UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C.  20549
 
 FORM
10-K/A
 
 (Mark
One)
  x ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007.
  o TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
 
 Commission
File Number 000-24829
  
  FTS
      GROUP, INC.
                (Exact
      name of registrant as specified in its charter)Nevada
                (State
      or other jurisdiction of
                incorporation
      or organization)
              84-1416864
                (IRS
      Employer Identification No.)300
      State Street East, Suite 226
                Oldsmar,
      FL
                (Address
      of principal executive offices)
              34677
                (Zip
      Code)
 
 (813)
749-8805
 (Registrant’s
telephone number)
 
 Securities
registered pursuant to Section 12(b) of the Act:  None
 
 Securities
registered pursuant to Section 12(g) of the Act:
 
 Common
Stock, $0.001 par value
 (Title of
class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes o  No x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes o  No x
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes x  No o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein,
and  will not 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-K or any amendment to this Form 10-K.  o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  Set the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
  Large accelerated
      filer  o
              Accelerated
      filer  oNon-accelerated
      filer (Do not check if a smaller reporting company)  o
              Smaller reporting
      company  x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the  Act).  Yes o  No x
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed fiscal
year.  As of December 31, 2007:  $2,411,005 based on a total
150,687,844  shares of our common stock held by non-affiliates on
December 31, 2007 at a closing price of $0.016 per share.
 
 Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock as of December 31, 2007. 174,205,601
 
 Documents
incorporated by reference:  None.
  
  FTS
GROUP, INC.
 FORM
10-K
 For
the year ended December 31, 2007
 
 TABLE OF CONTENTS
  Item
              
              
              
              PagePart IItem 1.
              Business
              
              1Item
    1A.
              Risk Factors
              
              2Item
    2.
              Properties
              
              3Item 3.
              Legal Proceedings
              
              3Item
    4.
              Submission of Matters to a Vote of Security
      Holders
              
              3Part
    IIItem 5.
              Market for Registrant's Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
              
              3Item
    7.
              Management's Discussion and Analysis of
      Financial Condition and Results of Operations
              
              3Item
    8.
              Financial  Statements and Supplementary
      Data
              
              5Item 9.
              Changes in and Disagreements With Accountants on
      Accounting and Financial Disclosure
              
              6Item
      9A(T).
              Controls and Procedures
              
              6Item
    9B.
              Other Information
              
              6Part
    IIIItem
    10.
              Directors, Executive Officers and Corporate
      Governance
              
              6Item
    11.
              Executive Compensation
              
              6Item
    12.
              Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder
    Matters
              
              7Item
    13.
              Certain Relationships and Related
      Transactions, and Director Independence
              
              7Item
    14.
              Principal Accounting Fees and
      Services
              
              7Part
    IVItem
    15.
              Exhibits, Financial Statement
    Schedules
              
              7
 Table of Contents
  EXPLANATORY
NOTE
  FTS
Group, Inc. (the "Company" or "FTS") is filing this Amendment No. 1 on Form
10-K/A in order to amend its Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 (which was filed on April 15, 2008) to correct a
typographical error on page F-2. The report of independent registered public
accounting firm was reported as "April 11, 2007" it should have been "April 11,
2008".
 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 Factors” 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.  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 Chairman and Chief Executive
Officer and we appointed three new directors. Mr. Gallagher agreed to purchase
1,861,618 shares of our common stock owned by two of the former officers and
directors and other stockholders. 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.
 
 In July
of 2007, we acquired an Internet media business and incorporated our
wholly-owned subsidiary, Elysium Internet, Inc.  On April 4, 2008, we
sold 100% of the shares and the assets of Elysium Internet, Inc. and it ceased
to be our 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. and in July of
2007, we acquired an Internet media business and incorporated our wholly-owned
subsidiary, Elysium Internet, Inc.  We sold the 100% of the shares and
the assets of Elysium Internet on April 4, 2008.
 
 Through
our wholly-owned subsidiaries, See World Satellites, Inc., FTS Wireless, Inc.
and Elysium Internet, Inc. we created a diversified wireless distribution
business and Internet media business. Our subsidiary, See World Satellites, Inc.
is a Regional Service Provider and retail distributor of satellite television
systems and services for DISH Networks. On the regional service provider 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. 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 through our e-store www.CellChannel.com. During 2007, our
subsidiary Elysium Internet, Inc. owned and operated an Internet directory and
media business through its web site www.TherapeuticDirectory.com and by
leveraging its Internet domain portfolio of over 1,000 direct navigation domain
names.
 
 We
constantly re-evaluate our product portfolio to stay current with changing
industry trends in order to deliver the absolute best user experience and meet
the needs of our customers through all of our businesses. We also continuously
evaluate how new technologies and advertising methods such as Wi-Fi and Voice
over Internet, or VoIP and Direct Navigation, will affect our business in the
future. We believe these new communication technologies and Internet traffic
generating methods will provide us and companies like us with new opportunities
as the technologies and methods become more widely adopted and next generation
products and services are developed and increase in demand.
 
 THE
MARKET FOR OUR PRODUCTS AND SERVICES
 
 On the
satellite side of our business, the overall industry had a very strong year. In
its annual report for fiscal 2007 our primary satellite television vendor DISH
Networks reported more than 13.78 million subscribers for a year-over-year
increase of 675,000 when compared to 2006.Top line sales grew by 13%
year-over-year at DISH. DIRECTV Group added 275,000 subscribers during 2007
versus 2006 and experienced its lowest churn rate in eight years. While these
results give us a sample status of the industry leaders in the satellite
television industry as a whole, their results are not necessarily reflective of
our satellite television installation business.
 
 On the
wireless handset distribution side of our business, CTIA-The Wireless
Association® announced April 1, 2008 that as of December 2007, the industry
survey recorded more than 255 million wireless users. This represents a
year-over-year increase of more than 22 million subscribers. The industry’s
12-month record for subscriber growth was reached in 2005, when 25.7 million new
users came online.  The survey also recorded record-breaking six-month
wireless service revenues of $71 billion. Wireless data service revenues
for the entirety of 2007 rose to more than $23 billion. This represents a
53% increase over 2006, when data revenue was $15.2 billion. Wireless data
revenues for the year 2007 amounted to about 17% of all wireless service
revenues, and represent money that consumers spend on non-voice services. 
These results reflect the national trend in the wireless industry and not
necessarily our core markets.  FTS Wireless, Inc. does operate an
online e-store that markets and sells wireless related products nationally and
can sell products globally.
 
 The
overall market for our satellite television installation business, retail
wireless distribution business and Internet media business remains strong as
evidenced by the key metrics identified above. While the overall market remains
strong for our businesses, some of the challenges we expect to deal with during
the coming year include continued rising fuel prices may affect our profit
margins at our satellite installation business and new unlimited wireless plans
offered by the national carriers may impact sales at our retail wireless
operations.
 
 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 and 90%
in 2007. Metro PCS is a regional wireless carrier based in Dallas, Texas with
more than 2 million subscribers in various markets around the United States
including Miami, Tampa, Orlando, Atlanta and Sacramento. We have secured
additional licenses for Los Angeles, New York, Philadelphia and other key
markets around the United States. We distribute Metro PCS wireless handsets and
service plans at five 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 regional service provider-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 regional service provider side of our business operates in a
less competitive environment due to the regional service provider 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.
 
 FTS
WIRELESS COMPETES WITH 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;
 -
AT&T;
 -
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.
 
 SEE
WORLD SATELLITES
 
 Due to
its regional service provider status, See World does not compete with any other
major players in its core markets.
  1
  Table of
Contents
 MARKETING
 
 Our
retail wireless businesses depend on advertising and marketing to attract new
customers. We currently advertise in local print publications, including daily
newspapers and weekly publications, 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 $10,000 and $20,000 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. In 2007, our Internet directory business spent
between $2,000 and $5,000 per month advertising primarily through Google.com. We
believe our advertising campaigns increased foot traffic in our stores and
continue to generate new sign-ups at our Internet directory sites.
 
 SUPPLIERS
 
 See World
Satellites purchases satellite equipment directly from EchoStar. FTS Wireless,
Inc. purchases Metro PCS wireless handsets from Bright Point. Bright Point is
one of the largest handset distributors in the U.S. 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.
  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, 2007, we had forty-nine full-time employees and three part-time
employees working under our three 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
1A. 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 LOSSES AND WE MAY NOT BE ABLE TO REMAIN
PROFITABLE.
 
 We had a
net loss from operations of $604,216 for the year ended December 31, 2007 and
had operating income of $223,419 and net income after derivative valuations of
$1,231,367 during 2006. 2006 was the first year since inception that we had
positive income from operations. Our future operations may not be profitable if
we are unable to develop and expand our wireless business and our SeeWorld
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, 2007,
reflect a net loss of $604,216 and stockholders' equity of $1,621,741as of December 31, 2007. 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, as amended, authorize the issuance of 855,000,000
shares of common stock. As of December 31, 2007, we had 174,205,601shares of our common
stock issued and outstanding. We are also authorized to issue 150,000 shares of
our Series A Convertible Preferred Stock of which no shares are issued or
outstanding,
1,000,000 shares of Seris B Convertible Preferred Stock, of which all 1,000,000
shares are issued and outstandingand 3,850,000
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 stockholders. 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.
  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 $0.036 and $0.012. 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 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, AT&T, Sprint/Nextel, and EchoStar. 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.
 2
  Table of Contents
  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
AT&Tand 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
2. PROPERTIES.
 
 As of
December 31, 2007, we had six leases for FTS Wireless retail stores and one for
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.
 
 None.
 
 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
Over-the-Counter Bulletin Board since March 18, 1999. Our common 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.
  2006March 31
              
              
              $
              0.065
              
              $
              0.035June
    30
              
              
              $
              0.13
              
              $
              0.075September
      30
              
              
              $
              0.075
              
              $
              0.045December 31
              
              
              $
              0.07
              
              $
              0.0492007
              
              
              
              
              
              
              2007March 31
              
              
              $
              0.036
              
              $
              0.022June 30
              
              
              $
              0.034
              
              $
              0.014September
      30
              
              
              $
              0.031
              
              $
              0.01December
      31
              
              
              $
              0.024
              
              $
              0.0122008March 31
              
              
              $
              0.016
              
              $
              0.0026
  HOLDERS
OF RECORD
 
 We had
approximately 2,557 holders of record of our common stock as of December 31,
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 allowed
stockholders of record to purchase one new share of common stock at $0.25 for
each ten common shares owned. The warrant expired on August 28, 2007. 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.
 
 SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN
 
 This
information is incorporated by reference to Item 12 of this annual
report.
 
 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
  On July
9, 2007, we issued 588,235 restricted shares of common stock to an institutional
investor relating to the conversion of $11,000 of debt at a price of $0.01870
per share.
 
 On July
30, 2007, we issued 208,905 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.01819 per share.
  On
September 18, 2007, we issued 1,522,491 shares of common stock to an
institutional investor relating to the conversion of $22,000 of debt at a price
of $0.0145 per share.
 
 On
October 22, 2007, we issued 346,021 shares of restricted common stock to an
institutional investor relating to the conversion of $5,000 of debt at a price
of $0.0145 per share.
 
 On
December 12, 2007, we issued 490,196 shares of restricted common stock to an
institutional investor relating to the conversion of $7,500 of debt at a price
of $0.0153 per share.
  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).
  ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS 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-K. 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-K.
 
 OVERVIEW
 
 We are an
acquisition and development company focused on developing, acquiring and
investing in cash-flow positive businesses and viable business projects
primarily in the Internet, wireless and technology industries. We operate a
diversified wireless business through two of our wholly-owned subsidiaries, See
World Satellites, Inc. and FTS Wireless, Inc. See World is a Regional Service
Provider and retail distributor for DISH Network Services satellite television
systems primarily to business and retail customers in the western Pennsylvania
market and nationally through our retail channel. FTS Wireless is an emerging
distributor of next generation wireless communications devices and related
products and services. FTS Wireless operates a chain of six retail wireless
locations in the Gulf Coast market of Florida. All of the retail locations are
leased properties. Through our third wholly-owned subsidiary, Elysium Internet,
Inc., an online media Company focused on developing and acquiring a subscription
based targeted Internet directory business, we owned and operated an Internet
media and advertising business. We generated revenue by selling advertising
directly to customers through our directory web sites as well as through
affiliate programs that leverage the direct navigation Internet traffic of our
domain portfolio.  On April 4, 2008, we sold the Elysium Internet
business.
 
 RESULTS
OF OPERATIONS
 
 FULL
YEAR PERIOD ENDED DECEMBER 31, 2007 AS COMPARED TO THE FULL YEAR
 ENDED
DECEMBER 31, 2006 RESULTS OF OPERATIONS
 SEGMENT
RESULTS FOR THE FULL YEARS ENDED DECEMBER 31, 2007
  Year
      Ended December 31, 2007
              
              
              Year
      Ended December 31, 2006FTS
              
              
              FTS
              
              
              See
              
              
              Elysium
              
              
              
              
              
              FTS
              
              
              FTS
              
              
              See
              
              
              ElysiumGroup
              
              
              Wireless
              
              
              World
              
              
              Internet
              
              
              
              
              
              Group
              
              
              Wireless
              
              
              World
              
              
              InternetInc.
              
              
              Inc.
              
              
              Satellites
              
              
              Inc.
              
              
              Total
              
              
              Inc.
              
              
              Inc.
              
              
              Satellites
              
              
              Inc.
              
              
              TotalRevenuesExternal
              
              $
              -
              
              
              $
              2,577,869
              
              
              $
              4,401,206
              
              
              $
              45,225
              
              
              $
              7,024,300
              
              
              $
              -
              
              
              $
              1,841,839
              
              
              $
              4,836,237
              
              
              $
              -
              
              
              $
              6,678,076Internal
              
              
              1,500,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,500,000
              
              
              
              1,500,000
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,500,000Segment
      Revenues
              
              
              1,500,000
              
              
              
              2,577,869
              
              
              
              4,401,206
              
              
              
              45,225
              
              
              
              8,524,300
              
              
              
              1,500,000
              
              
              
              1,841,839
              
              
              
              4,836,237
              
              
              
              -
              
              
              
              8,178,076Cost
      of Goods Sold
              
              
              -
              
              
              
              2,182,835
              
              
              
              844,823
              
              
              
              16,788
              
              
              
              3,044,446
              
              
              
              -
              
              
              
              1,580,263
              
              
              
              788,968
              
              
              
              -
              
              
              
              2,369,231Gross
      Profit
              
              
              1,500,000
              
              
              
              395,034
              
              
              
              3,556,383
              
              
              
              28,437
              
              
              
              5,479,854
              
              
              
              1,500,000
              
              
              
              261,576
              
              
              
              4,047,269
              
              
              
              -
              
              
              
              5,808,845Selling,
      General, & AdministrativeExternal
              
              
              1,013,180
              
              
              
              737,820
              
              
              
              4,146,886
              
              
              
              17,613
              
              
              
              5,915,499
              
              
              
              727,792
              
              
              
              452,485
              
              
              
              2,780,779
              
              
              
              -
              
              
              
              3,961,056Internal
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              300,000
              
              
              
              1,200,000
              
              
              
              -
              
              
              
              1,500,000Segment
      S, G, &A
              
              
              1,013,180
              
              
              
              737,820
              
              
              
              4,146,886
              
              
              
              17,613
              
              
              
              5,915,499
              
              
              
              727,792
              
              
              
              752,485
              
              
              
              3,980,779
              
              
              
              -
              
              
              
              5,461,056Subtotal
              
              
              486,820
              
              
              
              (342,786
              )
              
              
              (590,503
              )
              
              
              10,824
              
              
              
              (435,645
              )
              
              
              772,208
              
              
              
              (490,909
              )
              
              
              66,490
              
              
              
              -
              
              
              
              347,789Derivative
      Gain (Loss)
              
              
              337,990
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              337,990
              
              
              
              1,400,902
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,400,902Depreciation
              
              
              (28,995
              )
              
              
              (26,015
              )
              
              
              (33,553
              )
              
              
              -
              
              
              
              (88,563
              )
              
              
              (22,226
              )
              
              
              (40,857
              )
              
              
              (61,287
              )
              
              
              -
              
              
              
              (124,370
              )Loss
      on Disposed Assets
              
              
              -
              
              
              
              (87,607
              )
              
              
              (15,120
              )
              
              
              -
              
              
              
              (102,727
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              
              
              
              -Interest
              
              
              (315,272
              )
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (315,272
              )
              
              
              (388,611
              )
              
              
              (3,184
              )
              
              
              (1,159
              )
              
              
              -
              
              
              
              (392,954
              )Net
      Income (Loss)
              
              
              480,543
              
              
              
              (456,408
              )
              
              
              (639,176
              )
              
              
              10,824
              
              
              
              (604,217
              )
              
              
              1,762,273
              
              
              
              (534,950
              )
              
              
              4,044
              
              
              
              -
              
              
              
              1,231,367Intersegment
      Adjustments
              
              
              (1,500,000
              )
              
              
              300,000
              
              
              
              1,200,000
              
              
              
              
              
              
              
              -
              
              
              
              (1,500,000
              )
              
              
              300,000
              
              
              
              1,200,000
              
              
              
              -
              
              
              
              -$
              (1,019,457
              )
              
              $
              (156,408
              )
              
              $
              560,824
              
              
              $
              10,824
              
              
              $
              (604,217
              )
              
              $
              262,273
              
              
              $
              (234,950
              )
              
              $
              1,204,044
              
              
              $
              -
              
              
              $
              1,231,367
  3
  Table of Contents
  SALES
REVENUE
 
 CONSOLIDATED
 
 Consolidated
sales revenues for the year ended December 31, 2007 increased $346,224, or 5.2%,
to $7,024,300, as compared to $6,678,076 for the year ended December 31, 2006.
The increase in sales revenues was primarily related to the inclusion of results
from Elysium Internet not included in the prior year results as well as a year
over year increase in top line sales at FTS Wireless.
 
 FTS
WIRELESS, INC.
 
 Sales
revenue for the year ended December 31, 2007 increased $736,030 or 39.96% to
$2,577,869as
compared to $1,841,839 for the year ended December 31, 2006. 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.
 
 SEE
WORLD SATELLITES, INC.
 
 Sales revenue for the year
ended December 31, 2007 decreased $435,031 or 9.0% to $4,401,206 as
compared to $4,836,237 for the year ended December 31, 2006. The revenue decline
was primarily related to reduced retail sales during the year. The Company
determined to focus its efforts on the higher margin RSP business and therefore
cut back advertising for retail business..
 
 ELYSIUM
INTERNET, INC.
 
 Sales revenue for the year
ended December 31, 2007 were $45,225. We do not have year over year
comparables as business related to Elysium began in late July 2007 with the
acquisition of an Internet directory business.
 
 COST OF GOODS
SOLD
 
 CONSOLIDATED
 
 Consolidated
Cost of Goods Sold totaled $ 3,044,445 for the year ended December 31, 2007 as
compared to $2,369,231 for the year ended December 31, 2006 resulting in an
increase of $675,214.
  GROSS
PROFITS
 
 CONSOLIDATED
 
 Consolidated
Gross Profits totaled decreased $328,990 to $3,979,855 for the year ended
December 31, 2007 as compared to $4,308,845 for the year ended December 31,
2006. The decrease in gross profits was primarily related to increased fuel and
operating costs at our largest subsidiary, See World Satellite,
Inc.
  SELLING, GENERAL AND
ADMINISTRATIVE
 
 Selling,
General and Administrative expense for the year ended December 31, 2007
increased by $519,415 to $4,604,841 as compared to $4,085,426 for the year
December 31, 2006. The increase in selling, general and administrative expenses
is primarily related to increased consulting fees incurred during the fourth
quarter relating to merger and acquisition and other deal related
activities.
 
 INTEREST
EXPENSE
 
 Interest
expense decreased $75,734 to $317,220 for the year ended December 31, 2007 as
compared to Internet expense of $392,954 for the year ended  December
31, 2006. The decrease was due mainly to reduced borrowing via short term notes
as part of the capital raised in early 2006 and early 2007.
 
 INCOME
 
 We had a
net loss of $604,216 for the fiscal year ended December 31, 2007, as compared to
net income of $1,231,367 for a net decrease of $1,835,583. Other income for 2007
was $20,770 as compared to other income of $1,007,948 during the same period for
2006. The drop in other income is primarily related to changes in derivative
valuations. The primary reason for the net loss versus an operating profit
during 2006 was related to increased consulting fees relating to mergers and
acquisition activities, and increased legal and accounting fees relating to our
financial restatements during 2007. As of
December 31, 2007, we had an accumulated deficit of $11,308,442.
 
 LIQUIDITY AND CAPITAL
RESOURCES
 
 As of
December 31, 2007, total current assets decreased to $551,635 versus $866,501 as
of December 31, 2006. Current assets consisted of  $21,713 of cash, $71,987
of accounts receivable, $285,168 of inventories and $172,767 of prepaid expenses
and current assets. Total assets decreased to $6,288,850 versus $6,719,323 as of
December 31, 2006. Total assets consisted of $121,986 of property and equipment,
net of accumulated depreciation, $238,156 domain portfolio, unamortized discount
of convertible debt $192,991, goodwill of $5,177,696 and deposits of
$6,386.
 
 As of
December 31, 2007, total current liabilities increased to $4,562,060 from
$3,612,067 as of December 31, 2006. Current liabilities consisted of $2,538,817
current portion of notes payable to related parties, net of discount, $1,217,005
of convertible debentures-current portion, $802,238 of accounts payable and
accrued expenses and a $4,000 loan from an officer.
 
 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 2007 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
stockholders.
  Our
currently anticipated levels of revenues and cash flow are subject to many
uncertainties beyond our control. Even though we have recently become cash flow
positive, 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
the three months ending March 31, 2006, we issued 2,250,000 restricted
shares of common stock valued at $0.02 per share to an officer 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 an officer 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 a consultant 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 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 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, 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.
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, we 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, 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 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.
  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.
 
 On
November 8, 2006, we issued 788,000 shares to an investor at $0.04 for
proceeds of $32,179.
 
 On
January 5, 2007, we issued 1,000,000 restricted shares of common stock
relating to the conversion of $40,000 of debt at a price of $0.04 per
share.
  On
January 22, 2007, we issued 15,000,000 restricted shares of common stock to four
accredited investors relating to a $1,000,000 financing.
  On
February 13, 2007, we issued 160,177 restricted shares of common stock
relating to the conversion of $4,627 of debt at a price of $0.029 per
share.
  On
February 14, 2007, we issued 188,857 restricted shares of common stock
relating to the conversion of $4,627 of debt at a price of $0.025 per
share.
  On March
1, 2007, we issued 263,911 restricted shares of common stock to two
investors relating to the conversion of $6,940 of debt at a price of $0.026 per
share.
  On March
16, 2007, we issued 246,050 restricted shares of common stock relating to
the conversion of $9,710 of debt at a price of $0.039 per share.
  On March
30, 2007, we issued 275,430 restricted shares of common stock to two
investors relating to the conversion of $6,940 of debt at a price of $0.025 per
share.
 
 On May 4,
2007, we issued 230,303 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.0165 per share.
 
 On June
11, 2007, we issued 199,117 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.01908 per share.
 
 On June
14, 2007, we issued 705,882 restricted shares of common stock to an
institutional investor relating to the conversion of $14,400 of debt at a price
of $0.02040 per share.
 
 On June
18, 2007, we issued 245,098 restricted shares of common stock to an
institutional investor relating to the conversion of $5,000 of debt at a price
of $0.02040 per share.
 
 On July
9, 2007, we issued 588,235 restricted shares of common stock to an
institutional investor relating to the conversion of $11,000 of debt at a price
of $0.01870 per share.
 
 On July
30, 2007, we issued 208,905 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.01819 per share.
 
 On July
30, 2007, we issued 750,000 restricted shares of common stock to an
investor relating to a $25,000 loan agreement entered into.
  4
  Table of Contents
 
 On
September 18, 2007, we issued 1,522,491 shares of common stock to an
institutional investor relating to the conversion of $22,000 of debt at a price
of $0.0145 per share.
 
 On
October 22, 2007, we issued 346,021 shares of restricted common stock to an
institutional investor relating to the conversion of $5,000 of debt at a price
of $0.0145 per share.
 
 On
December 12,2007, we issued 490,196 shares of restricted common stock to an
institutional investor relating to the conversion of $7,500 of debt at a price
of $0.0153 per share.
  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.
  DERIVATIVE
FINANCIAL INSTRUMENTS
 
 We
estimate 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 (SFAS 133)
 
 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 SFAS 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
  Our
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.
 
 Our
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 the customer signs a contract.
  Elysium
Internet, Inc. recognized revenue when it made a sale through its director
business. Sales generaged from third-party aggregators were recognized in the
month they are made.
 Although our
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. We have set up a reserve for possible activation charge-backs.
Based on SFAS No. 48, this is permitted if reliable estimates of the expected
refunds can be made on a timely basis, the refunds are being made for a large
pool of homogeneous 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 our
management. 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, 2007.
 
 INVENTORIES
  Inventories
are valued at the lower of cost determined on a first-in, first-out method, or
market value.
  ITEM
8. FINANCIAL STATEMENTS.
  5
  Table of Contents
 
 FTS
Group, Inc. and Subsidiary
 Index
to Consolidated Financial Statements
 Item
              
              PageReport of Independent Registered Public
      Accounting Firm
              
              F-2Consolidated Balance Sheets as of December 31, 2007
      and 2006
              
              F-3Consolidated Statements of Operations for
      the years ended December 31, 2007 and 2006
              
              F-4Consolidated Statements of Stockholders’
      Equity (Deficiency) for the Years ended December 31, 2007 and
      2006
              
              F-5Consolidated Statements of
      Cash Flows for the years ended December 31, 2007 and
    2006
              
              F-6Notes to the Consolidated Financial
      Statements
              
              F-7
  F-1
 Table of Contents
  R.E. Bassie & Co.
 Certified
Public Accountants
   6671
      Southwest Freeway, Suite 550Houston,
      Texas 77074-2220Tel:
      (713) 272-8500E-Mail:
      Rebassie@aol.com
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Stockholders
 FTS
Group, Inc.:
 
 We have
audited the accompanying consolidated balance sheets of FTS Group, Inc. and
subsidiaries as of December 31, 2007 and 2006, and the related consolidated
statements of operations, stockholders' equity and cash flows for the two-year
period ended December 31, 2007. 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, 2007 and 2006, and the results of their
operations and their cash flows for two-year period ended December 31, 2007, 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/ R. E.
Bassie & Co.
 Houston,
Texas
 April 11,
2008
  F-2
  Table of Contents
  FTS GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2007 AND 2006
 
 Assets
              
              2007
              
              
              2006Current
      assets:Cash
      and cash equivalents
              
              $
              21,713
              
              
              $
              115,056Accounts
      receivable
              
              
              71,987
              
              
              
              130,025Inventories
              
              
              285,168
              
              
              
              373,734Prepaid
      expenses and current assets
              
              
              172,767
              
              
              
              247,686Total
      current assets
              
              
              551,635
              
              
              
              866,501Property
      and equipment, net of accumulated depreciation
              
              
              121,986
              
              
              
              303,641Domain
      Portfolio
              
              
              238,156Unamortized
      discount on convertible debt
              
              
              192,991
              
              
              
              232,925Unamortized
      debt issuance costs
              
              
              -
              
              
              
              29,573Investments
              
              
              -
              
              
              
              92,505Goodwill
              
              
              5,177,696
              
              
              
              5,177,696Deposits
              
              
              6,386
              
              
              
              16,482Total
      assets
              
              $
              6,288,850
              
              
              $
              6,719,323Liabilities and Stockholders'
      EquityCurrent
      liabilities:Accounts
      payable and accrued expenses
              
              $
              802,238
              
              
              $
              548,707Loan
      from officer
              
              
              4,000
              
              
              
              -Current
      portion of notes payable to related parties, net of
    discount
              
              
              2,538,817
              
              
              
              1,820,215Convertible
      debentures-current portion
              
              
              1,217,005
              
              
              
              1,238,321Current
      installments of long-term debt-equipment loans
              
              
              -
              
              
              
              4,824Total
      current liabilities
              
              
              4,562,060
              
              
              
              3,612,067Fair
      value of derivative liabilities
              
              
              115,049
              
              
              
              453,039Convertible
      debentures
              
              
              -
              
              
              
              -Long-term
      debt to related parties, less current installments
              
              
              -
              
              
              
              1,000,000Total
      liabilities
              
              
              4,677,109
              
              
              
              5,065,106Stockholders'
      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,
    2007
              
              
              10,000
              
              
              
              10,000Common
      stock, $.001 par value.  Authorized 855,000,000
      shares:174,205,601
      shares issued and outstanding at December 31, 2007,137,650,469
      shares issued and outstanding at December 31, 2006.
              
              
              174,206
              
              
              
              137,650Additional
      paid-in capital
              
              
              12,745,977
              
              
              
              12,231,626Accumulated
      deficit
              
              
              (11,308,442
              )
              
              
              (10,704,226
              )1,621,741
              
              
              
              1,675,050Deferred
      stock compensation
              
              
              (10,000
              )
              
              
              (20,833
              )Total
      stockholders' equity
              
              
              1,611,741Total
      liabilities and stockholders' equity
              
              $
              6,288,850
              
              
              $
              6,719,323See
      accompanying notes to consolidated financial statements.
 
 F-3
  Table of Contents
 
 FTS GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
  2007
              
              
              2006Revenues
              
              $
              7,024,300
              
              
              $
              6,678,076Cost of
      goods sold
              
              
              3,044,445
              
              
              
              2,369,231Gross
      profit
              
              
              3,979,855
              
              
              
              4,308,845General and
      administrative expenses
              
              
              4,604,841
              
              
              
              4,085,426Income
      (loss) from operations
              
              
              (624,986
              )
              
              
              223,419Other
      income (expense)Change
      in fair value of Derivative Liabilities
              
              
              337,990
              
              
              
              1,400,902Interest
              
              
              (317,220
              )
              
              
              (392,954
              )20,770
              
              
              
              1,007,948Net income
      (loss)
              
              $
              (604,216
              )
              
              $
              1,231,367Per share information:Weighted
      average shares outstandingBasic
              
              
              158,207,128
              
              
              
              124,851,085Diluted
              
              
              158,207,128
              
              
              
              214,014,960Net
      loss per common share:Basic
              
              0.00
              
              
              
              0.01Diluted
              
              
              0.00
              
              
              
              0.01See
      accompanying notes to consolidated financial statements.
 F-4
  Table of Contents
  FTS GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
  Preferred
              
              
              
              
              
              Common
              
              
              Additional
              
              
              
              
              
              
              
              
              TotalPreferred
              
              
              Stock
              
              
              Common
              
              
              Stock
              
              
              Paid-In
              
              
              Deferred
              
              
              Accumulated
              
              
              Stockholders'Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Compensation
              
              
              Deficit
              
              
              EquityBeginning
      balance January 1, 2006
              
              
              -
              
              
              
              -
              
              
              
              102,098,756
              
              
              $
              102,099
              
              
              $
              10,196,539
              
              
              
              -
              
              
              $
              (11,935,593
              )
              
              $
              (1,636,955
              )Issuance
      of commonshares
      for cash
              
              
              -
              
              
              
              -
              
              
              
              26,603,651
              
              
              
              26,603
              
              
              
              828,726
              
              
              
              
              
              
              
              -
              
              
              
              855,329Issuance
      of commonshares
      for services
              
              
              -
              
              
              
              -
              
              
              
              4,920,000
              
              
              
              4,920
              
              
              
              93,480
              
              
              
              (30,000
              )
              
              
              -
              
              
              
              68,400Issuance
      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
              
              
              
              37,345
              
              
              
              
              
              
              
              -
              
              
              
              38,085Amortization
      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
              )
              
              $
              1,654,217Issuance
      of commonshares
      for services
              
              
              -
              
              
              
              -
              
              
              
              12,000,000
              
              
              
              12,000
              
              
              
              108,000
              
              
              
              -
              
              
              
              -
              
              
              
              120,000Issuance
      of common stockfor
      repayment of debt
              
              
              -
              
              
              
              -
              
              
              
              8,805,132
              
              
              
              8,806
              
              
              
              170,341
              
              
              
              -
              
              
              
              -
              
              
              
              179,147Issuance
      of common sharesas
      loan inducements
              
              
              -
              
              
              
              -
              
              
              
              15,750,000
              
              
              
              15,750
              
              
              
              236,010
              
              
              
              -
              
              
              
              
              
              
              
              251,760Amortization
      ofdeferred
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10,833
              
              
              
              -
              
              
              
              10,833Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (604,216
              )
              
              
              (604,216
              )Balance
      December 31,2007
              
              
              1,000,000
              
              
              $
              10,000
              
              
              
              174,205,601
              
              
              $
              174,206
              
              
              $
              12,745,977
              
              
              $
              (10,000
              )
              
              $
              (11,308,442
              )
              
              $
              1,611,741See
      accompanying notes to consolidated financial
    statments.
 
 F-5
  Table of Contents
 
 FTS GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
  2007
              
              
              2006Cash
      flows from operating activities:Net
      income (loss)
              $
              (604,216
              )
              $
              1,231,367Adjustments to reconcile net income to net cash used in operating
      activities:Depreciation
      and amortization
              
              
              451,002
              
              
              
              399,592Common
      shares issued for services
              
              
              120,000
              
              
              
              68,400Amortization
      of debt discount
              
              
              19,516
              
              
              
              2,679Amortization
      of deferred stock compensation
              
              
              10,833
              
              
              
              -(Gain)
      loss on disposal of assets
              
              
              102,727
              
              
              
              (7,612
              )Change
      in fair value of derivative liabilities
              
              
              (337,990
              )
              
              
              (1,400,902
              )(Increase)
      decrease in operating assets:Accounts
      receivable
              
              
              58,038
              
              
              
              (32,066
              )Inventories
              
              
              88,566
              
              
              
              (196,010
              )Prepaid
      expenses
              
              
              74,919
              
              
              
              268,303Other
      assets
              
              
              10,096
              
              
              
              (343
              )Increase
      (decrease) in operating liabilities:Accounts
      payable and accrued expenses
              
              
              386,903
              
              
              
              (25,809
              )Net
      cash used in operating activities
              
              
              380,394
              
              
              
              307,599Cash
      flows from investing activities:Net
      assets 100% acquisition of See World Satellites, Inc.
              
              
              -
              
              
              
              (206,100
              )Investment in private entities
              
              
              (35,874
              )
              
              
              (92,505
              )Capital
      expenditures for property and equipment
              
              
              (15,580
              )
              
              
              (88,592
              )Proceeds from asset dispositions
              
              
              5,947
              
              
              
              12,855Expenditures
      for acquisition of intellectual property
              
              
              (238,156
              )
              
              
              -Proceeds from
      funding restricted for investment in acquisition
              
              
              -
              
              
              
              (440,000
              )Release
      of restriction on funding proceeds for investment in
      acquisition
              
              
              -
              
              
              
              1,060,000Payment
      to See World Satellites, Inc. acquisition
              
              
              -
              
              
              
              (1,000,000
              )Net cash used in investing activities
              
              
              (283,663
              )
              
              
              (754,342
              )Cash
      flows from financing activities:Proceeds
      from issuance of stock
              
              
              -
              
              
              
              862,829Proceeds from
      convertible debentures
              
              
              -
              
              
              
              30,000Proceeds from
      stock issued under equity line
              
              
              -
              
              
              
              33,110Proceeds from
      notes payable related parties
              
              
              50,700
              
              
              
              710,002Repayments of
      notes payable-truck loans
              
              
              (4,824
              )
              
              
              (15,823
              )Repayments of
      notes payable to individuals
              
              
              (179,000
              )Repayment of
      loans from related parties
              
              
              (56,950
              )
              
              
              (1,301,398
              )Net cash provided by financing activities
              
              
              (190,074
              )
              
              
              318,720Net
      decrease in cash
              
              
              (93,343
              )
              
              
              (128,023
              )Cash
      at beginning of year
              
              
              115,056
              
              
              
              243,079Cash
      at end of year
              
              $
              21,713
              
              
              $
              115,056Supplemental
      schedule of cash flow information:Interest
      paid
              
              $
              4,822
              
              
              $
              10,770Supplemental
      disclosure of non-cash investing and financing activities:Stock
      issued in exchange for convertible debentures
              
              $
              179,147
              
              
              $
              8,085Stock
      issued as loan inducements
              
              $
              251,760
              
              
              $
              10,714Acquisition
      of See World Satellites, In.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
              )$
              1,000,000See
      accompanying notes to consolidated financial statements.
 F-6
  Table of Contents
  FTS
GROUP, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2007
 
 (1) Summary of
Significant Acounting 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
three wholly-owned subsidiaries See World Satellites, Inc., Elysium Internet,
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. Through its wholly-owned subsidiary Elysium Internet, Inc.
the Company owned and operated an Internet advertising media business focused in
the local directory market.. 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. The Comany sold its Elysium Internet business on April 4,
2008.
 
 PRINCIPLES
OF CONSOLIDATION
  The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries: FTS Wireless, Inc., See World Satellites, Inc. and
Elysium Internet, 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.
  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.
  The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
 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, 2007.
 
 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.
 
 The
Company's wholly-owned subsidiary, Elysium Internet, Inc.  recognized
revenue when it made a sale through its directory business. Sales generated from
third-party aggregators were recognized in the month they were
made.
 
 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
commissionspecified
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, 2007 and 2006, 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 $114,866 and
$116,455 for the years ended December 31, 2007 and 2006,
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.
 
 FAIR
VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
 
 Estimating
the fair value of the Company’s 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 (SFAS 133).
 
 The
Company does not use derivative financial instruments to hedge exposures to
cash-flow, market or foreign-currency risks. However, the Company frequently
enters 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
SFAS 133, these instruments are required to be carried as derivative
liabilities, at fair value, in the Company’s financial statements.
 
 The
Company estimates 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), the Company considers, 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, the Company generally uses 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, the Company generally uses 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, the Company
projects and discounts 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 the
Company’s trading market price which has high-historical volatility. Since
derivative financial instruments are initially and subsequently carried at fair
values, the Company’s income will reflect the volatility in these estimate and
assumption changes.
 
 NEW
ACCOUNTING STANDARDS
  In June
2006, FASB issued FIN No. 48, “Accounting for Uncertainty in Income
Taxes.”  The interpretation applies to all tax positions related to
income taxes subject to FASB Statement No. 109, “Accounting for Income
Taxes.”  FIN No. 48 clarifies the accounting for uncertainty in income
taxes by prescribing a minimum recognition threshold in determining if a tax
position should be reflected in the financial statements.  Only tax
positions that meet the “more likely than not” recognition threshold may be
recognized.  The interpretation also provides guidance on
classification, interest and penalties, accounting in interim periods,
disclosure, and transition requirements for uncertain tax
positions.  FIN No. 48 will be effective for the Company’s fiscal year
ending December 31, 2007.  The Company does not believe that there are
material tax positions that would result in a material impact upon
implementation of FIN No. 48.
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.”  This standard establishes a single authoritative
definition of fair value, sets out a framework for measuring fair value and
expands disclosures about fair value measurements.  SFAS No. 157
applies to fair value measurements already required or permitted by existing
standards.  SFAS No. 157 will be effective for the Company’s fiscal
year ending December 31, 2008.  The Company is currently evaluating
the requirements of SFAS No. 157 and has not yet determined the impact on its
financial condition and results of operations.
 
 In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and other Postretirement Plans – an amendment of FASB Statement
No. 87, 88, 106 and 132R.”  This pronouncement requires an employer to
make certain recognitions, measurements, and disclosures regarding defined
benefit postretirement plans.  The Company does not have any defined
benefit postretirement plans and SFAS No. 158 will not have any impact on its
financial condition and results of operations.
 
 In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108 “Considering the Effects of Prior Year Misstatements in Current
Year Financial Statements” (“SAB 108”).  SAB 108 provides guidance on
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment.  SAB
108 is effective for fiscal years ending after November 15, 2006.  The
adoption of SAB 108 did not have an impact on the Company’s consolidated
financial statements.
 
 In
February 2007, the FASB issued SFAS No 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS 159”), which permits entities to choose
to measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value.  SFAS 159
will be effective for us on January 1, 2008.  The Company is currently
evaluating the impact of adopting SFAS 159 on its financial position, cash flows
and results of operations.
  F-7
  Table of Contents
  (2)  Property and
Equipment
  Major
classes of property and equipment, together with their estimated useful lives,
consisted of the following at December 31, 2007 and December 31,
2006:
  Years
              
              
              2007
              
              
              2006Leasehold
      Improvements
              
              
              5
              
              
              4,032
              
              
              142,822Furniture
      and Fixtures
              
              
              5
              
              
              208,252
              
              
              194,340Equipment
              
              
              3-5
              
              
              92,595
              
              
              120,583Vehicles
              
              
              3
              
              
              18,777
              
              
              25,777Total
      property and equipment
              
              
              
              
              
              323,656
              
              
              483,522Less:
      accumulated depreciation
              
              
              
              
              
              (201,670
              )
              
              (179,881
              )Net
      property and equipment
              
              
              
              
              
              121,986
              
              
              303,641
  Depreciation
expense for the year ended December 31, 2007 and 2006 was $88,563 and
$124,370, respectively
 
 (3)   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.
  (4)  Convertible Debt
  In
December 2005 and January 2006, the Company raised a total of $1,470,000 from
the issuance of $1,858,622 in Secured Convertible Promissory Notes to
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 an
additional $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 36,260,486 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.
 
 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 Notes. 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;
and
 
 - the
Company gave the Assignee the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering and to obtain any additional
information which it possessed or could acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information
furnished.
  The
Company accounted for the issuance of stock 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.
  (5)    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.
  2007
              
              
              2006Net
      income (losses) before taxes
              
              $
              (604,216
              )
              $
              1,231,367Times
      the statutory tax rates
              
              
              34.00
              %
              
              34.00
              %(205,433
              )
              
              (418,665
              )Temporary
      differencesDerivative
      (income) expense
              
              
              (114,917
              )
              
              (476,309
              )Goodwill
      amortization
              
              
              (117,361
              )
              
              (117,361
              )Net
      operating losses
              
              
              437,711
              
              
              175,005$
              -
              
              $
              -Deferred
      Tax Assets
              
              $
              3,235,375
              
              $
              3,029,942Less
      valuation allowance
              
              
              (3,235,375
              )
              
              (3,029,942
              )$
              -
              
              $
              -
  The net
operating loss carry-forward of approximately $9,400,000 will expire
through 2025.
 
 (6)  Operating Leases
  The
Company leases real property for its six retail locations and its corporate
office. Four of the locations have lease terms ranging from one to five years
while two locations are on a month-to-month basis.
  Future
minimum payments due on the non-cancelable leases are as follows:
  AnnualYear
      Ending
              
              Payments2008
              $
              93,6002009
              
              52,8002010
              
              52,8002011
              
              52,8002012
              
              17,600$
              269,600
  Rent
expense was $217,056 and $176,638 for the years ended December 31, 2007 and
2006, respectively.
 
 (7)   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.
 
 (8)   Stock
  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 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.
 
 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.
 
 On
November 8, 2006, the Company issued 788,000 shares to an investor at $0.04 for
proceeds of $32,179.
 
 On
January 5, 2007, the Company issued 1,000,000 restricted shares of common stock
relating to the conversion of $40,000 of debt at a price of $0.04 per
share.
  On
January 22, 2007, the Company issued 15,000,000 restricted shares of common
stock to four accredited investors relating to a $1,000,000
financing.
  On
February 13, 2007, the Company issued 160,177 restricted shares of common stock
relating to the conversion of $4,627 of debt at a price of $0.029 per
share.
  On
February 14, 2007, the Company issued 188,857 restricted shares of common stock
relating to the conversion of $4,627 of debt at a price of $0.025 per
share.
  On March
1, 2007, the Company issued 263,911 restricted shares of common stock to two
investors relating to the conversion of $6,940 of debt at a price of $0.026 per
share.
  On March
16, 2007, the Company issued 246,050 restricted shares of common stock relating
to the conversion of $9,710 of debt at a price of $0.039 per share.
  On March
30, 2007, the Company issued 275,430 restricted shares of common stock to two
investors relating to the conversion of $6,940 of debt at a price of $0.025 per
share.
 
 On May 4,
2007, the Company issued 230,303 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.0165 per share.
 
 On June
11, 2007, the Company issued 199,117 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.01908 per share.
 
 On June
14, 2007, the Company issued 705,882 restricted shares of common stock to an
institutional investor relating to the conversion of $14,400 of debt at a price
of $0.02040 per share.
 
 On June
18, 2007, the Company issued 245,098 restricted shares of common stock to an
institutional investor relating to the conversion of $5,000 of debt at a price
of $0.02040 per share.
 
 On July
9, 2007, the Company issued 588,235 restricted shares of common stock to an
institutional investor relating to the conversion of $11,000 of debt at a price
of $0.01870 per share.
 
 On July
30, 2007, the Company issued 208,905 restricted shares of common stock to an
institutional investor relating to the conversion of $3,800 of debt at a price
of $0.01819 per share.
  F-8
  Table of Contents
 
 On July
30, 2007, the Company issued 750,000 restricted shares of common stock to an
investor relating to a $25,000 loan agreement entered into.
 
 On
September 18, 2007, the Company issued 1,522,491 shares of common stock to an
institutional investor relating to the conversion of $22,000 of debt at a price
of $0.0145 per share.
 
 On
October 22, 2007, the Company issued 346,021 shares of restricted common stock
to an institutional investor relating to the conversion of $5,000 of debt at a
price of $0.0145 per share.
 
 On
December 12,2007, the Company issued 490,196 shares of restricted common stock
to an institutional investor relating to the conversion of $7,500 of debt at a
price of $0.0153 per share.
 
 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 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, as amended, 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.
 
 (9)   Options and
Warrants
 
 Options
  The
Company had a Non-Qualified Stock Option and Stock Grant Plan. For the year
ended December 31, 2005, the Company had not granted any options. Under the
Plan, the Company's Board of Directors had reserved 2,500,000 shares that may
have been granted at the Board of Directors' discretion. No option may have been
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, 2007:
  The
Company had 3,000,000 warrants outstanding relating to a dividend declared to
stockholders of record on August 27, 2004. The warrants had an exercise price of
$0.25 and expired on August 7, 2007.
  In
accordance with the subscription agreement relating to the private placement the
Company closed during the period ended 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 the A Warrants had an initial exercise
price of $0.12. The Company filed the terms and conditions of the financing and
registration rights in March 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.
  The table
below summarizes warrants issued prior to December 2005 and still
outstanding as of the period ended December 31, 2007.
 
 December 31,
      2007Underlying
      Shares
              
              
              Exercise
      PriceWarrants
      issued during 2000
              
              
              1,036,000
              
              $
              1.50Warrants
      issued during 2004 (Expired on August 7, 2007)
              
              
              0
              
              $
              0Warrants
      issued during 2004 and 2005, A Warrants
              
              
              4,956,250
              
              $
              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.
  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 per share and the B Warrants have an exercise
price of $0.0239 per share.
  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.
  The table
below summarizes the Class A and B Warrants outstanding as of December 31,
2007, relating to the financing closed on December 29, 2005.
 
 December 31,
      2007Underlying
      Shares
              
              
              Exercise
      PriceWarrants
      issued in December 2005A
      Warrants
              
              
              46,465,550
              
              
              $
              0.02868B
      Warrants (new)
              
              
              11,458,338
              
              
              $
              0.04
  Based on
the table of A and B Warrants related to the December 31, 2005 financing, the
following summarizes the settlement alternatives at each balance sheet date
assuming net settlement in shares:
  December 31,
      2007
                
                
                December 31,
      2006Shares
                
                Fair
      Value
                
                Shares
                
                Fair
      ValueA Warrants
                
                46,465,550
                
                $115,049
                
                
                46,465,550
                
                $302,026B Warrants-Old (Expired November
      18, 2007)
                0
                
                $0
                
                
                23,232,775
                
                $151,013B
    Warrants-New
                
                11,458,338
                
                $0
                
                
                0
                
                $057,923,888
                
                $115,049
                
                
                69,698,325
                
                $453,039
  Based on
the terms of Subscription Agreement in conjunction with Black-Scholes
methodology of calculating fair value amounts, a change in the price of the
Company's common shares is one factor in a four factor calculation which also
considers volatility, risk-free interest rate and time until expiration. A rise
in Company stock will generally have the affect of increasing fair value. This
however, is offset by decreasing life until expiration.
  Although, the stockholders did authorize an increase in
shares from 150,000,000 to 855,000,000 in October 2006, the warrants are still
classified as a derivative in total. Per EITF-0019, the reset provision in the
Subscription Agreement prevents the warrants from being reclassified into equity
while they are outstanding. Warrants will be classified into equity upon
effectiveness of the SB-2 and exercise of the warrants into shares.
  10)  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 stockholder 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
              
              $
              185,850Property
      and Equipment, net
              
              $
              136,454Goodwill
              
              $
              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.
  Unaudited
pro forma data (included in the Company's 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, pro forma 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
transactions between January 1, 2006 through January 2, 2006 to be immaterial,
pro forma presentation is deemed unnecessary.
  (11)  Related Party Transactions (See World
Acquisition)
  At
December 31, 2007, 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 Satellites, Inc. 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 among Echo Star Satellites, L.L.C., DISH Network
Services, L.L.C. and See World. During the three months ended September 30,
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. In January 2007, the Company made a $1,000,000 payment to Mr.
Miller reducing the outstanding note amount to $1.75 million. In February 2007,
the Company made a $162,500 payment to Mr. Miller reducing the outstanding note
amount to $1.587 million at September 30, 2007. The Company filed an 8-K with
the terms and conditions of this note on January 5, 2006.
  F-9
  Table of
Contents
 (12)  Stock-Based
Compensation
  The
disclosures required by paragraph 84 of SFAS 123R are stated below, although the
Company had not granted any options from 2001 to December 31,
2007.
  December
      31, 2007
              
              
              December
      31, 2006Net
      Income/ (Loss) as reported
              
              $
              (604,216
              )
              
              $
              1,271,367Basic
      and diluted earnings per share as reported
              
              $
              (0.00
              )
              
              $
              0.01Share-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 the 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
              
              $
              (604,216
              )
              
              $
              1,271,367Pro-forma
      basic and diluted earnings per share as if the fair-value based method had
      been applied to all awards.
              
              $
              (0.00
              )
              
              $
              0.01
  (13) Segment
Information
 
 During
2007, the Company had three reportable segments and corporate overhead: (1)
product sales for wireless products segment, includes sales of wireless handsets
and accessories; (2) service revenues for installments of satellites segment,
includes sales of satellite dish equipment and installations; (3) sales revenue
generated through Internet advertising and affiliate programs and (4) a holding
company for current and future commercial ventures. The corporate overhead
includes the Company's investment holdings including financing current
operations and expansion of its current holdings as well as evaluating the
feasibility of entering into additional businesses.
  The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performances
based on profit or loss from operations before income taxes, not including
nonrecurring gains and losses and foreign exchange gains and
losses.
  The
Company's reportable segments are strategic business units that offer different
technology and marketing strategies.
  The
Company's areas of operations are principally in the United States. No single
foreign country or geographic area is significant to the consolidated financial
statements.
  Consolidated
revenues, operating income/(losses), and identifiable assets were as
follows:
  December
31,2007
                
                
                2006Revenues:Service
      revenue - See World Satellites, Inc.
                
                $
                4,401,206
                
                
                $
                4,836,237Product
      sales - FTS Wireless, Inc.
                
                $
                2,577,869
                
                
                $
                1,841,839Domain
      Revenue-Elysium Internet, Inc.
                
                $
                45,225
                
                
                $
                -Corporate
                
                $
                -
                
                
                $
                -$
                7,024,300
                
                
                $
                6,678,076Income (loss) from
      operations:Service
      revenue - See World Satellites, Inc.
                
                $
                562,773
                
                
                $
                1,196,206Product
      sales - FTS Wireless, Inc.
                
                $
                (156,408
                )
                
                $
                (234,950
                )Domain
      Revenue-Elysium Internet, Inc.
                
                $
                10,824
                
                
                $
                -Corporate
                
                $
                (1,042,175
                )
                
                $
                (737,837
                )$
                (624,986
                )
                
                $
                223,419Identifiable
      assets:Service
      revenue - See World Satellites, Inc.
                
                $
                5,718,330
                
                
                $
                5,960,762Product
      sales - FTS Wireless, Inc.
                
                $
                55,371
                
                
                $
                213,507Domain
      Revenue-Elysium Internet, Inc.
                
                $
                244,072
                
                
                $
                -Corporate
                
                $
                271,075
                
                
                $
                545,054$
                6,288,848
                
                
                $
                6,719,323
  (14) 
Earnings Per Share
  Basic
earnings (loss) per share are calculated on the basis of the weighted average
number of common shares outstanding. Diluted earnings per share, in addition to
the weighted average determined for basic earning (loss) per share, include
common stock equivalents, which would arise from the conversion of the preferred
stock, convertible notes payable and warrants to purchase common shares. Diluted
earnings per common share assume that any dilutive convertible notes and
preferred stock that were outstanding at the beginning of each year were
converted at those dates. It also assumes that outstanding common shares were
increased by shares issuable upon exercise of those warrants for which market
price exceeds exercise price.
 For
      the Years EndedDecember
      312007
                  
                  
                  2006Basic
      income (loss) per share:Net
      income (loss)
                  
                  $
                  (604,216
                  )
                  
                  $
                  1,231,367Weighted
      average common shares outstanding
                  
                  
                  158,208,128
                  
                  
                  
                  124,851,085Diluted
      income per share:Weighted
      average common shares outstanding
                  
                  
                  N/A
                  
                  
                  
                  124,851,085Convertible
      notes payable
                  
                  
                  N/A
                  
                  
                  
                  46,465,550Warrants
      A
                  
                  
                  N/A
                  
                  
                  
                  46,465,550Warrants
      B
                  
                  
                  N/A
                  
                  
                  
                  23,232,775Weighted
      average common shares outstanding for diluted net earning per
      share
                  
                  
                  158,208,128
                  
                  
                  
                  241,014,960Net income (loss) per share -
      basic
                  
                  $
                  0.00
                  
                  
                  $
                  0.01Net income (loss) per share -
      diluted
                  
                  $
                  0.00
                  
                  
                  $
                  0.01
 (15) 
Subsequent Events
  Subsequent
to the period ended December 31, 2007, the Company sold its wholly owned
subsidiary Elysium Internet, Inc. to US Biodefense, Inc. a Company majority
owned by Scott Gallagher our Chairman and Chief Executive Officer. The total
transaction value was $2 Million dollars. The valuation of the deal was based on
third party domain name valuations, amount’s paid to acquire domain names,
recent market sales of domain names as well as current valuations of portfolio’s
of similar size. The Company received a note from US Biodefense, Inc. for
$1.5 Million payable over 12 months upon completion of a financing, in addition
the Company received shares of a new class of preferred stock convertible into
60% of the issued and outstanding shares at the time of the first
conversion. The Company
believes this transaction was completed under terms which would have been
substantially the same as if the transaction were completed with independent
third parties.
 
 Also
subsequent to the year end the Company's wholly owned subsidiary FTS
Wireless sold 3 of its retail wireless locations. The Company is restructuring
its business model to focus on higher margin Internet sales of wireless products
due to changes in rate plans of the national wireless carriers that are now more
competitive with Metro PCS. The Company also starting to redirect its efforts
towards its cell phone translator project and completing a liquidity event with
its wireless operations later in 2008.
 F-10
  Table of Contents
 
 ITEM
9. 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 2007 or 2006.
 
 ITEM
9A(T). 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-K.  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.
 
 Management’s
Report on Internal Control Over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting. Our internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting principles. Our
internal control over financial reporting includes those policies and procedures
that:
 
 1.  pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect our transactions and dispositions of our assets;
  2.  provide
reasonable assurance that our transactions are recorded as necessary to permit
preparation of our financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures of our Company are
being made only in accordance with authorizations of our management and our
directors; and
  3.  provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of our assets that could have a material effect
on our financial statements.
  Internal
control over financial reporting includes the controls themselves, monitoring
and internal auditing practices and actions taken to correct deficiencies
identified.
  Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with policies or procedures may deteriorate.
  Under the
supervision and with the participation of our management, including our Chief
Executive Officer / Interim Chief Financial Officer, we conducted an assessment
of the effectiveness of our internal control over financial reporting as of
December 31, 2007. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal
Control—Integrated
Framework, specifically as supplemented by the COSO publication, Internal Control over Financial
Reporting – Guidance for Smaller Public Companies. Based on this
evaluation, our management concluded that our internal control over financial
reporting was effective as of December 31, 2007.
 
 Changes
in Internal Controls
 
 There
were no changes in our internal control over financial reporting that occurred
during the fourth quarter covered by this annual report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to the temporary rules of the
Securities and Exchange Commission that permit us to provide only management’s
report in this annual report.
 
 ITEM
9B. OTHER INFORMATION.
 
 None.
 PART III
 
 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.
 
 The
following individuals presently serve as officers and directors of the
Company.
  Name
              
              Age
              
              PositionScott
      Gallagher
              
              41
              
              Chairman
      of the Board of Directors, Chief Executive Officer and
      PresidentDavid
      R. Rasmussen
              
              41
              
              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 NASD licenses
series 7, 63 and 24 all of which were retired in good standing. In January of
2008 Mr. Gallagher became the Chairman and Chief Executive Officer of US
Biodefense, Inc., a publicly traded Internet media Company.
 
 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, 2007, 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)(5)(ii) of Regulation S-K. 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, 2007, we believe
Forms 3, 4 and 5 were timely filed, except that Mr. Gallagher filed a Form 4
representing one transaction one day late.
 
 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 stockholder 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 our
company's business and meet the needs of our company and the
board.
  The board
will consider candidates for director recommended by our stockholders.
Candidates recommended by stockholders 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., 300 State Street East, Suite 226,
Oldsmar, Florida 34677, Attention: Scott Gallagher. All candidate referrals are
reviewed by at least one current board member.
 
 ITEM
11. EXECUTIVE COMPENSATION.
 
 The
following table shows the compensation paid or accrued during the fiscal years
ended December 31, 2007 and 2006 to (1) our Chief Executive Officer and (2)
our Chief Operating Officer.
  Summary
Compensation Table
 
 Name
      and Principal Position
                (a)
              
              
              Year
                (b)
              
              
              Salary
                $
                (c)
              
              
              Bonus
                $
                (d)
              
              
              Stock
      Awards (2)
                $
                (e)
              
              
              All
      Other Compensation
                $
                (i)
              
              
              Total
                $
                (j)Scott
      Gallagher, Principal Executive Officer
              
              
              2007
              
              $
              200,000
              
              $
              50,000
              
              
              
              
              
              
              
              $
              250,0002006
              
              $
              200,000
              
              $
              50,000
              
              $
              
              
              $
              
              
              $
              250,000David
      Rasmussen, Chief Operating Officer
              
              
              2007
              
              $
              150,000
              
              $
              25,000
              
              $
              
              
              
              
              
              $
              175,0002006
              
              
              150,000
              
              
              25,000
              
              
              30,000(1)
              
              $
              
              
              $
              205,000
  (1)    
In 2006, Mr. Rasmussen received 1,500,000 restricted shares as part of his
employment contract.
  (2)     A discussion of the
assumptions used to value these awards are included in Note 1, Notes to
Consolidated Financial Statments.
  NARRATIVE
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 2 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
  6
  Table of Contents
 
 OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
  We did
not grant stock options in 2006 or 2007. Additionally, no stock options were
exercised by any of the named executive officers in 2006 or 2007.
 
 DIRECTOR
COMPENSATION
  During
2007, our directors received a grant of 250,000 shares of restricted stock. For
their service during 2008, directors will receive $10,000 in cash or stock
at our option.
 
 ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
 
 The
following table sets forth certain information as of March 31, 2008
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
stockholders listed below have sole voting and investment power. The address of
each of the beneficial owners is 300 State Street East, Suite 226, Oldsmar,
Florida 34677, 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
              
              
              21,797,235
              
              6.7
              %David
      R. Rasmussen
              
              
              1,727,500
              
              
              %All
      directors and current executive officers as a group (2
      persons)
              
              
              23,524,735
              
              7.3
              %
 
 * 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., 300 State Street East, Suite 226, Oldsmar Florida 34677.
 
 (2) The
number of shares of common stock issued and outstanding as of March 31, 2007
was 324,344,378 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, 2008, plus shares of common stock
subject to options and warrants held by such person on December 31, 2008 and
exercisable within 60 days thereafter.
  SECURITIES AUTHORIZED FOR ISSUANCE UNDER
EQUITY COMPENSATION PLANS
 
 The following table provides information
as of December 31, 2007, regarding our stock option plan compensation under
which our equity securities are authorized for issuance:
 
 Equity
Compensation Plan Information
 
 Plan
      Category
              
              Number
      of securities to be issued upon exercise of outstanding options, 
      warrants and rights
                (a)
              
              
              Weighted-average
      exercise price of outstanding options, warrants and
      rights
                (b)
              
              
              Number of securities remaining
      available for future issuance under equity compensation plans (excluding
      securities reflected in column
                (a) (c)Equity
      compensation plans approved by security holders
              
              
              
              
              
              $Equity
      compensation plans not approved by security holdersTotal
              
              
              
              
              
              $
 
 Under our 2007 Stock Option Plan, the
total number of shares of common stock that may be granted is 50,000,000. The
Plan provides that shares granted come from our authorized but unissued common
stock. The price of the options granted pursuant to these plans will not be
less than 100% of the fair market value of the shares on the date of
grant. The optionsexpire
tenyears from date of
grant. A total of 20,000,000shares are available for stock grants
under all plans, or 6.2% of
our issued and outstanding common stock as of December 31, 2007, including
existing securities to be issued upon exercise of currently outstanding options
and assuming all options under all plans were granted and
exercised.
 
 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
 CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
 
 On March
19, 2008, we entered into an asset purchase agreement with US Biodefense, Inc.,
a Utah corporation, pursuant to which US Biodefense agreed to purchase 100% of
the common stock and assume full operating control of the directories and all
funds received by our wholly-owned subsidiary, Elysium Internet, Inc., a Florida
corporation, beginning on the closing date which took place on April 4, 2008.
Upon closing of this transaction, Elysium ceased to be our wholly-owned
subsidiary and became a wholly-owned subsidiary of US Biodefense. Mr. Scott
Gallagher, our Chairman and Chief Executive Officer, is also the Chairman and
Chief Executive Officer of US Biodefense.
 
 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
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 2007.
 
 AUDIT-RELATED
FEES
 
 During
2007 we paid Gibson and Mayer $60,000 in fee’s for quarterly and annual audit
preparation of financial statements .
 
 TAX
FEES
 
 For their
review of tax matters, Gibson & Mayer, P.C. billed us a total of $1,500 in
the fiscal year ended December 31, 2006 and $1,500 in the fiscal year ended
December 31, 2007.
 
 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 2007, 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.
 
 PART
IV
  ITEM
15. 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
Certificate of Designation for Series A Convertible Preferred Stock, dated April
15, 1998 (included as Exhibit 2.2 to the Form 10SB12G filed August 24, 1998, and
incorporated herein by reference).
 3.3
Bylaws (included as Attachment C to the Definitive Proxy on Form DEF 14A filed
January 9, 2004, and incorporated herein by reference).
 
 3.4
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).
  3.5
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).
  3.6
Amendment to the Articles of Incorporation, as amended, dated October 20, 2006,
filed with the State of Nevada January 18, 2007 (filed herewith).
 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).
  7
  Table of Contents
  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).
 
 10.46
Asset Purchase Agreement between the Company and US Biodefense, Inc., dated
March 19, 2008 (included as exhibit 10.1 to the Form 8-K filed April 11, 2008,
and incorporated herein by reference).
 
 10.47
Promissory Note due January 3, 2010, issued to the Company by US Biodefense,
Inc. (included as exhibit 10.2 to the Form 8-K filed April 11, 2008, 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.
   SIGNATURES
  Pursuant
to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
 FTS
      GROUP, INC.By:
              /s/ Scott GallagherScott
      Gallagher, Chairman of the Board,
                Chief
      Executive Officer, Principal Accounting Officer and
      PresidentDate:
      April 15, 2008
  By:
              /s/ David R.
  RasmussenDavid
      R. Rasmussen, Chief Operating Officer and DirectorDate:
      April 15, 2008
  
 8