            
            (422,259
            )1,007,948
            
            
            (2,059,590
            )NET
                INCOME (LOSS)
            
            **$**
            **1,231,367**
            
            **$**
            **(3,627,067**
            **)**PER
                SHARE INFORMATION:WEIGHTED
                AVERAGE SHARES OUTSTANDINGBasic
            
            
            124,851,085
            
            
            55,986,790DilutedNET
                LOSS PER COMMON SHARE:Basic
            
            $
            0.01
            
            $
            (0.04)Diluted





See
      accompanying notes to consolidated financial statements



















**FTS
      GROUP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIENCY**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


Preferred
            
            
            
            
            
            Common
            
            
            Additional
            
            
            
            
            
            
            
            
            TotalPreferred
            
            
            Stock
            
            
            Common
            
            
            Stock
            
            
            Paid-In
            
            
            Deferred
            
            
            Accululated
            
            
            Stockholders'Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Capital
            
            
            Compenasation
            
            
            Deficit
            
            
            EquityBeginning
                balance January 1, 2005
            
            
            -
            
            $
            -
            
            
            37,882,183
            
            $
            37,882
            
            $
            7,848,833
            
            $
            -
            
            $
            (8,308,526
            )
            $
            (421,811
            )Issuance
                of commonshares
                for cash
            
            
            -
            
            
            -
            
            
            13,461,300
            
            
            13,461
            
            
            868,837
            
            
            -
            
            
            -
            
            
            882,298Issuance
                of commonshares
                for services
            
            
            -
            
            
            -
            
            
            6,572,500
            
            
            6,573
            
            
            624,277
            
            
            -
            
            
            -
            
            
            630,850Conversion
                of debentures intoshares
                of common stock
            
            
            -
            
            
            -
            
            
            522,086
            
            
            522
            
            
            50,494
            
            
            -
            
            
            -
            
            
            51,016Issuance
                of common sharesthrough
                equity line
            
            
            -
            
            
            -
            
            
            8,140,263
            
            
            8,141
            
            
            451,513
            
            
            -
            
            
            -
            
            
            459,654Proceeds
                for stock and warrantsfrom
                subscription agreement
            
            
            -
            
            
            -
            
            
            35,520,424
            
            
            35,520
            
            
            352,585
            
            
            -
            
            
            -
            
            
            388,105Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (3,627,067
            )
            
            (3,627,067
            )Balance
                December 31, 2005
            
            
            -
            
            
            -
            
            
            102,098,756
            
            
            102,099
            
            
            10,196,539
            
            
            -
            
            
            (11,935,593
            )
            
            (1,636,955
            )Issuance
                of commonshares
                for cash
            
            
            -
            
            
            -
            
            
            26,603,651
            
            
            26,603
            
            
            858,726
            
            
            -
            
            
            -
            
            
            885,329Issuance
                of commonshares
                for services
            
            
            -
            
            
            -
            
            
            4,920,000
            
            
            4,920
            
            
            93,480
            
            
            -
            
            
            -
            
            
            98,400Issuance
                of preferred stockfor
                repayment of debt
            
            
            1,000,000
            
            
            10,000
            
            
            -
            
            
            -
            
            
            990,000
            
            
            -
            
            
            -
            
            
            1,000,000Issuance
                of common stockfor
                repayment of debt
            
            
            -
            
            
            -
            
            
            2,250,000
            
            
            2,250
            
            
            42,750
            
            
            -
            
            
            -
            
            
            45,000Issuance
                of common sharesthrough
                equity line
            
            
            -
            
            
            -
            
            
            788,000
            
            
            788
            
            
            32,322
            
            
            -
            
            
            -
            
            
            33,110Issuance
                of common sharesas
                loan inducements
            
            
            -
            
            
            -
            
            
            250,000
            
            
            250
            
            
            10,464
            
            
            -
            
            
            -
            
            
            10,714Proceeds
                for stock and warrantsfrom
                subscription agreement
            
            
            -
            
            
            -
            
            
            740,062
            
            
            740
            
            
            7,345
            
            
            -
            
            
            -
            
            
            8,085Deferred
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (30,000
            )
            
            -
            
            
            (30,000
            )Amortization
                ofdeferred
                compensation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            9,167
            
            
            -
            
            
            9,167Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,231,367
            
            
            1,231,367Balance
                December 31, 2006
            
            
            1,000,000
            
            $
            10,000
            
            
            137,650,469
            
            $
            137,650
            
            $
            12,231,626
            
            
            (20,833
            )
            $
            (10,704,226
            )
            $
            1,654,217








See
      accompanying notes to consolidated financial statements











**FTS
      GROUP, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


2006
            
            
            2005Cash
                flows from operating activities:Net
                income (loss)
            
            $
            1,231,367
            
            
            (3,627,067
            )Adjustments
                to reconcile net income to net cashused
                in operating activities:Depreciation
                and amortization
            
            
            399,592
            
            
            35,974Common
                shares issued for services
            
            
            68,400
            
            
            630,850Gain
                on equipment disposal
            
            
            (7,612
            )
            
            -Unrealized
                loss on investment in private entity
            
            
            -
            
            
            7,500Amortization
                of debt discount
            
            
            2,679
            
            
            180,893Change
                in fair value of derivative liabilities
            
            
            (1,400,902
            )
            
            1,629,831(Increase)
                decrease in operating assets:Accounts
                receivable
            
            
            (32,066
            )
            
            75,284Inventories
            
            
            (196,010
            )
            
            11,818Prepaid
                expenses
            
            
            268,303
            
            
            747Other
                assets
            
            
            (343
            )
            
            10,850Increase
                (decrease) in operating liabilities:Accounts
                payable and accrued expenses
            
            
            (25,809
            )
            
            322,011Net
                cash used in operating activities
            
            
            307,599
            
            
            (721,309
            )Cash
                flows from investing activities:Net
                assets 100% acquisition of See World Satellites, Inc.
            
            
            (206,100
            )
            
            -Capital
                expenditures for property and equipment
            
            
            (88,592
            )
            
            (119,629
            )Insurance
                proceeds involuntary conversion of assets
            
            
            12,855Proceeds
                from funding restricted for investment in acquisition
            
            
            (440,000
            )
            
            (560,000
            )Release
                of restriction on funding proceeds for investment in acquisition
            
            
            1,060,000Payment
                to See World Satellites, Inc. acquisition from escrowed amounts
            
            
            (1,000,000
            )Payments
                for investment in Elysium
            
            
            (92,505
            )Net
                cash used in investing activities
            
            
            (754,342
            )
            
            (679,629
            )Cash
                flows from financing activities:Proceeds
                from issuance of stock
            
            
            862,829
            
            
            882,298Proceeds
                from convertible debentures
            
            
            30,000
            
            
            -Proceeds
                from stock issued under equity line
            
            
            33,110
            
            
            1,263,000Proceeds
                from note payable to Dutchess Advisors
            
            
            -
            
            
            560,000Proceeds
                from notes payable related parties
            
            
            710,002
            
            
            84,000Repayments
                of notes payable-truck loans
            
            
            (15,823
            )
            
            -Repayments
                of note payable to Dutchess Advisors
            
            
            -
            
            
            (921,022
            )Repayments
                of debenture loan
            
            
            -
            
            
            (26,876
            )Repayments
                of notes payable to individuals
            
            
            -
            
            
            (37,250
            )Repayment
                of loans from related parties
            
            
            (1,301,398
            )
            
            (168,082
            )Net
                cash provided by financing activities
            
            
            318,720
            
            
            1,636,068Net
                decrease in cash
            
            
            (128,023
            )
            
            235,130Cash
                at beginning of year
            
            
            243,079
            
            
            7,949Cash
                at end of year
            
            $
            115,056
            
            
            243,079Supplemental
                schedule of cash flow information:Interest
                paid
            
            $
            10,770
            
            $
            93,133Supplemental
                disclosure of non-cash investing and financing activities:Stock
                issued in exchange for convertible debentures
            
            $
            8,085
            
            $
            51,016Stock
                issued as loan inducements
            
            $
            10,714
            
            $
            38,462Stock
                issued in payment of accounts payable and accrued expenses
            
            $
            -
            
            $
            77,365Acquisition
                of See World Satellites, Inc.Final
                negotiated purchase price of 100% of See World Satellites, Inc. stock
            
            $
            5,500,000Amount
                financed through formal promissory note to Richard Miller
            
            
            (3,500,000
            )Paid
                in preferred stock of FTS Group, Inc.
            
            
            (1,000,000
            )Cash
                down payment for See World Satellites, Inc.
            
            $
            1,000,000


See
      accompanying notes to consolidated financial statements











**FTS
      GROUP, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2006**





**(1)
      SUMMARY OF SIGINIFICANT ACCOUNTING POLICIES**




**ORGANIZATION,
      OWNERSHIP AND BUSINESS**





FTS
      Group, Inc. (the "Company"), is a holding company incorporated under the laws
      of
      the State of Nevada. The Company is focused on developing, acquiring and
      investing-in cash-flow positive businesses and viable business ventures
      primarily those in the Internet, Wireless and Technology industries. Through
      its
      two wholly-owned subsidiaries See World Satellites, Inc. and FTS Wireless,
      Inc.,
      the Company has acquired and developed a diversified wireless business engaged
      in the distribution of next generation wireless communications and entertainment
      products and services for businesses and consumers alike. The Company's
      wholly-owned subsidiary See World Satellites, Inc. is a leading distributor
      of
      satellite television systems and relating products and services for DISH
      Networks in the western Pennsylvania marketplace. The Company's wholly-owned
      subsidiary FTS Wireless, Inc. is an emerging retail wireless distributor
      operating in the gulf coast market of Florida.





**PRINCIPLES
      OF CONSOLIDATION**




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





**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.





**CASH
      AND CASH EQUIVALENTS**





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





**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.





**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 included in the results of operations. 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, 2006.





**REVENUE
      RECOGNITION**





The
      Company's wholly-owned subsidiary, FTS Wireless, recognizes 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.





The
      Company's wholly-owned subsidiary, See World Satellites, Inc. recognizes revenue
      when it makes a sale within the store, completes a retail satellite receiver
      installation at the customer's home and the customer signs a contract, or
      completes a retail service provider satellite receiver installation at the
      customer's home and signs a contract.





Although
      the Company's post-paid activations both at wireless and the retail side of
      See
      World’s business are subject to possible charge-back of commissions if a
      customer deactivates service within the allowable 180-day period after signing
      the contract, they still recognize the activation in the period of the
      activation. The Company has 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 terms, 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.





**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, 2006 and 2005, 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**





The
      cost
      of advertising is expensed as incurred. Advertising expense was $116,455 and
      $23,631 for the years ended December 31, 2006 and 2005
      respectively.





**STOCK-BASED
      COMPENSATION**





Effective
      the first quarter of fiscal 2006, the Company adopted SFAS 123(R) which
      establishes accounting for stock-based awards exchanged for employee services.
      Accordingly, stock-based compensation cost is measured at grant date, based
      on
      the fair value of the award, over the requisite service period. The Company
      previously applied APB 25 and related interpretations, as permitted by SFAS
      123.





**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.





·
            Estimating
                the fair value of our complex derivative financial instruments that
                are
                required to be carried as liabilities at fair value pursuant to Statements
                on Financial Accounting Standards No. 133*Accounting
                for Derivative Financial Instruments and Hedging Activities (FAS
                133)*




**FAIR
      VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS**





We
      do not
      use derivative financial instruments to hedge exposures to cash-flow, market
      or
      foreign-currency risks. However, we frequently enter into certain other
      financial instruments and contracts, such as debt financing arrangements,
      preferred stock arrangements and freestanding warrants with features that are
      either (i) not afforded equity classification, (ii) embody risks not clearly
      and
      closely related to host contracts or (iii) may be net-cash settled by the
      counterparty to a financing transaction. As required by FAS 133, these
      instruments are required to be carried as derivative liabilities, at fair value,
      in our financial statements.





We
      estimate fair values of derivative financial instruments using various
      techniques, and combinations thereof, that are considered to be consistent
      with
      the objective measuring of fair values. In selecting the appropriate
      technique(s), we consider, among other factors, the nature of the instrument,
      the market risks that such instruments embody and the expected means of
      settlement. For less complex derivative instruments, such as free-standing
      warrants, we generally use the Black Scholes option valuation technique, since
      it embodies all of the requisite assumptions, including trading volatility,
      estimated terms and risk free rates, necessary to fair value these instruments.
      For complex derivative instruments, such as embedded conversion options, we
      generally use the Flexible Monte Carlo valuation technique since it embodies
      all
      of the requisite assumptions, including credit risk, interest-rate risk and
      exercise/conversion behaviors, that are necessary to fair value these more
      complex instruments. For forward contracts that contingently require net-cash
      settlement as the principal means of settlement, we project and discount future
      cash flows applying probability-weightage to multiple possible outcomes.
      Estimating fair values of derivative financial instruments requires the
      development of significant and subjective estimates that may, and are likely
      to,
      change over the duration of the instrument with related changes in internal
      and
      external market factors. In addition, option-based techniques are highly
      volatile and sensitive to changes in our trading market price which has
      high-historical volatility. Since derivative financial instruments are initially
      and subsequently carried at fair values, our income will reflect the volatility
      in these estimate and assumption changes.





**NEW
      ACCOUNTING STANDARDS**





In
      May
      2005, the Financial Accounting Standards Board ("FASB") issued Statement of
      Financial Accounting Standards ("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. The Company adopted 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 this statement was 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.





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.





**(2)**  **RESTRICTED
      CASH**





At
      June
      30, 2006 Restricted Cash of $500,000 represented a short term note obligation
      due Richard Miller as part of the financing of the acquisition of See World
      Satellites, Inc. ("See World"). Per the purchase agreement, Mr. Miller was
      to
      receive $500,000 within 30 days of the ratification of new five year renewal
      contracts with Echo Star Satellites, LLC and DISH Network Services, LLC, both
      of
      which were signed in June 2006. The $500,000 payment was made to Mr. Miller
      during the third quarter 2006. Therefore, restricted cash is zero at December
      31, 2006.





At
      December 31, 2005 restricted Cash of $560,000 represents funds held in escrow
      by
      Grushko & Mittman to be utilized at the closing of acquisition of See World
      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 were contractually restricted to be remitted directly towards
      settlement of the acquisition January 3, 2006.





**** **(3)**  **PROPERTY
      AND EQUIPMENT**





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





December
                31Years
            
            
            2006
            
            
            2005Leasehold
                improvements
            
            
            5
            
            $
            259,878
            
            $
            180,937Furniture
                and fixtures
            
            
            5
            
            
            58,950
            
            
            54,208Equipment
            
            
            3-5
            
            
            344,305
            
            
            20,890Vehicles
            
            
            3
            
            
            11,927
            
            
            11,927Total
                property and equipment
            
            
            
            
            
            675,060
            
            
            267,962Less
                accumulated depreciation and amortization
            
            
            
            
            
            -371,419
            
            
            -59,752Net
                property and equipment
            
            
            
            
            $
            303,641
            
            $
            208,210





Depreciation
      expense for the years ended December 31, 2006 and 2005 was $ 124,370 and $35,974 respectively.





There
      was
      a significant increase in the Vehicles component of Property and Equipment
      in
      2006 from that reported for the comparable period in 2005. This increase
      resulted from acquiring a fleet of trucks in the acquisition of See World
      Satellites, Inc. The trucks are utilized for delivery of equipment and service
      related activities consistent with that of the Company's established business
      purpose.





**(4)**  **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.


**(5)**  **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 #1, 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 of the allocation is being reclassified
      to liability until the fourth quarter, 2006 at which time the shareholders
      approved an increase in authorized shares sufficient to cover the
      shortage.




**(6)**  **** **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.





Reconciliation
      of the Federal statutory income tax rate of 34% to the effective rate is as
      follows:




December
                312005
            
            2004Federal
                statutory income tax rate
            
            (659,000)
            
            (792,000)659,000
            
            
            792,000-
            
            
            
            
            
            -





The
      tax
      effects of temporary differences and net operating losses that give rise to
      significant portions of deferred tax assets and liabilities consisted of the
      following:










December
                31Reconciling
                items:
            
            2005
            
            2004Net
                operating loss carryforward:
            
            $3,244,000
            
            $2,585,000Less
                valuation allowance
            
            
            (3,244,000
            )
            
            (2,585,000
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -





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.





**(7)**  **OPERATING
      LEASES**




The
      Company leases real property for its retail locations. At December 31, 2006,
      there were seven actively operating retail locations. Four locations have lease
      terms ranging from six months to three years while three locations are on a
      month-to-month basis.




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


Year
            
            
            AnnualEnding
            
            
            Payments2007
            
            
            63,8902008
            
            
            30,000$
            93,890





Rent
      expense was $176,638 and $165,392 for the years ended December 31, 2006 and
      2005, respectively .





**(8)**  **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
      its
      telephone and satellite television supplies from two vendors. Additionally,
      these same two vendors are also major customers of the Company who provide
      over
      80% of revenue.





**(9)**  **STOCK**




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.





On
      January 17, 2005 the Company closed a private placement and agreed to issue
      14,493,750 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 Class
      A
      and Class 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 on March 24, 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, LP
      in
      the amount of $500,000 plus a $100,000 premium. The note, dated January 10,
      2005
      matured on August 10, 2005. The note bore interest at 12% per annum. The note
      carried certain restrictions relating to additional financing and registration
      rights to certain shares issued to Dutchess. As of May 5, 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
      January 15, 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 its 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.





During
      the three months ending March 31, 2006, the Company issued 1,500,000 restricted
      shares of common stock to an officer of the Company relating to a two year
      employment agreement dated February 1, 2006.





During
      the three months ending March 31, 2006, the Company issued 2,250,000 restricted
      shares of common stock valued at $0.02 per share to an officer of the Company
      to
      reduce an outstanding debt obligation of $45,000.





During
      the three months ending March 31, 2006, the Company issued 2,500,000 restricted
      shares of common stock valued at $0.02 per share to an officer of the Company
      as
      a success bonus for 2005.





During
      the three months ending March 31, 2006, the Company issued 920,000 restricted
      shares of common stock valued at $0.02 per share to a consultant of the Company
      to reduce the $18,400 owed for consulting services relating to services rendered
      during 2005.





During
      the three months ending March 31, 2006, the Company issued 1,000,000 shares
      of
      its Series B Convertible Preferred stock to Mr. Richard Miller, the former
      owner
      and current President of See World Satellites, Inc. The conversion rate for
      the
      Series B stock is 25 shares of common stock for each share of Series B
      Convertible Preferred Stock. The shares of Series B Convertible Preferred Stock
      may be converted into common stock at any time after January 3, 2008, at the
      option of the Company or that of the holder. The Series B stock has no voting
      rights. Each share is worth $1.00.





During
      the three months ended June 30, 2006, the Company agreed to issue 11,458,338
      restricted common shares relating to warrants priced at $0.0239 that were
      exercised by four accredited investors for total proceeds of $273,854.28.
      11,458,338 new warrants were issued to the investors under the same terms other
      than the strike price which was increased to $0.04.





During
      the three months ended September 30, 2006, relating to the exercise of warrants,
      the Company issued 5,600,000 shares at an exercise price of $0.045 per share
      for
      proceeds of $252,000.





At
      September 30, 2006, 1,185,350 restricted shares due to one of the investors
      included in the financing closed on December 29, 2005 remained unissued.





On
      October 6, 2006 two investors exercised warrants to purchase 1,750,000 shares
      of
      common stock at an exercise price of $0.045 per share for proceeds of
      $78,750.





On
      October 6, 2006 the Company issued 250,000 shares as an inducement to enter
      into
      a short term loan in the amount of $75,000.





On
      October 16, 2006 two investors exercised warrants to purchase 1,250,000 shares
      of common stock at an exercise price of $0.045 per share for proceeds of
      $56,250.





On
      October 16, 2006 an investor exercised warrants to purchase 1,562,500 shares
      of
      common stock at an exercise price of $0.045 per share for proceeds of
      $70.312.50.





On
      October 17, 2006 an investor exercised warrants to purchase 312,500 shares
      of
      common stock at an exercise price of $0.045 per share for proceeds of
      $14,062.50.





On
      November 8, 2006 the Company issued 788,000 shares to an investor at $0.04
      for
      proceeds of $32,179.





**COMMON
      STOCK**





Holders
      of shares of common stock are entitled to one vote for each share on all matters
      to be voted on by the stockholders. Holders of common stock do not have
      cumulative voting rights. Holders of common stock have no preemptive rights
      to
      purchase the Company’s common stock. There are no conversion or redemption
      rights or sinking fund provisions with respect to the common stock. Holders
      of
      common stock are entitled to share ratably in dividends, if any, as may be
      declared from time to time by the Company's Board of Directors in its discretion
      from funds legally available therefore, subject to the rights of Preferred
      stockholders. Please refer to the discussion below under "Preferred Stock."
      In
      the event of the Company's liquidation, dissolution or winding up, the holders
      of common stock are entitled to share pro rata all assets remaining after
      payment in full of all liabilities, subject to the rights of Preferred
      Stockholders.





**PREFERRED
      STOCK**





The
      Company's Articles of Incorporation, as amended, vest its Board of Directors
      with authority to divide its preferred stock into series and to fix and
      determine the relative rights and preferences of the shares of any such series
      so established to the full extent permitted by the laws of the State of Nevada
      and the Articles of Incorporation in respect to, among other things, (i)the
      number of shares to constitute such series and the distinctive designations
      thereof; (ii)the rate and preference of dividends, if any, the time of payment
      of dividends, whether dividends are cumulative and the date from which any
      dividend shall accrue; (iii) whether Preferred Stock may be redeemed and, if
      so,
      the redemption price and the terms and conditions of redemption; (iv) the
      liquidation preferences payable on Preferred Stock in the event of involuntary
      or voluntary liquidation; (v) sinking fund or other provisions, if any, for
      redemption or purchase of Preferred Stock; (vi) the terms and conditions by
      which Preferred Stock may be converted, if the preferred stock of any series
      are
      issued with the privilege of conversion; and (vii) voting rights, if any. A
      total of 150,000 shares were designated Series A Preferred Stock, however,
      none
      are outstanding. All Series A shares have an issue price and preference on
      liquidation equal to $1.00 per share. The Series A Preferred Shares accrue
      dividends at the rate of 10% per annum during the first two years following
      issuance, which dividend is payable in cash and is cumulative. During the third
      through fifth year in which the Series A Preferred Shares are outstanding,
      the
      holders are entitled to 3.75% of the Company's net profits, also payable in
      cash. The Company may redeem this preferred stock at any time following notice
      to the holder for an amount equal to the issue price, plus any accrued but
      unpaid dividends.





The
      Series A Preferred Shares are convertible into shares of the Company's common
      stock at the option of the holder on a one for one basis at any time up to
      the
      fifth anniversary of the issuance. On the fifth anniversary, the Series A
      Preferred Shares automatically convert into shares of the Company's common
      stock. The conversion rate is subject to adjustment in certain events, including
      stock splits and dividends. Holders of our Preferred Stock are entitled to
      one
      vote for each share held of record. Holders of the preferred stock vote with
      holders of the common stock as one class.





In
      April
      2006, a total of 1,000,000 shares were designated Series B Preferred Stock
      and
      all 1,000,000 shares are outstanding. Upon liquidation (voluntary or otherwise),
      dissolution or winding up of the Company, holders of Series B Convertible
      Preferred Stock will receive their prorate share of the total value of the
      assets and funds of the Company to be distributed, assuming the conversion
      of
      Series B Convertible Preferred Stock to Common Stock. The holders of shares
      of
      Series B Convertible Preferred Stock shall not be entitled to receive dividends
      and shall have no voting rights. After June 1, 2006, the shares of Series B
      Convertible Preferred Stock shall be redeemable at $2.00 per share solely at
      the
      Company's option.





Any
      shares of Series B Convertible Preferred Stock may, at any time after January
      3,
      2008, at the option of the holder or the Company, be converted into fully paid
      and nonassessable shares of common stock. The number of shares of common stock
      to which a holder of Series B Convertible Preferred Stock shall be entitled
      upon
      a conversion shall be the product obtained by multiplying the number the number
      of shares of Series B Convertible Preferred Stock being


converted
      by 25.





**(10)**  **OPTIONS
      AND WARRANTS**





**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 under the Plan is ten years. In accordance with SFAS 123R, the
      Company reviewed the provisions of the plan and its related outstanding options
      to comply with the required fair value analysis component to SFAS 123R that
      took
      effect January 1, 2006. During this analysis the Company determined that the
      598,000 options previously issued have expired and are no longer outstanding
      as
      of January 1, 2006 per plan provisions.





**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, Class A and
      Class B warrants, for each share of common stock purchased. The B warrants
      had
      an initial exercise price of $0.08 and A warrants had an initial exercise price
      of $0.12. The Company filed the terms and conditions of the financing and
      registration rights on March 24, 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.





2006
            
            2006Underlying
            
            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
            
            $
            0.045




On
      September 28, 2005, the Company reduced the exercise price of the A warrants
      from $0.12 to $0.10. Additionally, the Company reduced the exercise price of
      the
      B warrants from $0.08 to $0.03. On July 17, 2006 the Company lowered the
      exercise price on the "A" Warrants from $0.10 to $0.045.





During
      the three months ending March 31, 2006, 4,670,313 "B" warrants priced at $0.03
      were exercised for gross proceeds of $140,109. Expenses relating to warrant
      exercises were $14,048. Additionally, during the three months ended March 31,
      2006, 9,499,937 "B" warrants expired.





During
      the three months ending September 30, 2006, 5,600,000 "A" warrants priced at
      $0.045 were exercised for gross proceeds of $252,000.





During
      the three months ended December 31, 2006, 4,875,000 “A” warrants priced at
      $0.045 were exercised for gross proceeds of $219,375.





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 Class A and Class 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 $0.0239.





The
      Company filed the terms and conditions of the financing and registration rights
      in January 2006 on Form 8-K. The funds raised in the private placement were
      primarily used for the acquisition of the Company's 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 warrant portion of the allocation is being reclassified
      to liability until the fourth quarter, 2006 at which time the shareholders
      approved an increase in authorized shares sufficient to cover the
      shortage.





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 Class 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.





The
      warrants below, associated with the financing, are not exercisable until such
      time as the Company's pending SB-2 becomes effective.





The
      table
      below summarizes the A and B warrants outstanding as of December 31, 2006
      relating to the financing closed on December 29, 2005.





20052005


Underlying  Exercise


Shares  Price


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


Warrants
      issued in December 2005


A
      Warrants     36,260,486  $
      0.02868


B
      Warrants     6,671,905  $
      0.0239


New
      B
      Warrants     11,458,338  $
      0.04


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





During
      the year ended December 31, 2006, the Company agreed to issue 11,458,338
      restricted common shares relating to warrants priced at $0.0239 that were
      exercised by four accredited investors for total proceeds of $273,854.28.
      1,185,350 restricted shares due to one of the investors remained unissued.
      New
      warrants totaling 11,458,338 were issued to the investors under the same terms
      other than the strike price which was increased to $0.04.





**(11)**  **SEE
      WORLD SATELLITES, INC. ACQUISITION**





Effective
      January 3, 2006, the Company acquired 100% of the capital stock of See World
      Satellites, Inc. ("See World"), for consideration, providing for (i) $1,000,000
      in cash to the shareholder of See World, (ii) a promissory note in the amount
      of
      $3,500,000, and (iii) $1,000,000 in convertible preferred stock of the
      Company.





As
      required by SFAS No. 141, the Company has recorded the acquisition using the
      purchase method of accounting with the purchase price allocated to the acquired
      assets and liabilities based on their respective estimated fair values at the
      acquisition date. The purchase price of $5,500,000 had been allocated at
      follows:





Current
      assets      
      $185,850


Property
      and equipment, net      136,454


Goodwill         5,177,696


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





$5,500,000


==============





Goodwill
      recorded as a result of the acquisition is assignable to the See World
      Satellites, Inc. segment and is tax deductible over a period of fifteen years.
      Revenues and expenses are included in the Company's statement of operations
      from
      January 3, 2006 through December 31, 2006.





Unaudited
      pro forma data (included in the Company 8-K/A filing on March 3, 2006)
      summarizes the results of operations of the Company for the years ended December
      31, 2005 and 2004 as if the acquisition had been completed on January 1, 2004.
      The pro forma data gives effect to the actual operating results prior to
      acquisition. The pro forma results do not purport to be indicative of the
      results that would have actually been achieved if the acquisition had occurred
      on January 1, 2004 or may be achieved in the future.





SFAS
      141
      also requires in the year of the acquisition, proforma information displaying
      the results of operations for the current period as if the combination had
      been
      completed at the beginning of the period, unless the acquisition was at or
      near
      the beginning of the period. Since See World Satellites, Inc. was acquired
      on
      January 3, 2006, the first business day of the year, and the Company determined
      that transactions between January 1, 2006 through January 2, 2006 to be
      immaterial, proforma presentation is deemed unnecessary.





**(12)**  **RELATED
      PARTY TRANSACTIONS (SEE WORLD ACQUISITION)**





At
      September 30, 2006, the Company had the following debt obligations and made
      the
      following payments to Mr. Richard Miller, a director and President of the
      Company's wholly-owned subsidiary See World. The Company paid Mr. Miller
      $500,000 on January 3, 2006 relating to the acquisition of See World. The
      Company carried a short term note obligation in the amount of $500,000 due
      to
      Mr. Miller. This note was due within 30 days of the effective date of a new
      five
      year contract between Echo Star Satellites, L.L.C., DISH Network Services,
      L.L.C. and See World. During the twelve months ended December 31, 2006 the
      Company paid this note in full. Additionally, the Company issued 1,000,000
      shares of its Series B Convertible Preferred stock to Mr. Miller during the
      three months ended March 31, 2006. The conversion rate for the Series B stock
      is
      25 shares of common stock for each share of Series B Convertible Preferred
      Stock. The shares of Series B Convertible Preferred Stock may be converted
      into
      common stock at any time after January 3, 2008, at the Company's option or
      that
      of the holder. The Series B stock has no voting rights. Each share is worth
      $1.00. On April 3, 2006, the Company made a $250,000 payment to Mr. Miller
      reducing the outstanding note amount to $3.25 million as of June 30, 2006.
      On
      July 5, 2006, the Company made a $250,000 payment to Mr. Miller reducing the
      outstanding note amount to $3 million. In October 2006 the Company made a
      $250,000 payment to Mr. Miller reducing the outstanding note amount due to
      $2.75
      million as of November 15, 2006. The Company filed an 8-K with the terms and
      conditions of this note on January 5, 2006. Mr. Miller also extended a
      short-term note in the amount of $551,073 to the Company, of which $375,000
      was
      paid back January 13, 2006. During the three months ended September 30, 2006
      the
      Company repaid $58,691 of the outstanding note leaving an unpaid balance of
      $117,382 at September 30, 2006. Also during the period ended December 31, 2006
      the Company paid an additional $117,382 to Mr. Miller to extinguish an existing
      note due January 3, 2007.





**(13)**  **STOCK-BASED
      COMPENSATION**





The
      disclosures required by paragraph 84 of SFAS 123 (R) are stated below, although
      the Company had not granted any options since 2001 to September 30, 2006, and
      options to purchase 598,000 shares of the Company have not been
      exercised:





2006    
2005


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


Net
      Income (Loss) as reported            $1,261,645    $(3,627,067)





Basic
      and
      diluted earnings per share as reported          $
      .00    
      $(.04)





Share-based
      employee compensation cost net of related tax effects included


in
      net
      income as reported             -     
-





Share-based
      employee compensation cost, net of related tax effects that


would
      have been included in net income if the fair-value based method had


been
      applied to all awards             -      -





Pro-forma
      net income as if the fair-value method had been applied to all


awards                $1,261,645    
      $(3,627,067)





Pro-forma
      basic and diluted earrings per share as if the fair-value based


method
      had been applied to all awards           $.00     
$(.04)





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




At
      December 31, 2006 the Company had an outstanding note payable to the President
      of one of its wholly-owned subsidiaries in the amount of $2,750,000 relating
      to
      the acquisition of See World Satellites, Inc.





**(15)**  **EQUITY
      LINE OF CREDIT**




In
      2004,
      the Company entered into an equity line of credit with Dutchess Private Equities
      Fund. The agreement provided for a maximum of $6,000,000 with 15,000,000 shares
      of common stock registered and available to repay credit line advances. Shares
      were 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, 2006 the equity
      line
      of credit with Dutchess Private Equities Fund has been canceled.





**(16)**  **SUBSEQUENT
      EVENTS**





On
      January 3, 2005, the Company acquired See World Satellites, Inc., a Pennsylvania
      corporation. As part of the purchase price for See World, currently a
      wholly-owned subsidiary of the Company, the Company agreed to issue a promissory
      note in the amount of $3,500,000. On January 22, 2007, the Company assigned
      a
      $1,000,000 portion of this Note to four investors (the "Assignees"). The Company
      issued a Note to each Assignee with a combined principle amount of $1,000,000.
      The Notes bear interest at a rate of 20% which was paid in the form of an
      original issue discount to the Note. Payments are due to each Assignee in
      accordance with their pro rata share.





As
      consideration for the assignment, the Company agreed to issue 15,000,000 shares
      of common stock to be distributed pro rata among the Assignees of the Notes.
      The
      shares were issued in accordance with Rule 506 of Regulation D under the
      Securities Act of 1933 (as amended) in that:





-
      the
      sales were made to an accredited investor, as defined in Rule 501;





The
      Company filed a form 8-K regarding this transaction on January 26,
      2007.





On
      March
      12, 2007, the Company acquired a ring-tone network including 161 domain names
      and operating web sites for $17,000 in cash.





**(17)**  **** **RESTATEMENT**





The
      Company will restate 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-0019 requires the treatment of these warrants
      as derivative liabilities, with an adjustment at each reporting date to mark
      the
      liability to market.





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 stockholder’s 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
            
            $
            -
            
            $
            1,002,496
            
            $
            1,002,496Convertible
                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
            )
            $
            10,196,593Total
                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
            )











The
      Company will also restate its financial statements for the three interim
      quarters previously reported in 2006 to amend and restate the accounting for
      these warrants.





In
      addition, two reclassifications are required for previously reported activity.
      Firstly, the Company invested funds into Elysium Internet. This investment
      was
      initially treated as prepaid expense; however, a reclassification to Investment
      is appropriate in each of the first three quarters. Secondly, David Rasmussen
      was given 1,500,000 shares of Company Stock as part of his employment contract.
      The value of this stock was entered as a prepaid item, and is being amortized
      over the term of his employment contract. However, a reclassification to
      Deferred Compensation is appropriate for this item. These two items have balance
      sheet impact only.





The
      effect of the restatement on specific amounts provided in the consolidated
      financial statements is as follows:








**Restatement
                of previously Issued Quarterly Data (Unaudited)**Aspreviously
            
            
            Restatement
            
            
            Asreported
            
            
            adjustments
            
            
            restated**Three
                months ended March 31, 2006**Revenues
            
            
            1,633,614
            
            
            
            
            
            1,633,614Cost
                of Sales
            
            
            583,482
            
            
            
            
            
            583,482Selling,
                general, and administrative
            
            
            1,008,186
            
            
            
            
            
            1,008,186Total
                costs and expenses
            
            
            1,591,668
            
            
            0
            
            
            1,591,668Operating
                income (loss)
            
            
            41,946
            
            
            
            
            
            41,946Interest
                income (expense)
            
            
            (36,695
            )
            
            (2,334
            )
            
            (39,029
            )Change
                in fair value of derivative liabilities
            
            
            0
            
            
            (7,478,664
            )
            
            (7,478,664
            )Total
                other income (expenses)
            
            
            (36,695
            )
            
            (7,480,998
            )
            
            (7,517,693
            )Net
                income (loss)
            
            
            5,251
            
            
            (7,480,998
            )
            
            (7,475,747
            )**Six
                months ended June 30, 2006**Revenues
            
            
            3,267,006
            
            
            
            
            
            3,267,006Cost
                of Sales
            
            
            1,055,992
            
            
            
            
            
            1,055,992Selling,
                general, and administrative
            
            
            2,074,828
            
            
            
            
            
            2,074,828Total
                costs and expenses
            
            
            3,130,820
            
            
            0
            
            
            3,130,820Operating
                income (loss)
            
            
            136,186
            
            
            0
            
            
            136,186Interest
                income (expense)
            
            
            (74,068
            )
            
            (35,524
            )
            
            (109,592
            )Change
                in fair value of derivative liabilities
            
            
            0
            
            
            (652,875
            )
            
            (652,875
            )Total
                other income (expenses)
            
            
            (74,068
            )
            
            (688,399
            )
            
            (762,467
            )Net
                income (loss)
            
            
            62,118
            
            
            (688,399
            )
            
            (626,281
            )**Nine
                months ended September 30, 2006**Revenues
            
            
            4,912,253
            
            
            
            
            
            4,912,253Cost
                of Sales
            
            
            1,586,746
            
            
            
            
            
            1,586,746Selling,
                general, and administrative
            
            
            3,082,858
            
            
            
            
            
            3,082,858Total
                costs and expenses
            
            
            4,669,604
            
            
            0
            
            
            4,669,604Operating
                income (loss)
            
            
            242,649
            
            
            0
            
            
            242,649Interest
                income (expense)
            
            
            (110,980
            )
            
            (73,440
            )
            
            (184,420
            )Change
                in fair value of derivative liabilities
            
            
            0
            
            
            (336,909
            )
            
            (336,909
            )Total
                other income (expenses)
            
            
            (110,980
            )
            
            (410,349
            )
            
            (521,329
            )Net
                income (loss)
            
            
            131,669
            
            
            (410,349
            )
            
            (278,680
            )








**Restatement
                  of previously Issued Quarterly Data (Unaudited)**As
              
              
              2005
              
              
              2006previously
              
              
              Restatement
              
              
              Restatement
              
              
              Asreported
              
              
              adjustments
              
              
              adjustments
              
              
              restated**March
                  31, 2006**Cash
                  and cash equivalents
              
              $
              624,801
              
              $
              -
              
              $
              (500,000
              )
              $
              124,801Restricted
                  cash
              
              $
              -
              
              $
              -
              
              $
              500,000
              
              $
              500,000Property
                  and equipment, net
              
              $
              319,762
              
              $
              -
              
              $
              70,000
              
              $
              389,762Investment
                  in private entity
              
              $
              70,000
              
              $
              -
              
              $
              (70,000
              )
              $
              -Investments
              
              $
              -
              
              $
              -
              
              $
              15,000
              
              $
              15,000Prepaid
                  expenses
              
              $
              122,512
              
              $
              -
              
              $
              (43,333
              )
              $
              79,179Accounts
                  payable and accrued expenses
              
              $
              236,552
              
              $
              -
              
              $
              2,334
              
              $
              238,886Fair
                  value of derivative liabilities
              
              $
              -
              
              $
              -
              
              $
              9,332,606
              
              $
              9,332,606Additional
                  paid-in capital
              
              $
              10,699,663
              
              $
              (219,535
              )
              $
              (4,575
              )
              $
              (224,110
              )Accumulated
                  deficit
              
              $
              (10,300,511
              )
              $
              (1,629,831
              )
              $
              (7,480,998
              )
              $
              (19,411,340
              )Deferred
                  Compensation
              
              $
              -
              
              $
              -
              
              $
              28,333
              
              $
              28,333**June
                  30, 2006**Investments
              
              $
              -
              
              $
              -
              
              $
              26,179
              
              $
              26,179Prepaid
                  expenses
              
              $
              154,319
              
              $
              -
              
              $
              (52,012
              )
              $
              102,307Accounts
                  payable and accrued expenses
              
              $
              212,946
              
              $
              -
              
              $
              35,524
              
              $
              248,470Fair
                  value of derivative liabilities
              
              $
              -
              
              $
              -
              
              $
              2,506,816
              
              $
              2,506,816Additional
                  paid-in capital
              
              $
              11,952,059
              
              $
              (219,535
              )
              $
              (4,575
              )
              $
              11,727,949Accumulated
                  deficit
              
              $
              (10,243,644
              )
              $
              (1,629,831
              )
              $
              (688,399
              )
              $
              (12,561,874
              )Deferred
                  Compensation
              
              $
              -
              
              $
              -
              
              $
              25,833
              
              $
              25,833**September
                  30, 2006**Investments
              
              $
              -
              
              $
              -
              
              $
              59,339
              
              $
              59,339Prepaid
                  expenses
              
              $
              199,714
              
              $
              -
              
              $
              (82,672
              )
              $
              117,042Accounts
                  payable and accrued expenses
              
              $
              145,483
              
              $
              -
              
              $
              73,440
              
              $
              218,923Fair
                  value of derivative liabilities
              
              $
              -
              
              $
              -
              
              $
              2,190,851
              
              $
              2,190,851Additional
                  paid-in capital
              
              $
              11,973,568
              
              $
              (219,535
              )
              $
              (4,575
              )
              $
              11,749,458Accumulated
                  deficit
              
              $
              (10,174,095
              )
              $
              (1,629,831
              )
              $
              (410,349
              )
              $
              (12,214,275
              )Deferred
                  Compensation
              
              $
              -
              
              $
              -
              
              $
              23,333
              
              $
              23,333













**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 2006 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.





**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
            
            40
            
            Chairman
                of the Board of Directors, Chief Executive Officer and
                PresidentDavid
                R. Rasmussen
            
            40
            
            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.








***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. Rasmussen 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. Mr. Rasmussen
      was
      in the United States 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**





We
      do not
      have a separately-designated standing Audit Committee. Our full board of
      directors performs the functions usually designated to an Audit Committee.
      As of
      December 31, 2006, we did not have a director on our board that met the
      definition of “audit committee financial expert” as set forth in Item
      407(d)(2=3)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.





**SECTION
      16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.**





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, 2006, 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.





**PROCEDURE
      FOR NOMINATING DIRECTORS**





We
      have
      not made any material changes to the procedures by which security holders may
      recommend nominees to our board of directors.





The
      board
      does not have a written policy or charter regarding how director candidates
      are
      evaluated or nominated for the board. Additionally, the board has not created
      particular qualifications or minimum standards that candidates for the board
      must meet. Instead, the board considers how a candidate could contribute to
      the
      company's business and meet the needs of the company and the board.




The
      board
      will consider candidates for director recommended by our shareholders.
      Candidates recommended by shareholders are evaluated with the same methodology
      as candidates recommended by management or members of the board. To refer a
      candidate for director, please send a resume or detailed description of the
      candidate's background and experience with a letter describing the candidate's
      interest in the company to FTS Group, Inc., 7610 West Hillsborough Ave., Tampa,
      Florida 33615, Attention: Scott Gallagher. All candidate referrals are reviewed
      by at least one current board member.










**ITEM
      10. EXECUTIVE COMPENSATION.**





The
      following table shows the compensation paid or accrued during the fiscal years
      ended December 31, 2006 and 2005 to (1) our Chief Executive Officer and (2)
      our Chief Operating Officer.




**Summary
      Compensation Table**





Name
                and Principal Position
              
              
              (a)
            
            
            Year
              Ended
              December
              31,
              
              (b
            )
            
            Base
                Salary
              $
              
              
              
              (c
            )
            
            Bonus
              $
              
              
              
              (d
            )
            
            Stock
                Awards (7)
              $
              
              
              (e
            )
            
            All
                Other Compensation
              $
              
              
              (i
            )
            
            Dollar
                Value of total compensation for the covered fiscal year $
              
              
              (j
            )Scott
                Gallagher, Principal Executive Officer
            
            
            2006
            
            $
            200,000
            
            $
            50,000
                (2
            )
            
            
            
            
            
            
            $
            250,0002005
            
            $
            100,000
            
            $
            50,000
                (1
            )
            $
            50,000
                (5
            )
            $
            8,000
                (4
            )
            $
            208,000David
                Rasmussen, Chief Operating Officer
            
            
            2006
            
            $
            150,000
            
            $
            25,000
                (3
            )
            $
            30,000
                (6
            )
            
            
            
            $
            205,0002005
            
            
            
            
            
            
            
            
            
            
            $
            8,000
                (4
            )
            $
            8,000




(1)
            In
                2005 Mr. Gallagher was granted an annual bonus of $50,000.




(2)
            In
                2006 Mr. Gallagher was granted an annual bonus of
                $50,000.




(3)
            In
                2006 Mr. Rasmussen was granted an annual bonus of
                $25,000.




(4)
            In
                2005 both Mr. Gallagher and Mr. Rasmussen received $8,000 as board
                compensation.




(5)
            In
                2005 Mr. Gallagher received 1,500,000 restricted shares as part of
                his
                employment contract.




(6)
            In
                2006 Mr. Rasmussen received 1,500,000 restricted shares as part of
                his
                employment contract.




(7) A discussion of
              the assumptions used to value these awards are included in Note 1,
              Notes
              to Consolidated Financial Statements





**NARATIVE
      TO SUMMARY COMPENSATION TABLE**





EMPLOYMENT
      AGREEMENTS FOR EACH NAMED EXECUTIVE OFFICER





We
      have
      two-year consulting agreements with our Chief Executive Officer and our Chief
      Operating Officer as follows:




*Employment
      Agreement with Mr. Scott Gallagher*





On
      February 1, 2006, we entered into an employment agreement with Mr. Scott
      Gallagher to serve as our Chief Executive Officer and as Chairman of the Board
      of Directors. The employment agreement was changed to a consulting agreement
      during 2006 under the same terms. Under the terms of such agreement, Mr.
      Gallagher received an initial grant of 1,500,000 restricted shares of our common
      stock per his contract. 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.




*Employment
      Agreement with Mr. David R, Rasmussen*





On
      February 1, 2006, we entered into an employment agreement with Mr. David R.
      Rasmussen to act as our Chief Operating Officer and as Chief Executive Officer
      of our wholly-owned subsidiary, See World Satellites, Inc. Under the terms
      of
      such agreement, Mr. Rasmussen will received an initial grant of 1,500,000
      restricted shares of our common stock per his contract. For an initial term
      of 2 years, Mr. Rasmussen is to receive a base salary of $150,000 per year.
      We will review Mr. Rasmussen’s salary annually to for the purpose of determining
      a reasonable increase based on his service and performance, taking into
      consideration a good-faith assessment of any other incentive and/or bonus plans
      to which Mr. Rasmussen may be a party. Mr. Rasmussen will also be eligible
      for
      cash and stock bonuses annually depending upon the performance of the Company
      as
      set forth below:





Year
            EBITDA
                Target
            Cash
                Bonus
            Revenue
                Target
            Stock
                Bonus2006
            $2
                Million
            $100,000
            $9
                Million
            500,000
                Shares2007
            $3
                Million
            $150,000
            $12
                Million
            750,000
                Shares2008
            $4
                Million
            $200,000
            $15
                Million
            1,000,000
                Shares





**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END**




We
      did
      not grant stock options in 2005 or 2006. Additionally, no stock options were
      exercised by any of the named executive officers in 2005 or 2006.








**DIRECTOR
      COMPENSATION**




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. During 2007 our directors will receive a grant of 250,000
      shares of restricted stock.








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





The
      following table sets forth certain information as of December 31, 2006 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
            
            
            11,686,451
            
            
            8.5
            %David
                R. Rasmussen
            
            
            1,727,500
            
            
            1.3
            %Alpha
                Capital Aktiengesellschaft (3)
            
            
            4,850,866
            
            
            3.5
            %Pradafant
                7, Furstentums 9490Vaduz,
                LiechtensteinWhalehaven
                Capital Fund Limited (4)
            
            
            12,141,475
            
            
            8.8
            %3rdFloor, 14 Par-Laville Rd., Hamilton, Bermuda HM08Bristol
                Investment Fund, LTD. (5)
            
            
            8,094,317
            
            
            5.9
            %Caledonian
                Fund Services Limited,69 Dr. Roy’s Dr.George
                Town, Grand Cayman, Cayman IslandsAll
                directors and current executive officers as a group (2
                persons)
            
            
            13,413,951
            
            
            9.7
            %





*
      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 December 31,
      2006
      was 137,650,469 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 December 31, 2006, plus shares of common stock subject
      to
      options and warrants held by such person on December 31, 2006 and exercisable
      within 60 days thereafter.




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





(4)
      This
      information was based on a 13G filed on May 4, 2006 by Whalehaven Capital Fund
      Limited.





(5)
      This
      information is based on a 13G filed on May 4, 2006 by Bristol Investment Fund
      LTD.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.**





CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS





None.





DIRECTOR
      INDEPENDENCE





During
      the year ended December 31, 2006, Scott Gallagher and David Rasmussen served
      as
      our directors. We are currently traded on the Over-the-Counter Bulletin Board
      or
      OTCBB. The OTCBB does not require that a majority of the board be
      independent.








**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).




3.4
      Certificate of Designation for Series B Convertible Preferred Stock dated March
      8, 2006 (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).




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).




4.16
      Form
      of Common Stock Purchase Warrant between the Company and Olympus Securities,
      (included as exhibit 4.16 to the Form SB-2/A filed July 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).




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).




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.,
      dated 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).




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).




10.36
      Amendment Number 1 to the Retailer Agreement between the Company and EchoStar
      Satellite LLC, dated March 31, 2006 (included as Exhibit 10.1 to the Form 8-K
      filed March 31, 2006, and incorporated herein by reference).




10.37
      Amendment to extend Authorized Regional Service Provider Agreement between
      the
      Company and Dish Network Service LLC dated March 31, 2006 (included as Exhibit
      10.2 to the Form 8-K filed March 31, 2006, and incorporated herein by
      reference).




10.38
      Letter Agreement between the Company and EchoStar Satellite LLC, dated March
      27
      2006 (included as exhibit 10.1 to the Form 8-K filed April 5, 2006 and
      incorporated herein by reference).




10.39
      Employment Agreement between the Company and Scott Gallagher dated November
      15,
      2005 with amended start date of February 1, 2007 (included as exhibit 10.27
      to
      the Form 10-QSB filed May 15, 2006 and incorporated herein by
      reference).




10.40
      Employment Agreement between the Company and David Rasmussen dated February
      1,
      2006 (included as exhibit 10.28 to the Form 10-QSB filed May 15, 2006 and
      incorporated herein by reference).




10.41
      Promissory Note between the Company and Alpha Capital Anstalt, dated January
      22,
      2007 (included as exhibit 10.1 to the Form 8-K filed January 26, 2007 and
      incorporated herein by reference).




10.42
      Promissory Note between the Company and Ellis International, Ltd., dated January
      22, 2007 (included as exhibit 10.2 to the Form 8-K filed January 26, 2007 and
      incorporated herein by reference).




10.43
      Promissory Note between the Company and Platinum Long Term Growth V, dated
      January 22, 2007 (included as exhibit 10.3 to the Form 8-K filed January 26,
      2007 and incorporated herein by reference).




10.44
      Promissory Note between the Company and Whalehaven Capital Fund Limited, dated
      January 22, 2007 (included as exhibit 10.4 to the Form 8-K filed January 26,
      2007 and incorporated herein by reference).




10.45
      Assignment and Amendment No. 1 to Note Agreement by and among the Company,
      Richard E. Miller and Assignees, dated January 22, 2007 (included as exhibit
      10.5 to the Form 8-K filed January 26, 2007 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 herewith).





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 Officer 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**





For
      their
      audit of our annual financial statements and for their review of our Quarterly
      Reports on Form 10-QSB, Bassie and Co. was paid $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.





**AUDIT-RELATED
      FEES**





During
      2006 we paid Bassie and Company $75,000 in audit related fees **.**





**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 and $1,500 in the fiscal year ended
      December 31, 2006.





**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, Principal Accounting Officer and
                PresidentDate:
                April 16, 2007




By:
            /s/ David
                R. RasmussenDavid
                R. Rasmussen, Chief Operating Officer and DirectorDate:
                April 16, 2007








Exhibit
      21.1





**Subsidiaries**





As
      of
      December 31, 2006, we had two wholly-owned subsidiaries, FTS Wireless, Inc.
      and
      See World Satellites, Inc.





**Exhibit
      31.1**


**CERTIFICATION
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**








I,
      Scott
      Gallagher, certify that:





1.
      I have
      reviewed this annual report of FTS GROUP, INC.;





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





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





4.
      As the
      small business issuer's certifying officer, I am responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
      have:





(a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under my supervision, to ensure that
      material information relating to the small business issuer, including its
      consolidated subsidiaries, is made known to me by others within those entities,
      particularly during the period in which this report is being
      prepared;





(b)
      Evaluated the effectiveness of the small business issuer's disclosure controls
      and procedures and presented in this report my conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of the
      period covered by this report based on such evaluation; and





(c)
      Disclosed in this report any change in the small business issuer's internal
      control over financial reporting that occurred during the small business
      issuer's fourth fiscal quarter that has materially affected, or is reasonably
      likely to materially affect, the small business issuer's internal control over
      financial reporting; and





5.
      As the
      small business issuers certifying officer, I disclosed, based on my most recent
      evaluation of internal control over financial reporting, to the small business
      issuer's auditors and the audit committee of the small business issuer's board
      of directors (or persons performing the equivalent functions):





(a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer's ability to record, process,
      summarize and report financial information; and





(b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer's internal control over
      financial reporting.





Date:
                April 16, 2007
            /s/
            Scott
                GallagherScott
                Gallagher
              Chief
                Executive Officer, Principal Accounting Officer and Chairman of the
                Board








**EXHIBIT
      32.1**


CERTIFICATION
      PURSUANT TO


SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002


(18
      U.S.C. SECTION 1350)





Pursuant
      to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of
      section 1350, chapter 63 of title 18, United States Code), the undersigned
      officer of FTS Group, Inc., a Nevada corporation (the "Company"), does hereby
      certify, to such officer’s knowledge, that:





The
      Annual Report on Form 10-KSB for the period ending December 31, 2006 (the “Form
      10-KSB”) of the Company fully complies with the requirements of Section 13(a) or
      15(d) of the Securities Exchange Act of 1934, and the information contained
      in
      the Form 10-KSB fairly presents, in all material respects, the financial
      condition and results of operations of the Company.





/s/
            Scott
                GallagherBy:
            Scott GallagherChief
                Executive Officer and Interim Principal Accounting Officer
              April
                16, 2007