UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-K/A**


Amendment
      No. 1





xANNUAL
      REPORT PURSUANT
      TO SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934




For
      the
      fiscal year ended December 31, 2007




OR




o TRANSITION
      REPORT
      PURSUANT TO SECTION 13


OR
      15(d)
      OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from ____________ to ____________





**CSMG
      TECHNOLOGIES, INC.**


(Exact
      name of registrant as specified in its charter)


Texas
              0-27359
              74-2653437(state
                  of
                incorporation)
              (Commission
                File
                  Number)
              (IRS
                  Employer
                I.D.
                  Number)




501
      North
      Shoreline Drive, Suite 701 North


Corpus
      Christi, TX 78471


(361)
      887-7546


(Address
      and telephone number of registrant's principal


executive
      offices and principal place of business)





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange 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
oNo
x




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act. Yes
oNo
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
xNo
o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K 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. x




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of "large accelerated filer," "accelerated filer" and "smaller
      reporting company" in Rule 12b-2 of the Exchange Act. (Check one):




Large accelerated filer o
            Accelerated filer oNon-accelerated filer o
            Smaller
              reporting company x(Do not check if a smaller reporting
              company)





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.


Yes
oNo
x





As
      of
      June 30, 2007, the aggregate market value of the registrant’s $.001 par value
      common stock held by non-affiliates of the registrant was $32,683,223 based
      on
      the average bid and ask price of the registrant’s common stock reported on such
      date on the Over-The-Counter Bulletin Board.





As
      of
      March 1, 2008, the registrant had 38,519,469 shares of its $.001 par value
      common stock issued and outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCED**





None.





**TABLE
      OF CONTENTS**




PART
                  I
              
              
              
              PageItem
                  1.
              
              Business
              
              2Item
                  1A.
              
              Risk
                  Factors
              
              5Item
                  1B.
              
              Unresolved
                  Staff Comments
              
              5Item
                  2.
              
              Properties
              
              6Item
                  3.
              
              Legal
                  Proceedings
              
              6Item
                  4.
              
              Submission
                  of Matters to a Vote of Security Holders
              
              8PART
                  IIItem
                  5.
              
              Market
                  for Registrant’s Common Equity, Related Stockholder Matters and
                  IssuerPurchases
                    of Equity Securities
              
              8Item
                  6.
              
              Selected
                  Financial Data
              
              9Item
                  7.
              
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              10Item
                  7A.
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              18Item
                  8.
              
              Financial
                  Statements and Supplementary Data
              
              18Item
                  9.
              
              Changes
                  In and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              
              18Item
                  9A.
              
              Controls
                  and Procedures
              
              19
 Item
                    9B.
                
                Other
                    Information
                
                20
 PART
                    IIIItem
                    10.
                
                Directors,
                    Executive Officers and Corporate Governance
                
                21Item
                    11.
                
                Executive
                    Compensation
                
                24Item
                    12.
                
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    StockholderMatters
                
                25Item
                    13.
                
                Certain
                    Relationships and Related Transactions, and Director
                    Independence
                
                26Item
                    14.
                
                Principal
                    Accountant Fees and Services
                
                26Item
                    15.
                
                Exhibits,
                    Financial Statement Schedules
                
                27
  1


**EXPLANATORY
        NOTE**
  In
        this
        Form 10-K/A, we are restating our consolidated financial statements for the
        years ended December 31, 2007 and 2006, including the applicable
        notes.
  We
        do not
        plan to file an amendment to our Annual Report on Form 10-KSB for the year
        ended
        December 31, 2006. Nor do we plan to file amendments to our Quarterly Reports
        on
        Forms 10-QSB for the quarterly periods ended March 31, June 30 and September
        30,
        2007, respectively. Thus, you should not rely on any of the previously filed
        annual or quarterly reports relating to the foregoing periods since they
        are
        superseded by this report.
  For
        more
        detailed information about the restatement, please see Note 13, “Restatement of
        Prior Financial Statements” in the accompanying consolidated financial
        statements and “Restatement of Previously Issued Financial Results” in the
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” section of this Annual Report.
  In
        addition, management has concluded that we had a material weakness in our
        internal control over financial reporting relating to our accounting for
        options
        granted by our majority-owned subsidiary Live Tissue Connect, Inc. As described
        in more detail in Item 9A of this Annual Report, we have identified the causes
        of this material weakness and are implementing measures designed to remedy
        them.




**FORWARD-LOOKING
      STATEMENTS**




The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward-looking statements, which are identified by the words “believe,”
“expect,” “anticipate,” “intend,” “plan” and similar expressions. The statements
      contained herein which are not based on historical facts are forward-looking
      statements that involve known and unknown risks and uncertainties that could
      significantly affect our actual results, performance or achievements in the
      future and, accordingly, such actual results, performance or achievements may
      materially differ from those expressed or implied in any forward-looking
      statements made by or on our behalf. These risks and uncertainties include,
      but
      are not limited to, risks associated with our ability to successfully develop
      and protect our intellectual property, our ability to raise additional capital
      to fund future operations and compliance with applicable laws and changes in
      such laws and the administration of such laws. These risks are described below
      in “Item 1. Business” and “Item 7. Management’s Discussion
      and Analysis of Financial Condition and Results of Operations” included in this
      Form 10-K. Readers are cautioned not to place undue reliance on these
      forward-looking statements which speak only as of the date the statements were
      made.





**PART
      I**





**ITEM
      1. BUSINESS**





**Business
      Overview**




We
      were
      incorporated on November 17, 1992 in the State of Texas. We conduct our
      business from our headquarters in Corpus Christi, Texas and our office in Kiev,
      Ukraine. We first had revenues from operations in 1995. We are a technology
      management company that finances, owns, develops, patents, manages, licenses
      and
      markets innovative technologies.





We
      have a
      formal relationship with several organizations in Ukraine. They have, as their
      stockholders or members, Ukraine scientists, engineers and
      technicians.





We
      believe we are unique in our business mission. We have developed and own
      technologies that we have brought to the United States and other developed
      countries that were invented by the scientists and engineers of Ukraine.
      Included in these technologies and independent of other Ukraine business
      interests are:


·
                our
                    live biological tissue bonding/welding technology, which bonds
                    human
                    tissue without the use of sutures, staples, sealants or glues
                    (“Live
                    Tissue Bonding/Welding”);
                    and


·
                our
                    patented landfill gas purification system that processes raw
                    landfill gas
                    up to pipeline quality.





In
      1994
      we organized United Engineering Company (“UEC”), a Ukrainian company. In Ukraine
      it is referred to as a “joint stock company with a foreign investor.” We owned a
      one-third interest in UEC and the remaining owners were Ukraine companies and
      individuals. UEC is authorized by Ukraine law, among other things, to perform
      classified and secret construction works related to the national security of
      Ukraine. From 1995 to 2002 UEC negotiated contracts with United States and
      German contractors to dismantle the Ukraine nuclear and non-nuclear missiles,
      silos and related equipment under the START treaty. Such contracts were for
      amounts of approximately $6 million for United States contractors and DM4.7
      million for German contractors, primarily for dismantling ICBM silos. The
      shareholders of UEC elected to sell it to an unrelated party in March 2007
      and
      we recorded net proceeds of $278,500 from our pro rata share of the proceeds
      from the sale.





We
      identify state-of-the-art technologies that appear to have strong commercial
      application and in return for financing the costs of research and development,
      patent applications, manufacturing, and market distribution, we acquire
      ownership of these technologies, including all patents and other intellectual
      property in connection with these technologies. Our Live Tissue Bonding/Welding
      and CO2 separator technologies are examples of such projects.




2





Working
      through the Ukraine Academy of Sciences and the E.O. Paton Institute of Electric
      Welding, we have successfully negotiated technology transfer agreements for
      the
      Live Tissue Bonding/Welding Equipment Project and the Carbon Dioxide Separator
      Project set forth below.





**Business
      of the Company**





***Live
      Tissue Bonding/Welding Equipment*** **.** The E.O.
      Paton Institute of Electric Welding of the Ukraine National Academy of Sciences,
      Kiev, Ukraine (the “Paton Institute”) and the International Association of
      Welding (“IAW”), developed equipment that bonds and reconnects blood vessels and
      other soft tissues and organs using radio frequency fusion in substantially
      less
      time than other technologies. Animal testing resulted in minimal scar tissue
      formation. To date this equipment and technology has been used in more than
      10,000 human surgeries in Ukraine. In addition, our experience is that there
      is
      no need for prolonged special training of surgeons and surgical personnel to
      use
      this equipment.





We
      have 31 patent patents and applications pending relating to our live tissue
      bonding/welding technology, including 12 in the United States and 19 in
      other countries, including  European countries, Russia, Japan, Australia,
      Canada, India and China.  Our issued patents to date consist of four United
      States patents, one European Union patent and one Australian patent have been
      issued. In
      addition, the Ukraine Ministry of Health has approved the technology for
      commercial development in Ukraine.





In
      2002,
      we formed Live Tissue Connect, Inc., a Delaware corporation, through which
      we
      will develop the tissue bonding/welding technology. We own 86% of Live Tissue
      Connect, Inc. In March 2005, Live Tissue Connect entered into an agreement
      with
      ConMed Corporation of Utica, New York involving a potential licensing of our
      technology. That agreement, and all rights and licenses granted to ConMed under
      that agreement, expired on May 31, 2005 without action by ConMed or
      us.





Until
      the
      end of 2006, all surgeries with the equipment were performed using prototype
      equipment in Ukraine hospitals during human clinical trials. During the Ukraine
      human clinical trials, we developed a device prototype that has performed more
      than 80 types of surgical procedures. Subsequently, we successfully developed
      and tested a specialized device for duct and vessel sealing. This is the first
      of several specialized devices we intend to develop using the prototype
      equipment. In December 2007, we completed a prototype of a second specialized
      device designed for intestinal surgery. We believe that developing specialized
      devices for specific surgical procedures will enable us to license our
      technology for use in different surgical procedures to different medical device
      distribution companies. To date we have identified 13 different surgical
      procedure device types for license. We are currently in negotiations with
      potential licensees. We have identified seven categories of surgical procedures
      for which we are developing specific devices. These categories are (1) cosmetic
      surgery (aesthetic tissue welding), (2) gynecology and general surgery, (3)
      orthopedics and arthroscopy, (4) colorectal, (5) pulmonary/lung, (6) urology
      and
      (7) veterinary.





Approval
      of the process and equipment by the United States Food and Drug Administration
      (“FDA”) is required before we can market, distribute or use our Live Tissue
      Bonding/Welding equipment in the United States. We began the process for FDA
      discovery and developing the regulatory and commercial equipment models for
      submission to the FDA. Additional human testing may be required to obtain FDA
      approval for some procedures. In November 2006, we engaged a regulatory and
      equipment consultant to assist in obtaining FDA approval and i n
      June
      2007 we filed a pre-market notification pursuant to Section 510(K) of the
      Federal Food, Drug and Cosmetic Act with the FDA for our duct and vessel sealer. In
      December 2007, we obtained the European Conformité Européne (“CE”) Mark on our
      duct and vessel sealer electrosurgery generator. We are working with qualified
      US medical device and instrument manufacturers to manufacture the commercial
      equipment. Additionally, we have retained a qualified firm to complete FDA
      Filings.





We
      are
      beginning to market our Live Tissue Bonding/Welding equipment worldwide except
      in the former Soviet Republics that are current members of the Commonwealth
      of
      Independent States (the “CIS”) where the Paton Institute will market and sell
      the bonding equipment if regulatory approval is received by us and them. We
      have
      continued our plans to manufacture prototypes in Ukraine and are continuing
      clinical trials in Ukraine for comprehensive human clinical product development.
      We began this clinical work in May 2000. To date, 10,000 successful human
      surgeries have been completed utilizing more than 80 types of surgical
      procedures. We are currently negotiating with international medical device
      companies and distributors for possible license agreements.




3





In
      late
      2005, our Ukraine partner received its first commercial order, from the Ukraine
      Ministry of Health, for ten sets of Live Tissue Bonding/Welding equipment.
      We
      will not participate in the revenues of this sale but will benefit from the
      additional funding of the development of the technology.





***Carbon
      Dioxide Separator*** **.** We own
      the patented technology and exclusive worldwide rights to the CO2 separator
      technology with most of the equipment being manufactured in Ukraine. The
      technology separates carbon dioxide and other impurities from the gas produced
      in landfills. The equipment converts the remaining gas to a cleaner, up to
      98-percent pure methane gas for use in internal combustion engines or for sale
      to natural gas companies. This equipment was developed for us by the Institute
      of Gas, Ukraine National Academy of Sciences and will be manufactured for us
      only by Sumy Frunze in Sumy, Ukraine.





We
      installed the first separator equipment at a landfill in Chastang (Mobile),
      Alabama but have had to remove it as a result of disputes with the landfill
      gas
      owner (Resource Technology Corporation (“RTC”)) that filed for protection under
      chapter 11 of the United States Bankruptcy Code and the landfill operator,
      Waste
      Management, Inc. (“WMI”). The Company is engaged in litigation against RTC on
      the basis of our contention that RTC failed to reduce air intake into the waste
      gas gathering system at the landfill, causing CSMG not to meet gas quality
      specifications for commercial methane gas sales. We had signed a contract with
      DuPont on February 14, 2006 to provide up to 500,000 MM BTU a year of commercial
      quality gas to their plant outside Mobile, Alabama. The gas did not need to
      meet
      national gas pipeline quality specifications to fulfill the DuPont contract.
      We
      had to terminate this contract in light of RTC’s failure to have the Chastang
      site produce landfill gas of sufficient quality. WMI was to maintain the site
      so
      as to produce marketable levels of waste site gas but has failed to do so.
      WMI
      has countered by demanding that we remove our equipment from the site, which
      we
      have done. We are seeking an alternate site for our CO2 separator
      equipment.




**Manufacturing**





***Live
      Tissue Bonding/Welding Equipment*** **.** To move
      the Live Tissue Bonding/Welding product into market, we are currently working
      with retained medical device experts, manufacturers, and FDA consultants to
      move
      the product into the commercial market in the United States and Europe. We
      completed the development of the first generation of United States devices
      and
      instruments in the second quarter of 2007 and
      filed
      our Section 510(K) notification with the FDA for our duct and vessel
      sealer .
      We
      expect to manufacture the tissue bonding/welding units for all markets in the
      United States and Western Europe. To
      date,
      we have received CE Mark approval in Europe on the duct and vessel sealer
      electrosurgery generator but we have not received marketing approval for any
      product from the FDA.





***CO2
      Separator*** **.** The
      carbon dioxide separator plants will be manufactured in Sumy, Ukraine by Sumy
      Frunze.




**Competition**





***Live
      Tissue Bonding/Welding Equipment*** **.** We have
      the only equipment in the world that reconnects live tissues without the use
      of
      staples, sutures, glues or sealant. We compete with existing conventional
      surgical methods of wound closing technologies such as sutures, staples, glues
      and sealant. We anticipate that our technology will supplement most other
      methods of bonding human soft tissue and blood vessels.





***CO2
      Separator*** **.** Numerous
      companies manufacture CO2 separators in the United States. Based upon our
      experience in the industry, we believe that we can compete successfully on
      the
      basis of the higher percentage of pure methane that can be produced by our
      CO2
      separator, lower capital costs and the lower prices of production for our CO2
      separator.




4


**Patents,
      Trademarks and Licenses**





***Live
      Tissue Bonding/Welding Equipment*** **.** We own
      the Live Tissue Bonding/Welding technology and all worldwide rights except
      in
      CIS countries. Patents and patent applications for the United States, the
      European Patent Convention, Australia, Russia, Ukraine, China, India, Canada
      and
      Japan have been assigned to us. We
      have 31 patent patents and applications pending relating to our live tissue
      bonding/welding technology, including 12 in the United States and 19 in
      other countries, including  European countries, Russia, Japan, Australia,
      Canada, India and China.  Our issued patents to date consist of four United
      States patents, one European Union patent and one Australian patent have been
      issued. In
      addition, the Ukraine Ministry of Health has approved the technology for
      commercial development in Ukraine. These patents expire over a period of time
      ranging from 2018 to 2028.





***CO2
      Separator*** **.** One
      United States patent covering the CO2 separator has been issued. We own the
      CO2
      separator patented technology, equipment and all world rights. We are obligated
      to pay a five percent royalty to the Ukrainians when the equipment is installed
      and fully operational based on the adjusted retail price of the
      equipment.





**Government
      Approval and Regulations**





***Live
      Tissue Bonding/Welding Equipment*** **.** The Live
      Tissue Bonding/Welding equipment must obtain the approval of the Federal Drug
      Administration (the “FDA”) before it can be sold to be used on humans in the
      United States. In
      June
      2007, we filed a pre-market notification pursuant to Section 510(K) of the
      Federal Food, Drug and Cosmetic Act with the
      FDA for such approval that we expect to be approved in the second quarter of
      2008.





***CO2
      Separator*** **.** CO2
      separator plants require no governmental approval before being placed into
      use,
      but the results of their usage are subject to the oversight authority of the
      Environmental Protection Agency.





**Research
      and Development**





During
      2007, we expended $2,176,242 on research and development. During 2006, we
      expended $558,488 on research and development. We expect to invest an additional
      $5 million in 2008 for research and development in bring the Live Tissue
      Bonding/Welding product to market.





**Employees**





We
      employ
      fourteen persons full time in the United States and two persons full time in
      Kiev, Ukraine.





**ITEM
      1A. RISK FACTORS**





Not
      applicable.





**ITEM
      1B. UNRESOLVED STAFF COMMENTS**





None.




5


**ITEM
      2. PROPERTIES**





We
      rent
      office space in the following cities as indicated in the table
      below:




ApproximateSquare
                Feet
            
            Monthly
                Rent
            
            TermCorpus
                Christi, TX (1)
            
            
            1,000
            
            $
            1,146
            
            
            Expires
                May 1, 2008Goleta,
                CA (2)
            
            
            4,410
            
            $
            3,969
            
            
            Expires
                February 15, 2010Kiev,
                Ukraine
            
            
            800
            
            $
            1,200
            
            
            Month-to-Month




(1)
            Currently,
                we rent office space in Corpus Christi, Texas through an arrangement
                with
                Donald S. Robbins, our Chairman of the Board, President and Chief
                Executive Officer, who is the tenant on the lease, and we pay the
                rent
                directly to the landlord. This lease expires on May 1, 2008. We expect
                to
                enter into a new lease agreement for approximately 4,500 square feet
                of
                space at the same location commencing on or before May 1, 2008 for
                a term
                of five years and an initial base monthly rent of $4,950 per month,
                subject to an annual rent escalation of 4% per year.





(2)
            The
                4,410 square feet of office space that we lease in Goleta, California
                is
                for our majority-owned subsidiary, Live Tissue Connect,
                Inc.





**ITEM
      3. LEGAL PROCEEDINGS**





*Banco
      Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
      LLC* , 
      Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
      District Court as Case No. 06 C 7195.





We
      were
      sued on February 10, 2005 by Banco Panamericano, Inc. in the Circuit Court
      of
      Cook County, Illinois, *Banco Panamericano, Inc. v. Consortium Service Management Group, Inc. and CSMG
      Gastech LLC* , Case
      No. 2005L001514. The complaint alleges that we entered into a short-term
      promissory note dated February 15, 2002 (the “Note”) by which we borrowed from
      Banco Panamericano $203,800 at 12% interest, the Note being due April 1, 2002.
      The complaint alleged that the Note was secured by all of our equipment,
      inventory, accounts, general intangibles and other properties. The complaint
      alleged that the Note is in default and that we owe Banco Panamericano $514,920
      as of February 9, 2005, together with accrued interest and costs.





In
      our
      answer to the complaint, we alleged as follows with regard to the allegations
      of
      Banco Panamericano:




·
            Banco
                Panamericano is not a bank but a Nebraska corporation that is affiliated
                with Resource Technologies Corporation (“RTC”), a company that is a debtor
                in a federal chapter 11 reorganization case.·
            CSMG
                and RTC had entered into a contract (the “Contract”) whereby CSMG would
                provide equipment (the “Equipment”), at CSMG’s cost, to filter landfill
                gas from a landfill operated by RTC located in Alabama so as to provide
                marketable methane gas. Among RTC’s obligations under the Contract was a
                commitment to provide a pipeline hookup to the purchaser of the gas.
                CSMG
                and RTC would share in the proceeds from the sale of the methane
                gas.·
            CSMG
                lacked the funds to perform its obligations under the Contract, RTC
                arranged for its affiliate, Banco Panamericano, to lend CSMG $203,800
                to
                enable CSMG to meet these obligations. It was understood by CSMG,
                RTC and
                Banco Panamericano that CSMG would liquidate the Note from its share
                of
                the proceeds of sale of the methane
                gas.




6




·
            CSMG
                installed the Equipment but RTC never performed its obligations under
                the
                Contract and Banco Panamericano never loaned any funds to CSMG. Rather,
                Banco Panamericano advised CSMG, from time to time, that CSMG had
                incurred
                several indistinctly-described financial obligations to RTC and that
                Banco
                Panamericano had advanced the funds subject to the Note to its affiliate,
                RTC, to cover such obligations. Such allegations of CSMG indebtedness
                to
                RTC were not true.·
            The
                intention of RC and Banco Panamericano from the beginning was to
                have CSMG
                execute the Note - secured by the Equipment, to cause the Note to
                go into
                default, and to obtain title to the Equipment through the rights
                of a
                secured creditor.





We
      believe that we, not the plaintiff, is the injured party and that this
      litigation properly belongs in RTC’s chapter 11 proceedings in the federal
      bankruptcy court.





On
      March
      2, 2005, the case was removed from the Circuit Court of Cook County, Illinois
      to
      the Federal District Court for the Northern District of Illinois. We filed
      a
      motion to have the proceeding referred to the United States Bankruptcy Court
      for
      the Northern District of Illinois where the bankruptcy proceeding of RTC is
      pending. The Federal District Court referred the proceeding to the United States
      Bankruptcy Court on December 6, 2005. On January 9, 2007, the Bankruptcy Court
      ruled that we did not have standing to remove the case to its jurisdiction
      and
      the case was removed from the Bankruptcy Court back to the Federal District
      Court for the Northern District of Illinois. We have filed an answer in the
      proceedings setting forth several affirmative defenses and counterclaims focused
      on the affiliation of the plaintiff with one of our customers and based on
      certain misrepresentations.  Discovery has been completed and plaintiff has
      submitted a contested motion for summary judgment that is under consideration
      by
      the Court. A trial date of December 10, 2007, has been continued pending the
      outcome of this motion.





*Nature
      Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
      Donald S.  Robbins and Gordon W.  Allison* ,
      Case
      No. 2:06-cv-273 originally pending in the Federal District Court for the
      Southern District of Texas and recently ordered transferred to the Federal
      District Court for the Northern District of Illinois.





On
      June
      30, 2006, we were served with a complaint from Nature Coast Collections, Inc.
      in
      proceeding in the Federal District Court for the Southern District of Texas.
      The
      complaint alleges that Nature Coast Collections, Inc. is the assignee of the
      original payee, Stonegate Management, Ltd., a Costa Rican entity, of four
      promissory notes executed by us and Donald S. Robbins, our Chairman of the
      Board, President and Chief Executive Officer, and Gordon W. Allison, each as
      a
      guarantor. The amount claimed in the suit is the aggregate principal sum of
      $630,000, with interest, costs and attorney fees. We have answered the complaint
      and filed a counterclaim alleging, among other matters, that Nature Coast
      Collections, Inc. is an affiliate of the debtor in the bankruptcy proceeding
      in
      the Northern District of Illinois referred to above, RTC, and that we should
      be
      authorized to offset its losses caused by its contractual relationship with
      RTC
      against the claims of Nature Coast Collections, Inc. Our answer also asserted
      several affirmative defenses and counterclaims focused on the affiliation of
      the
      plaintiff with an offshore affiliate of one of our customers and based on
      certain misrepresentations.  Discovery has been completed and the Company
      has filed a motion for summary judgment with respect to the Plaintiff’s claims,
      the briefing of which by the parties has yet to be fully completed. No trial
      date has been set.





CSMG
      Technologies, Inc. v.  Gordon W.  Allison ,
      Case
      No. 4:07-cv-00715 in the Southern District of Texas District Court.





We
      have
      filed a complaint against Gordon Allison, our former executive vice president,
      seeking unspecified damages in connection with claims based upon fraudulent
      statements, breach of fiduciary duty and promissory estoppel with respect to
      our
      investments in certain projects in which we were involved through actions of
      Mr.
      Allison. Mr. Allison has filed a counterclaim seeking damages of approximately
      $328,041 principal and interest for amounts allegedly due under the terms of
      a
      November 5, 2003 promissory note issued to him by us, unpaid salary of $150,000,
      unspecified payment for services rendered, reimbursement of expenses estimated
      at $23,000 and punitive damages in an unspecified amount. The litigation is
      in
      the discovery stage, and we believe the counterclaim is without merit and we
      are
      vigorously defending the counterclaim.




7





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





None.





**PART
      II**





**ITEM
      5.**  **MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
      OF EQUITY SECURITIES**





**Market
      Information**





Our
      common stock, par value $.001 per share, is quoted on the OTC Bulletin Board.
      Its symbol is “CTGI,” or, depending upon the Internet service that quotes
      Bulletin Board stocks, CTGI.OB.





The
      range
      of high and low bid information for our common stock for the last two fiscal
      years is set forth below. The source of this information is the OTC Bulletin
      Board. The quotations reflect inter-dealer prices without retail markup,
      markdown or commissions and may not represent actual transactions.





**High**
            
            **Low**20061stQtr.
            
            $
            0.51
            
            $
            0.362ndQtr.
            
            
            0.43
            
            
            0.213rdQtr.
            
            
            0.78
            
            
            0.2554thQtr.
            
            
            0.64
            
            
            0.2520071stQtr.
            
            
            0.90
            
            
            0.322ndQtr.
            
            
            0.91
            
            
            0.633rdQtr.
            
            
            0.75
            
            
            0.614thQtr.
            
            
            0.89
            
            
            0.54





**Holders**





As
      of
      December 31, 2007 there were approximately 306 holders of record of our common
      stock.





**Dividends**





We
      have
      paid no dividends to our common stockholders and do not plan to pay dividends
      on
      our common stock in the foreseeable future. We currently intend to use any
      earnings to finance future growth.




8


**Securities
      Authorized for Issuance Under Equity Compensation Plans**





We
      have
      two equity compensation plans and our majority-owned subsidiary Live Tissue
      Connect has one equity compensation plan. Our 1998 Stock Option Plan (the “1998
      Plan”) provides for the issuance of up to 1,500,000 incentive and non-qualified
      stock options to our eligible employees and consultants and our 2003 Stock
      Option Plan (the “2003 Plan,” and together with the 1998 Plan, the “Stock Option
      Plans”) provides for the issuance of up to 3,300,000 incentive and non-qualified
      stock options to our eligible employees and consultants. Each of the Stock
      Option Plans was approved by our board of directors and ratified by the holders
      of a majority of our issued and outstanding shares of common stock within 12
      months of such board approval. The following table presents certain information
      relating to outstanding awards and shares available for future grant under
      our
      Stock Option Plans in accordance with Item 201(d) of Regulation
      S-K.




**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plans approved by security holders
            
            
            1,075,000
            
            $
            0.49
            
            
            2,875,000Equity
                compensation plans not approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/A**Total**
            
            
            1,075,000
            
            $
            0.49
            
            
            2,875,000





**Recent
      Sales of Unregistered Securities**





Set
      forth
      in the table below are unregistered sales of our equity securities that occurred
      during the fourth fiscal quarter of 2007 as well as other sales in prior
      quarters which were previously unreported. All of the equity securities issued
      in unregistered sales were exempt
      from registration pursuant to Section 4(2) of the Securities Act of 1933, as
      amended, on the basis that all purchasers were accredited
      investors.





**Person**
            
            **Date**
            
            **No.
                of Shares**
            
            **Price
                Per Share**
            
            **Type
                of Consideration**Kurt
                Roush
            
            
            12-28-07
            
            
            80,959
            
            
            .625
            
            
            Note
                conversionScott
                P. Shaffer
            
            
            11-23-07
            
            
            200,000
                (options
            )
            
            .75
                (exercise price
            )
            
            Fees
                for serviceWilliam
                Weldon
            
            
            10-18-07
            
            
            100,000
            
            
            .56
            
            
            Cash
                PurchaseDavid
                F. McAuliffe
            
            
            10-18-07
            
            
            178,571
            
            
            .56
            
            
            Cash
                PurchaseLaura
                Gail Collins TTEE
              Virginia
                S. Collins Revocable living Trust
            
            
            10-18-07
            
            
            44,643
            
            
            .56
            
            
            Cash
                PurchaseJeffery
                Machen
            
            
            10-18-07
            
            
            100,000
            
            
            .56
            
            
            Cash
                PurchaseScott
                P. Shaffer
            
            
            
            
            
            200,000
            
            
            .56
            
            
            Cash
                PurchaseChasley
                V. Morton
            
            
            10-18-07
            
            
            89,286
            
            
            .56
            
            
            Cash
                PurchaseDr.
                Anaka Prakash
            
            
            10-18-07
            
            
            100,000
            
            
            .56
            
            
            Cash
                PurchaseYA
                Global Investments, LP
            
            
            10-17-07
            
            
            535,267
            
            
            .70
            
            
            Cash
                PurchaseKhris
                Nemecek
            
            
            4-10-07
            
            
            50,000
            
            
            .625
            
            
            Fee
                for ServiceWalter
                Strait
            
            
            1-28-07
            
            
            48,190
            
            
            .625
            
            
            Note
                conversionSterling
                Trust Company FBO Patricia Coursey, IRA
            
            
            1-18-07
            
            
            35,746
            
            
            .625
            
            
            Note
                conversion





**ITEM
      6.**  **SELECTED
      FINANCIAL DATA**





Not
      applicable.




9


**ITEM
      7.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





*The
      following discussion and analysis should be read in conjunction with the
      financial statements and the accompanying notes thereto and is qualified in
      its
      entirety by the foregoing and by more detailed financial information appearing
      elsewhere. See “Financial Statements.”*


**Restatement
        of Previously Issued Financial Results**
  We
        are
        restating our consolidated financial statements for the years ended December
        31,
        2007 and 2006, including the applicable notes. For more information about
        the
        restatement, please see the Explanatory Note to this report and Note 13,
        “Restatement of Prior Financial Statements” in the accompanying consolidated
        financial statements.
  The
        following discussion and analysis of our financial condition and results
        of
        operations incorporate the restated amounts.


**Overview**




The
      following is a discussion of: (i) our results of operations and financial
      condition for the year ended December 31, 2007 as compared to the year ended
      December 31, 2006; (ii) our liquidity and capital resources; and (iii) our
      critical accounting policies. CSMG Technologies Inc., formerly, Consortium
      Service Management Group, Inc. (the “Company”), a Texas corporation, was
      incorporated on November 17, 1992. On January 18, 2007, we changed our name
      to
      CSMG Technologies, Inc. and increased our total number of authorized shares
      to
      90,000,000, which includes 80,000,000 authorized shares of common stock and
      10,000,000 shares of undesignated preferred stock.





We
      are a
      technology management company. Our technologies involve Live Tissue
      Bonding/Welding and CO2 (carbon dioxide) separation of landfill gas.





Our
      Live
      Tissue Bonding/Welding technology focuses on bonding living soft biological
      tissue used in surgical procedures which eliminates the need for sutures,
      staples, sealants or glues. We have an agreement with the E.O. Paton Institute
      of Electrical Welding of the Ukraine National Academy of Sciences and
      International Association of Welding and we own the rights to this technology
      including the worldwide rights of licensing, patenting, manufacturing,
      development and distribution of this technology. To date, we ha ve
      44
      issued or pending patents in the United States and overseas relating to our
      Live
      Tissue Bonding/Welding technology. In addition, in June 2007, we filed a 510(K)
      submission with the United States Food and Drug Administration for the duct
      and
      vessel sealer and two instruments, received the European CE Mark on the
      electrosurgery generator, and our technology has been approved for commercial
      development in Ukraine by the Ukraine Ministry of Health.





We
      also
      have one patent issued in both the United States and Canada relating to our
      carbon dioxide separator technology. This technology was also developed in
      Ukraine, and promotes the economical separation of methane from carbon dioxide
      gas emanating from landfills. Landfills generate a commingled mixture of methane
      and carbon dioxide gas which prevents the methane from being commercially sold
      as fuel. Our technology has been developed as an economical carbon dioxide
      separator that removes the carbon dioxide from landfill emissions to allow
      the
      methane gas to be sold to utility companies as well as other industrial and
      commercial customers.





The
      carbon dioxide separator equipment has been installed at the Chastang landfill
      in Mobile, Alabama since 2002, which landfill is owned by the city of Mobile
      but
      operated by Waste Management Inc. and Transamerican Waste Industries Inc. An
      agreement between Transamerican Waste Industries Inc. and Resource Technology
      Corporation (RTC) gave RTC the sole and exclusive right to collect, extract
      and
      remove landfill gas from the property. At this time, RTC contracted with the
      Company to extract the methane gas. Accordingly, the Company installed the
      carbon dioxide separator at the landfill in 2002 and 2003. Waste Management
      Inc.
      asserted that the carbon dioxide equipment produced methane gas that failed
      to
      meet Mobile Gas quality specifications. As a result and as noted in Note
      9 , Litigation, a legal dispute ensued as well as RTC filing bankruptcy.





On
      February 14, 2006, the Company signed a contract with DuPont to provide up
      to
      500,000 MMbtu commercial quality gas to their plant outside Mobile, Alabama.
      There is no requirement in this contract for gas quality specifications,
      however, the Company believes that based on current raw gas analysis, the gas
      produced will exceed current specifications.  Because
      of the inability for the landfill to produce enough raw gas the equipment has
      been removed from the site and put in temporary storage.




10





In
      1994,
      the Company formed United Engineering Company, a Ukraine and United States
      joint
      stock company registered under the laws of Ukraine with 14 of Ukraine’s largest
      defense contractors and Ukraine State Property fund. The purpose was to perform
      dismantlement of weapons of mass destruction under the START Treaty. The company
      initially had a 50% ownership that was reduced to 33.3% in 2000. The Company
      recorded this investment under the equity method, and maintained its investment
      until March 2007, when their interest was sold for net proceeds of $278,500.
      In
      March 2007, the Company sold its interest in United Engineering
      Company.





The
      Company recently has been focusing on its live bonding technology and has hired
      an internationally recognized medical device expert and a surgical device design
      company to design and manufacture the live tissue connect generator, as well
      as
      bringing on a major United States university to complete laboratory work and
      adding advisors that are surgeons, engineers and scientists to work on this
      project in the Ukraine.





**Results
      of Operations and Financial Condition**




***Year
      Ended December 31, 2007 compared to Year Ended December 31,
      2006***




*Total
      Operating Revenues*




We
      did
      not recognize any revenue in 2007 or in 2006. We do not expect to begin
      generating any revenues until such time as we obtain FDA approval for one of
      our
      products and commence manufacturing and distribution operations with respect
      to
      any such FDA approved product.




*Total
      Cost of Operating Revenues*




Our
      total
      cost of operating revenues represent research and development costs and were
      $2,716,242 and $558,488 for the years ended December 31, 2007 and 2006,
      respectively. This approximate 386% increase in cost of operating revenues
      was
      primarily the result of commercial development of Live Tissue Connect’s duct and
      vessel sealing electrosurgery generator and other related costs such as research
      and development, personnel and regulatory filings.




*Total
      Operating Expenses*




Total
      operating expenses for the year ended December 31, 2007 were $4,238,991 as
      compared to $2,263,854 for the year ended December 31, 2006. This represented
      an
      increase of $1,975,137 or 87.2%. Operating expenses included payroll,
      professional fees, and related expenses, rent expense, and other general and
      administrative expenses and stock based compensation. The activities which
      these
      expenses were intended to benefit were our Live Tissue Bonding/Welding project
      and our carbon dioxide separator project. The last of these projects - which
      is
      based upon Ukraine-developed equipment that can be manufactured in Ukraine,
      brought to the United States and installed at considerable savings to the
      employment of United States equipment of comparable or inferior quality -
      represents a considerable part of our business plan for the future. The increase
      from 2007 to 2006 is a result of using additional consultants and outsourced
      investor and public relations to assist the Company in raising
      money.




We
      depreciate fixed assets. This resulted in depreciation expense of $861 and
      $384
      for the years ended December 31, 2007 and 2006, respectively. We determine
      the
      fair value of the undiscounted cash flows annually, and sooner if circumstances
      change and determination is required, to value any impairment on our intangible
      assets and long-lived assets. As of December 31, 2007 and 2006, we determined
      that there was no impairment charge.




*Other
      Income (Expense)*




Included
      in other income (expense) is net interest expense of $1,983,961 and $413,884
      for
      the years ended December 31, 2007 and 2006, respectively, an increase of
      $1,570,077 or 380%. This increase is primarily the result of our capital raising
      activities and the interest payable on the $6,945,000 in convertible notes
      that
      we issued from July 27, 2006 through December 31, 2007. Included in the 2007
      interest expense is $ 922,001 in
      discounts on the conversion of notes payable to common stock. The Company has
      also recognized a gain of $225,117 in the year ended December 31, 2007 for
      the
      sale of United Engineering Company.




11




*Net
      Income (Loss)*




For
      the
      year ended December 31, 2007, we reported a net loss from operations of
      $8,440,455, or $0.23 per share on a basic and diluted basis, as compared to
      $3,090,565, or $0.10 per share on a basic basis and $0.09 per share on a diluted
      basis, for the year ended December 31, 2006, prior to the recognition of an
      extraordinary gain of $200,805 in 2006. This 173% increase in our net losses
      from operations in 2007 as compared to 2006 is primarily the result of our
      expanded research and development efforts in Kiev and relating to our regulatory
      filings with the United States Food and Drug Administration, LTC equipment
      commercialization and professional fees related to raising money, as well as
      interest expense. Included in our net losses in 2006 is $85,118 attributable
      to
      our 33.3 percent interest in the income of an unconsolidated subsidiary, United
      Engineering Company, a Ukraine company that represents a joint venture between
      us and several Ukraine entities. This loss represents our share of the profits
      and losses from the missile site conversion activities of United Engineering
      Company.




*Provision
      for Income Taxes*




There
      was
      no provision for income taxes for the years ended December 31, 2007 and 2006,
      respectively. There was no provision due to the carry forward of approximately
      $ 17,850,716 of
      net
      operating losses as of December 31, 2007 that we reserved in valuation
      allowances against this deferred tax asset.




**Liquidity
      and Capital Resources**




At
      December 31, 2007, we had $1,004,376 in cash and cash equivalents as compared
      to
      $868,217 at December 31, 2006. This increase is attributable to our capital
      raising activities which yielded $ 4,865,991 in 2007
      offset by cash used in operating activities and an increase in accounts payable
      and accrued expenses of $538,478 in 2007 as compared to 2006. In 2007, we
      received proceeds from the issuance of convertible notes of $ 4,195,000 ,
      other
      notes of $ 50,000 and
      stock for $ 620,991 and in
      2006 received proceeds from the sale of stock of $673,399 and convertible notes
      of $2,555,831.




As
      of
      December 31, 2007, our only significant current asset was cash in the amount
      of
      $1,004,376 and we had $11,116,392 in current liabilities, primarily consisting
      of $6,845,000 for liability for stock to be issued pursuant to the exercise
      of
      options and warrants, $1,508,407 of convertible notes payable, $1,699,124 in
      accrued interest payable, and $640,713 in accounts payable and accrued expenses.




From
      July
      27, 2006 through December 31, 2007, we raised $6,945,000 (of which $100,000
      was
      repaid during 2007) through Empire Financial Group in the form of convertible
      notes. The notes commenced interest accrual on January 1, 2007, at 15% per
      annum, and are convertible into Live Tissue Connect, Inc. shares at 50% of
      the
      initial public offering price of LTC’s common stock. We have accrued $741,897 in
      interest for the year ended December 31, 2007. The total due the investors
      as of
      December 31, 2007 is $7,586,897. The entire balance is reflected as a current
      liability on our consolidated balance sheet. Empire received 290,941 warrants
      on
      May 18, 2007 as part of their commission for the raising of the money. We
      recorded these warrants in accordance with EITF 96-18 and recognized an expense
      in the amount of $186,092.




From
      time
      to time we entered into various note agreements with our shareholders. The
      13
      notes that remain as of December 31, 2007 commenced from 2000 through 2005,
      and
      accrue interest at rates ranging from 8% to 15%. The remaining principal of
      these 13 notes as of December 31, 2007 is $1,508,407. Accrued interest through
      December 31, 2007 on these notes is $957,227, for a total amount due as of
      December 31, 2007 of $2,465,634.





Our
      management has been very successful over the past few years in converting these
      notes into shares of common stock. For the year ended December 31, 2007, we
      were
      successful in converting $1,748,423 in notes plus accrued interest into
      2,733,248 shares of stock. In addition, we recorded a discount in the amount
      of
      $922,001 to additional paid in capital based on the beneficial conversion price.




12





Included
      in the notes payable are:





*YA
      Globlal Investmenst, L.P.*





On
      March
      29, 2004, we entered into an equity line of credit with YA Global Investments
      (f/k/a Cornell Capital Partners) whereby we may issue and sell to YA Global
      Investments, L.P. up to $10,000,000 in common stock. Under this arrangement,
      YA
      Global Investments, L.P. advanced us $1,000,000 in 2004, all of which has been
      repaid through conversions to common stock.





In
      2005,
      we were advanced $600,000 under a convertible debenture. In accordance with
      this
      agreement, we have been repaying this through issuances of stock under Rule
      144.
      On October 18, 2007, we repaid the remaining $242,000 in principal along with
      interest in the amount of $132,687 with the issuance of 535,267 shares of common
      stock to YA Global Investments, L.P. There is no further indebtedness to YA
      Global Investments, L.P. These shares were issued pursuant to an exemption
      from
      registration under Section 4(2) of the Securities Act of 1933, as amended.
      The
      purchaser of these shares is aware that they are restricted. There were no
      warrants or options issued in the Cornell transaction.





Notwithstanding
      our present working capital deficiency, our condensed consolidated financial
      statements have been prepared on the assumption that we continue to have the
      ability to generate sufficient cash flows from operations or raise sufficient
      capital to ensure the reduction of the working capital deficiency and fund
      future operations, as a going concern. We have suffered significant recurring
      operating losses in the past few years, and this factor has caused significant
      doubt about our ability to continue as a going concern for a period of twelve
      months. The condensed consolidated financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




**Off-Balance
      Sheet Arrangements**





Except
      for our lease at our principal executive offices described under Item 2:
      Description of Properties, as of December 31, 2007, we
      did
      not have any off-balance sheet arrangements, as defined in Item 303(c)(2)
      of Regulation S-B.





**Critical
      Accounting Policies**





Critical
      accounting polices include the areas where we have made what we consider to
      be
      particularly subjective or complex judgments in making estimates and where
      these
      estimates can significantly impact our financial results under different
      assumptions and conditions.





We
      prepare our financial statements in conformity with accounting principles
      generally accepted in the United States of America. As such, we are required
      to
      make certain estimates, judgments and assumptions that we believe are reasonable
      based upon the information available. These estimate, judgments and assumptions
      affect the reported amounts of assets and liabilities at the date of the
      financial statement and the reported amounts of revenue and expenses during
      the
      periods presented. Actual results could be different than those estimates.





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





***Principles
      of Consolidation***




The
      condensed consolidated financial statements include the accounts of us and
      all
      of our wholly-owned subsidiaries. All significant intercompany accounts and
      transactions have been eliminated in consolidation.




13




***Research
      and Development***





We
      annually incur costs on activities that relate to research and development
      of
      new technology and products. Research and development costs are expensed as
      incurred.





***Revenue
      Recognition***





We
      have
      not generated revenue in many years. We anticipate that we will record revenue
      in accordance with Staff Accounting Bulletin 104. The criteria for recognition
      is as follows:





1)
            Persuasive
                evidence of an arrangement exists;





2)
            Delivery
                has occurred or services have been rendered;





3)
            The
                seller’s price to the buyer is fixed or determinable;
                and





4)
            Collectibility
                is reasonably assured.





***Income
      Taxes***





We
      account for income taxes utilizing the liability method of accounting. Under
      the
      liability method, deferred taxes are determined based on differences between
      financial statement and tax bases of assets and liabilities at enacted tax
      rates
      in effect in years in which differences are expected to reverse. Valuation
      allowances are established, when necessary, to reduce deferred tax assets to
      amounts that are expected to be realized.





***Impairment
      of Long-Lived Assets***





Long-lived
      assets, primarily fixed assets and intangible assets, are reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of the assets might not be recoverable. We do not perform a
      periodic assessment of assets for impairment in the absence of such information
      or indicators. Conditions that would necessitate an impairment assessment
      include a significant decline in the observable market value of an asset, a
      significant change in the extent or manner in which an asset is used, or a
      significant adverse change that would indicate that the carrying amount of
      an
      asset or group of assets is not recoverable. For long-lived assets to be held
      and used, we recognize an impairment loss only if its carrying amount is not
      recoverable through its undiscounted cash flows and measures the impairment
      loss
      based on the difference between the carrying amount and estimated fair value.





***Earnings
      (Loss) Per Share of Common Stock***





Basic
      net
      earnings (loss) per common share is computed using the weighted average number
      of common shares outstanding. Diluted earnings per share (EPS) includes
      additional dilution from common stock equivalents, such as stock issuable
      pursuant to the exercise of stock options and warrants. Common stock equivalents
      will not be included in the computation of diluted earnings per share when
      we
      report a loss because to do so would be anti-dilutive for periods
      presented.





***Stock-Based
      Compensation***





On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based
      Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to
      share-based payment transactions be recognized in the financial statements.
      Share-based payment transactions within the scope of SFAS 123R include stock
      options, restricted stock plans, performance-based awards, stock appreciation
      rights, and employee share purchase plans. The provisions of SFAS 123R, as
      amended, are effective for small business issuers beginning as of the first
      interim period after December 15, 2005. We adopted these provisions on January
      1, 2006, and the adoption of this pronouncement did not have a material effect
      on our condensed consolidated financial statements.




16


***Fair
      Value of Financial Instruments***





The
      carrying amounts reported in the condensed consolidated balance sheet for cash
      and cash equivalents, and accounts payable approximate fair value because of
      the
      immediate or short-term maturity of these financial instruments. For the notes
      payable, the carrying amount reported is based upon the incremental borrowing
      rates otherwise available to us for similar borrowings. For the convertible
      debentures, fair values were calculated at net present value using our weighted
      average borrowing rate for debt instruments without conversion features applied
      to total future cash flows of the instruments.





***Recent
      Accounting Pronouncements***




In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
        standard defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles, and expands disclosure about fair
        value measurements. This statement is effective for financial statements
        issued
        for fiscal years beginning after November 15, 2007. Early adoption is
        encouraged. The adoption of SFAS 157 is not expected to have a material impact
        on the consolidated financial statements. The
        adoption of SFAS 157 has not had a material effect on our consolidated
        financial position, results of operations or cash flows .
 
 In
        February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities - Including an amendment of FASB Statement
        No.
        115”, (“FAS 159”) which permits entities to choose to measure many financial
        instruments and certain other items at fair value at specified election dates.
        A
        business entity is required to report unrealized gains and losses on items
        for
        which the fair value option has been elected in earnings at each subsequent
        reporting date. This statement is expected to expand the use of fair value
        measurement. FAS 159 is effective for financial statements issued for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal
        years. The
        adoption of FAS 159 has not had a material effect on our consolidated
        financial position, results of operations or cash flows .
 
 In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements, an amendment of Accounting Research Bulletin
        No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
        ownership interests in subsidiaries held by parties other than the parent,
        changes in a parent’s ownership of a noncontrolling interest, calculation and
        disclosure of the consolidated net income attributable to the parent and
        the
        noncontrolling interest, changes in a parent’s ownership interest while the
        parent retains its controlling financial interest and fair value measurement
        of
        any retained noncontrolling equity investment. SFAS 160 is effective for
        financial statements issued for fiscal years beginning after December 15,
        2008,
        and interim periods within those fiscal years. Early adoption is prohibited.
        Management is determining the impact that t he
        adoption of SFAS No. 160 will have on our consolidated financial position,
        results of operations or cash flows.
 
 In
        December 2007, the FASB issued SFAS 141R, *Business Combinations* (“SFAS
        141R”), which replaces FASB SFAS 141, *Business Combinations.* This
        Statement retains the fundamental requirements in SFAS 141 that the acquisition
        method of accounting be used for all business combinations and for an acquirer
        to be identified for each business combination. SFAS 141R defines the acquirer
        as the entity that obtains control of one or more businesses in the business
        combination and establishes the acquisition date as the date that the acquirer
        achieves control.  SFAS 141R will require an entity to record
        separately from the business combination the direct costs, where previously
        these costs were included in the total allocated cost of the
        acquisition.  SFAS 141R will require an entity to recognize the assets
        acquired, liabilities assumed, and any non-controlling interest in the acquired
        at the acquisition date, at their fair values as of that date.  This
        compares to the cost allocation method previously required by SFAS No.
        141.  SFAS 141R will require an entity to recognize as an asset or
        liability at fair value for certain contingencies, either contractual or
        non-contractual, if certain criteria are met.  Finally, SFAS 141R will
        require an entity to recognize contingent consideration at the date of
        acquisition, based on the fair value at that date.  This Statement
        will be effective for business combinations completed on or after the first
        annual reporting period beginning on or after December 15,
        2008.  Early adoption of this standard is not permitted and the
        standards are to be applied prospectively only.  Upon adoption of this
        standard, there would be no impact to the Company’s results of operations and
        financial condition for acquisitions previously
        completed. The
        adoption of SFAS No. 141R is not expected to have a material effect on our
        consolidated financial position, results of operations or cash
        flows.
 
 Other
        accounting standards that have been issued or proposed by the FASB or other
        standards-setting bodies that do not require adoption until a future date
        and
        are not expected to have a material impact on our consolidated financial
        statements upon adoption.


17




**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





Not
      applicable.





**ITEM
      8.**  **FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA**





The
      information required by this Item appears following Item 15 of this annual
      report on Form 10-K and is incorporated herein by reference.





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





On
      July
      3, 2007, Gary Skibicki, CPA was dismissed as the Registrant’s independent
      registered public accounting firm, effective immediately. The report issued
      by
      Gary Skibicki, CPA in connection with our financial statements for its two
      most
      recent fiscal years ended December 31, 2006 and 2005 did not contain an adverse
      opinion or a disclaimer of opinion, nor was either such report qualified or
      modified as to uncertainty, audit scope, or accounting principles, except the
      report of the financial statements for the Registrant for the years ended
      December 31, 2006 and 2005 contained a paragraph expressing substantial doubt
      regarding the Registrant's ability to continue as a going concern. During the
      Registrant's two most recent fiscal years ended December 31, 2006 and 2005
      and
      the later interim period preceding the dismissal of Gary Skibicki, CPA on July
      3, 2007, there have been no disagreements with Gary Skibicki, CPA on any matter
      of accounting principles or practices, financial statement disclosure, or
      auditing scope or procedure, which disagreement (as defined in Item
      304(a)(1)(iv) of Regulation S-B), if not resolved to the satisfaction of Gary
      Skibicki, CPA, would have caused Gary Skibicki, CPA to make a reference to
      the
      subject matter of such disagreement in connection with its reports, and there
      occurred no events as defined in Item 304(a)(1)(iv)(B) of Regulation S-B. Gary
      Skibicki, CPA identified certain significant deficiencies in our internal
      control over financial reporting, however, these significant deficiencies did
      not constitute a material weakness in our internal control over financial
      reporting, we have taken actions to remedy the deficiencies, and unqualified
      opinions were issued by Gary Skibicki CPA for fiscal years 2005 and 2006 and
      KBL, LLP, the independent registered public accounting firm engaged to audit
      our
      financial statements for the two most recent fiscal years ended December 31,
      2007 and 2006, did not identify any significant deficiencies or material
      weaknesses in our internal control over financial reporting and has issued
      an
      unqualified opinion with respect to these financial statements.




18





**ITEM
      9A.**  **CONTROLS
      AND PROCEDURES**




On
          May 7,
          2008, our Board of Directors, in consultation with KBL, LLP, our independent
          registered public accounting firm, concluded that our previously issued
          financial statements for the fiscal years ended December 31, 2007 and 2006
          should no longer be relied upon. This conclusion was based on the Board’s
          determination that our financial statements required an adjustment to reflect
          our 86% ownership of Live Tissue Connect, Inc., rather than 100% ownership,
          and
          a charge adjustment for management stock options granted by Live Tissue
          Connect,
          Inc. in 2006 and 2007.
  In
          connection with management’s review of the foregoing, we assessed the
          effectiveness of our internal control over financial reporting and identified
          a
          material weakness in such control. We identified and reported this weakness
          to
          both our Board of Directors and KBL, LLP. The nature of the material weakness
          is
          described as part of management’s report on internal control over financial
          reporting, below.
 **Evaluation
        of disclosure controls and procedures.** Under
        the
        supervision of our Chief Executive Officer and Chief Financial Officer, we
        have
        carried out a reevaluation of the effectiveness of our disclosure controls
        and
        procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
        the
        Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December
        31, 2007. Based upon that reevaluation, our Chief Executive Officer and Chief
        Financial Officer concluded that as of December 31, 2007, our disclosure
        controls and procedures were effective. This conclusion was based, in part,
        upon
        the fact that the material weakness in our internal control over financial
        reporting did not relate to collecting information and timely providing it
        to
        senior management to allow them to determine whether disclosure should be
        made.


**Management’s
      Report on Internal Control Over Financial Reporting.** ** Internal
      control over financial reporting (as such term is defined in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act), is a process
      designed by, or under the supervision of, the Company’s Chief Executive Officer
      and Chief Financial Officer, or persons performing similar functions, and
      effected by the Company’s board of directors, management and other personnel, to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles.  The Company’s
      management, with the participation of the Company’s Chief Executive Officer and
      Chief Financial Officer, and in consultant with the Company’s board of
      directors, has established and maintained policies and procedures designed
      to
      maintain the adequacy of the Company’s internal control over financial reporting
      that it believes are appropriate in light of the Company’s limited activities,
      personnel and resources as a development stage company, and includes those
      policies and procedures that:





(1)
            Pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of the assets of
                the
                Company;




(2)
            Provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that receipts and expenditures of the
                Company
                are being made only in accordance with authorizations of management
                and
                directors of the Company; and





(3)
            Provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use or disposition of the Company’s assets that
                could have a material effect on the financial
                statements.





The
      Company’s management has evaluated the effectiveness of the Company’s internal
      control over financial reporting as of December 31, 2007 based on the criteria
      established in a report entitled *Internal
      Control—Integrated Framework* ,
      issued
      by the Committee of Sponsoring Organizations of the Treadway Commission
      (COSO).




19





Due
        to
        the discovery of the error mentioned in the previous paragraphs, management
        has
        reassessed the effectiveness of our internal control over financial reporting
        as
        of December 31, 2007. Based on our assessment, management has concluded that our
        internal controls over financial reporting were not effective as of December
        31,
        2007 due to the existence of a material weakness in our internal control
        over
        financial reporting, discussed below. Our Board of Directors has reviewed
        the
        results of management’s assessment. In addition, on a quarterly basis we will
        evaluate any changes to our internal control over financial reporting to
        determine if material changes occurred.
  ***Material
        Weakness in Internal Controls***
  During
        the conduct of our reassessment of internal control over financial reporting,
        we
        identified a material weakness and have advised the Board of Directors that
        the
        following material weakness existed at December 31, 2007. As defined by the
        Public Company Accounting Oversight Board Auditing Standard No. 5, a “material
        weakness” is a control deficiency or a combination of control deficiencies such
        that there is a reasonable possibility that a material misstatement of the
        annual or interim financial statements will not be prevented or detected
        on a
        timely basis.
  The
        material weakness exists in the financial reporting expertise of our senior
        management. Independent of our reassessment of internal controls over financial
        reporting, we implemented two changes to those controls that we believe
        remediate the material weakness identified above: (1) our majority-owned
        subsidiary Live Tissue Connect, Inc. has retained an outside financial
        consulting firm to assist with its internal accounting and financial reporting
        function, and (2) we implemented a policy that requires all financial
        information to be presented to our independent registered public accounting
        firm. These changes were responsible for our discovery of the error mentioned
        in
        the previous paragraphs.
  This
        material weakness resulted in misstatements in our financial statements for
        the
        years ended December 31, 2007 and 2006 to reflect our 86% ownership of Live
        Tissue Connect, Inc., rather than 100% ownership, and a charge adjustment
        for
        management stock options granted by Live Tissue Connect, Inc. in 2006 and
        2007.
        For more detailed information about the restatement, please see Note 13,
        “Restatement of Prior Financial Statements” in the accompanying consolidated
        financial statements.
  We
        cannot
        provide any assurance that neither we nor our independent auditors will in
        the
        future identify further material weaknesses or significant deficiencies in
        our
        internal control over financial reporting that we have not discovered to
        date.
  ***Inherent
        Limitations on Effectiveness of Controls***
  Our
        management, including the CEO and CFO, does not expect that our disclosure
        controls and procedures or our internal control over financial reporting
        will
        prevent or detect all error and all fraud. A control system, no matter how
        well
        designed and operated, can provide only reasonable, not absolute, assurance
        that
        the control system’s objectives will be met. The design of a control system must
        reflect the fact that there are resource constraints, and the benefits of
        controls must be considered relative to their costs. Further, because of
        the
        inherent limitations in all control systems, no evaluation of controls can
        provide absolute assurance that misstatements due to error or fraud will
        not
        occur or that all control issues and instances of fraud, if any, within the
        company have been detected. These inherent limitations include the realities
        that judgments in decision-making can be faulty and that breakdowns can occur
        because of simple error or mistake. Controls can also be circumvented by
        the
        individual acts of some persons, by collusion of two or more people, or by
        management override of the controls. The design of any system of controls
        is
        based in part on certain assumptions about the likelihood of future events,
        and
        there can be no assurance that any design will succeed in achieving its stated
        goals under all potential future conditions. Projections of any evaluation
        of
        controls effectiveness to future periods are subject to risks. Over time,
        controls may become inadequate because of changes in conditions of deterioration
        in the degree of compliance with policies or procedures.
  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 temporary rules of the Securities and Exchange
        Commission that permit us to provide only management’s report in this annual
        report.


**Changes
      in internal control over financial reporting.** During
      the last fiscal quarter, there was no change in the Company’s internal control
      over financial reporting (as
      such
      term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
      has
      materially affected, or is reasonably likely to materially affect, the Company’s
      internal control over financial reporting.





**ITEM
      9B.**  **OTHER
      INFORMATION**





Not
      applicable.




20


**PART
      III**





**ITEM
      10.**  **DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATION GOVERNANCE**





**Directors
      and Executive Officers**





Set
      forth
      below are the names of each of the directors, executive officers and significant
      employees of the Company and a description of the business experience of each.
      Members of our board of directors are elected each year at our annual meeting
      of
      stockholders to serve a one year term expiring at the next following year’s
      annual meeting.





**Name**
            
            **Age**
            
            **Position**
            
            **Director
                Since**Donald
                S. Robbins
            
            63
            
            Chairman
                of the Board of Directors, President and Chief Executive
                Officer
            
            1992Esmeralda
                G. Robbins
            
            63
            
            Director
            
            1992Conrad
                Derdeyn
            
            73
            
            Director
            
            2003K.
                Bruce Jones
            
            66
            
            Chief
                Financial Officer and Director
            
            2005Robert
                Jay Machen
            
            75
            
            Director
            
            2003Herman
                Hohauser
            
            66
            
            Executive
                Vice President and Secretary
            
            -





*Donald
      S. Robbins, Chairman of the Board of Directors, President and Chief Executive
      Officer* . Mr.
      Robbins is a founder of CSMG and currently serves as our Chairman of the Board,
      President and Chief Executive Officer. Mr. Robbins has been instrumental in
      developing relationships with our foreign and domestic partners and oversees
      the
      management of the company both internationally and domestically, as well as
      any
      new technology acquisitions, evaluation and investment. These acquisitions
      have
      included state of the art technologies, such as Live Soft Biological Tissue
      Bonding/Welding for humans and animals and CO 2 separation technologies for landfill gas. Mr. Robbins located the technology
      and
      performed key due diligence, negotiated contracts and began start-up of our
      Live
      Tissue Bonding/Welding project in 1995/1996. He orchestrated the Live Tissue
      Bonding/Welding project from its embryonic stage in 1996 and lead the project
      through many difficult obstacles, patent filings and patents issued to reach
      a
      point where the technology would be commercially viable and attracted a key
      medical device industry executive in 2006 to lead our commercialization of
      the
      technology to major world markets. Mr. Robbins has been responsible for
      arranging more that $14 million of financing for us and our Live Tissue Connect
      subsidiary and has negotiated contracts and developed the business plan for
      establishing UEC and its involvement in dismantlement of weapons of mass
      destruction under the START Treaty that lasted from 1994 to 2002.





Prior
      to
      founding CSMG, Mr. Robbins gained extensive experience in the financial services
      and insurance industries, where he held numerous licenses such as Registered
      Investment Advisor and Registered Principal. He was nationally recognized in
      the
      financial services industry and has lectured in public seminars as well as
      industry related symposiums. During his 22 years in the financial services
      industry, Mr. Robbins has received over 140 awards and honors including numerous
      “Man of the Year” awards from multinational financial service and insurance
      companies. Mr. Robbins previously served on the Supervisory Council of United
      Engineering Company and currently serves as a foreign member of the
      International Association of Welding of the E. O. Paton Institute of Electric
      Welding National Academy of Sciences of Ukraine, Chairman and CEO of Live Tissue
      Connect, Inc.





*Esmeralda
      G. Robbins, Director* .
      From
      1979 to 1993 Mrs. Robbins worked as Product Consultant and Salon Coordinator
      for
      Corpus Christi Beauty Supply, a family owned business that covered a 500-mile
      radius. Mrs. Robbins consulted boutiques, beauty, and barber salons providing
      the equipment and products necessary for them to start a new salon. Working
      with
      furniture manufacturers and product technicians, she also coordinated
      large-scale seminars to introduce shop owners and their employees to new
      products and ideas to improve and update their services. Mrs. Robbins would
      also
      oversee the day-to-day operations of the business along with other family
      members. In 1993 the business was closed due to the declining health of elder
      family members. Mrs. Robbins is an original founder of the company and was
      Chairman of the Board from 1992 to 2005. She is the spouse of Donald S. Robbins,
      President and Chief Executive Officer of the company.




21




*Conrad
      Derdeyn, director* .
      Mr.
      Derdeyn has degrees in civil engineering from the University of Texas at Austin.
      In addition to being employed from 1963 to 2002 by Caterpillar, Inc., and its
      affiliated companies, which are leading manufacturers of heavy earthmoving,
      mining, pipeline and construction equipment, he served from 1956 to 1994 in
      the
      Transportation Corps of the United States Army Reserves, retiring with the
      rank
      of colonel. His positions with Caterpillar and its affiliates were Manager,
      Special Projects (1963-1965); Construction Market engineer for mines, pipelines
      and dams (1965-1969); Supervisor, Heavy Construction (1969-1970); Manager of
      Pipeline Market Sales, Finning Tractor, Vancouver, B.C. (1970-1972); Marketing
      Engineer, Peoria, Illinois (1972-1973); Area Director, Caterpillar Overseas,
      Madrid, Spain (1973-1975); Sales Manager, Caterpillar Brazil, San Paulo Brazil
      (1975-1979); Manager of CONEXDO 1981, a worldwide construction industry
      exposition held every six years (1980-1981); Manager, Caterpillar, Inc.'s
      Southwest Division (1981-1983); District Manager, Caterpillar, Inc.'s Gulf
      Coast
      Area (1982-1999); and Manager, Caterpillar, Inc.'s Pipeline Division
      (1998-2002).




*K.
      Bruce Jones, Chief Financial Officer and director* .
      Mr.
      Jones holds a BA and an MBA degree from Emory University. Mr. Jones has been
      employed since 1994 as the owner of K. Bruce Jones & Associates, Inc. of
      Marietta, Georgia, an investment banking and consulting company for startup
      and
      early-stage companies. From 1987 until 1992 he was employed by Gateway
      Investment Advisers of Cincinnati, Ohio as Senior Vice President of Marketing
      and Sales with additional duties in product design.




*Robert
      Jay Machen, director* .
      Mr.
      Machen, a graduate of Auburn University, is a civil engineer. After several
      years early experience in building dams and bridges, he was employed from 1964
      to August 1997 by McDermott International, Inc., a New Orleans-based energy
      services company serving the energy and power industry. He held positions as
      vice president and general manager for fabrication of off-shore installations
      in
      the Gulf of Mexico, the British North Sea and the Western Hemisphere outside
      the
      United States. He also held positions as Senior Vice President for Government
      Relations in Washington, D.C. and as the Senior Vice President and Chief
      Representative for corporate sales efforts in Russia, China, Taiwan and Hong
      Kong. From October 1997 to the present he has acted as a director and adviser
      to
      MODEC International of Houston, Texas, a leading provider of floating production
      and storage systems and platforms on legs to the offshore petroleum industry
      around the world.




*Herman
      Hohauser, Esq., Executive Vice President and Secretary* .
      Mr.
      Hohauser received his BEE degree from the University of Florida in 1962 and
      his
      JD degree from Washington College of Law in 1971. He is a practicing lawyer
      and
      business consultant to small businesses. Mr. Hohauser served as corporate
      counsel to the company and consultant prior to becoming executive vice president
      in February 2005. He assists Mr. Robbins with day-to-day operations and
      expanding the company's business opportunities. From 1978 to 2005, he engaged
      in
      the practice of law specializing in intellectual property matters including
      patent prosecution, licensing, structuring of business arrangements, and
      technology transfer. He was employed by the United States Patent and Trademark
      Office from 1965 to 1978 as a patent examiner. He attained the level of Primary
      Examiner in the electrical arts having the authority to grant or deny patent
      applications. He served as chairman of the EEO Committee and recruited for
      the
      Office at universities.





**Information
      about the Board of Directors, Committees of the Board, and Executive
      Officers**




In
      2007,
      the Board of Directors held 20 meetings, 18 of which were conducted by telephone
      conference call, and acted by unanimous written consent 20 times. All directors
      attended at least 75% of the total number of Board meetings. The Board of
      Directors has determined that Messrs. Derdeyn and Machen are independent within
      the meaning of Section 10A and Rule 10A-3 of the Exchange Act. The Company
      does
      not have a formal policy regarding attendance by members of the board of
      directors at the annual meetings of stockholders, but the Company strongly
      encourages all members of the board of directors to attend its annual meetings
      and expects such attendance except in the event of exigent circumstances. All
      of
      the members of the board of directors at the time of the annual meeting of
      stockholders held on January 3, 2007.




22





Shareholders
      may contact the Board of Directors by mail addressed to the entire board of
      directors, or to one or more individual directors, at 501 North Shoreline Drive,
      Suite 701 North, Corpus Christi, Texas 78471, Attn: Secretary. All
      communications directed to the board of directors or individual directors in
      this manner will be relayed to the intended recipients.





**Directors’
      Fees**




Directors
      of the company receive no compensation for their services as
      directors.





**Compliance
      with Section 16(a) of the Securities Exchange Act**





Section
      16(a) of the Exchange Act, requires the Company’s executive officers, directors
      and persons who beneficially own more than 10% of the Company’s Common Stock to
      file initial reports of ownership and reports of changes of ownership (Forms
      3,
      4 and 5) of the Common Stock with the SEC. Executive officers, directors and
      greater than 10% holders are required by SEC regulations to furnish the Company
      with copies of such forms that they file.




To
      the
      Company’s knowledge, based solely on the Company’s review of the copies of such
      reports received by the Company, the Company believes that for the fiscal year
      2006, its executive officers, directors and greater than 10% beneficial owners
      complied with all Section 16(a) filing requirements applicable to such
      persons.





**Corporate
      Governance**





The
      Board
      of Directors has no standing committees. We are not required to have an
      independent audit committee. Accordingly, the Board of Directors has determined
      that audit committee functions would be performed by the entire Board of
      Directors in accordance with Section 3(a)(5) of the Exchange Act. The Board
      of
      Directors has determined that K. Bruce Jones is an audit committee financial
      expert under applicable SEC rules and regulations. Mr. Jones is not an
      independent director under applicable guidelines.





**Code
      of Ethics**





We
      have
      adopted a Code of Ethics that applies to our executive officers, including
      our
      chief executive officer. A copy of the Code of Ethics is filed as exhibit 14.1
      to this Annual Report on Form 10-K.




23




**ITEM
      11.**  **EXECUTIVE
      COMPENSATION**





The
      following table sets forth the cash and non-cash compensation we paid for
      services rendered during the fiscal years ended December 31, 2005, December
      31,
      2006 and December 31, 2007, to Donald S. Robbins, our current President and
      Chief Executive Officer. No other executive officer's compensation exceeded
      $100,000 in the fiscal year ended December 31, 2007.




**Summary
      Compensation Table**




**Name
                  and Principal Position**
              
              
              **Year**
              
              
              **Salary ($)**
              
              
              **Stock**
                **Awards**
                **($)**
              
              
              **Total**
                **($)**Donald
                  S. Robbins
              
              
              2007
              
              $
              200,000
              
              
              
              
              $
              200,000President
                  and Chief
              
              
              2006
              
              $
              183,139
              
              
              12,000
              (1)
              
              195,139Executive
                  Officer (PEO) (1)




(1)
      On
      February 8, 2006, Mr. Robbins was awarded 200,000 shares of common stock that
      was not part of his annual base compensation. The
      value
      of these shares of common stock recognized by the Company in its financial
      statements is $$0.06 per share calculated in accordance with FASB No. 123(R),
      which was the grant date fair market value of such shares. For a discussion
      of
      the Company’s treatment of its equity compensation awards, seen Note 2: “Summary
      of Significant Accounting Policies - Stock Based Compensation” to the financial
      statements filed with this annual report on Form 10-K.




**Employment
      Contracts**





We
      have
      no employment contracts.





**Director
      Compensation**





Directors
      of the company receive no compensation for their services as directors.
      Accordingly, the table entitled “Director Compensation” and the discussion
      related to that table have been omitted because no compensation required to
      be
      reported in that table was awarded to, earned by or paid to any of the directors
      in any of the covered fiscal years.




24


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





The
      following table sets forth, as of March 1, 2008, certain information concerning
      the beneficial ownership of common stock by (i) each person known by the company
      to be the owner of more than 5% of the outstanding common stock, (ii) each
      director, (iii) our Chief Executive Officer, and (iv) all directors and
      executive officers as a group. In general, “beneficial ownership” includes those
      shares a director or executive officer has the power to vote or the power to
      transfer, and stock options and other rights to acquire common stock that are
      exercisable currently or become exercisable within 60 days. Except as indicated
      otherwise, the persons named in the table below have sole voting and investment
      power with respect to all shares shown as beneficially owned by them. The
      calculation of the percentage owned is based on 38,519,469 shares outstanding
      on
      March 1, 2008.


**Name
                    and Address**
                
                
                **Amount
                    and Nature**
                  **of
                    Beneficial Ownership**
                
                
                **Percentage
                    of**
                  **Outstanding**
                  **Shares
                    Owned**Donald
                    S. Robbins
                  701
                    CCNB North Tower
                  500
                    North Shoreline
                  Corpus
                    Christi, TX 78471
                
                
                2,451,904
                (1),
                    (2)
                
                6.4
                %Esmeralda
                    G. Robbins
                  701
                    CCNB North Tower
                  500
                    North Shoreline
                  Corpus
                    Christi, TX 78471
                
                
                450,000
                (1)
                
                1.1
                %Conrad
                    Derdeyn
                  11534
                    Spicewood Parkway
                  Austin,
                    TX 78750-2602
                
                
                742,506
                
                
                2
                %K.
                    Bruce Jones
                  Building
                    22, Suite 300
                  610
                    Village Trace
                  Marietta,
                    GA 30067
                
                
                1,019,333
                (3)
                
                2.6
                %Robert
                    Jay Machen
                  5327
                    Westerdale Drive
                  Fulshear,
                    TX 77441
                
                
                1,627,285
                
                
                4.2
                %Herman
                    Hohauser
                  6212
                    Berlee Drive
                  Alexandria,
                    VA 22312
                
                
                260,000
                (4)
                
                0.7All
                    directors and executive
                  officers
                    as a group (7 persons)
                
                
                6,569,028
                
                
                17
                %





*
      Represents less than 1% of the Company's outstanding common stock.




25




(1)
            Esmeralda
                G. Robbins and Donald S. Robbins are wife and husband, and each is
                deemed
                the beneficial owner of the shares beneficially owned by the other.
                The
                shares indicated as beneficially owned by each excludes the shares
                beneficially owned by the other.(2)
            Includes
                vested options to purchase 525,000 shares of common
                stock.(3)
            Includes
                vested options to purchase 200,000 shares of common
                stock.(4)
            Includes
                vested options to purchase 100,000 shares of common
                stock.




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





There
      have been no transactions during the past two years, or proposed transactions,
      to which our company was or is to be a party, in which any director, executive
      officer, nominee for election as a director, a holder of more than five percent
      of our voting stock or any member of their immediate family had or is to have
      a
      direct or indirect interest that exceeds $120,000.





The
      Board
      of Directors has determined that each of Messrs. Derdeyn and Machen is an
“independent director” based on the independence standards as defined by the
      marketplace rules of The Nasdaq Stock Market, Inc. (Nasdaq). The Board has
      made
      a subjective determination as to each independent director that no relationships
      exist which, in the opinion of the Board, would interfere with the exercise
      of
      independent judgment in carrying out the responsibilities of a
      director.





We
      rent
      our office space in Corpus Christi through an arrangement with Donald Robbins,
      our President and Chief Executive Officer and a director, who is the tenant
      on
      the lease, and we pay the rent directly to the landlord. See Item 2: Description
      of Property.





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTING FEES AND SERVICES**





**Audit
      Fees** .
      Our
      independent registered public accounting firm billed us, for each of the last
      two fiscal years, the following aggregate fees for its professional services
      rendered for the audit of our annual financial statements and review of
      financial statements included in our Form 10-QSB reports or other services
      normally provided in connection with statutory and regulatory filings or
      engagements for those two fiscal years:





Fiscal
      Year ended December 31, 2007  $ 26,123




Fiscal
      Year ended December 31, 2006  $ 16,000





**Audit-Related
      Fees.** Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for assurance and related services
      reasonably related to the performance of the audit or review of our financial
      statements and not reported above under “Audit Fees”:





Fiscal
      Year ended December 31, 2007  $ 25,109




Fiscal
      Year ended December 31, 2006  $ 7,800





**Tax
      Fees** .
      Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for professional services rendered for
      tax
      compliance, tax advice and tax planning:





Fiscal
      Year ended December 31, 2007  $-0-




Fiscal
      Year ended December 31, 2006  $-0-





**All
      Other Fees** .
      Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for products and services provided by it,
      other than the services reported in the above three categories:





Fiscal
      Year ended December 31, 2007  $-0-




26




Fiscal
      Year ended December 31, 2006  $-0-





**Pre-Approval
      of Audit and Non-Audit Services.** The
      board of directors pre-approves all audit, review and attestation and non-audit
      service engagements of the Company’s independent registered public accounting
      firm before such services are rendered.





**ITEM
      15.**  **EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES**





**Exhibit**
              **Number**
            
            **Exhibit Title**3(i)
            
            Amended
                and Restated Articles of Incorporation of CSMG Technologies, Inc.,
                as
                amended (filed as Exhibit 3(i) to the registrant’s annual report on Form
                10-KSB for the year ended December 31, 2006 and incorporated herein
                by
                reference).3(ii)
            
            Bylaws
                of CSMG Technologies, Inc., as amended (filed as Exhibit 3(ii) to
                the
                registrant’s annual report on Form 10-KSB for the year ended December 31,
                2006 and incorporated herein by reference).10.1
            
            Second
                amendment to Lease Agreement between Bank of American and Donald
                S.
                Robbins, dated as of June 24, 2005 (filed as Exhibit 10.1 to the
                registrant’s annual report on Form 10-KSB for the year ended December 31,
                2006 and incorporated herein by reference).10.2
            
            Agreement
                of July 9, 1996 between Consortium Service Management Group, Inc. and
                International Welding concerning tissue bonding technology (filed
                as
                Exhibit 10.3 to the registrant’s Form 10-SB, filed on September 16, 1999
                and incorporate herein by reference).10.3
            
            Agreement
                of December 1998 between International Welding Association of Kiev,
                Ukraine and Consortium Service Management Group, Inc. concerning
                the
                carbon dioxide separator technology (filed as Exhibit 10.9 to the
                registrant’s Form 10-SB, filed on September 16, 1999 and incorporate
                herein by reference).10.4
            
            Operating
                Agreement of June 14, 2001 between Consortium Service Management
                Group,
                Inc. and Resource Technology Corporation. (filed as Exhibit 10.10
                to
                Amendment No. 2 to the registrant’s Form 10-SB, filed on December 3, 2001
                and incorporated herein by reference).10.5
            
            Agency
                Agreement between Joint Stock Company “Sumy Frunze Machine-Building
                Science and Production Association” of Ukraine and Consortium Service
                Management Group, Inc. (filed as Exhibit 10.20 to the registrant’s Form
                10-KSB for the year ended December 31, 2002 and incorporated herein
                by
                reference).10.6
            
            Amended
                2003 Stock Option Plan adopted by the board of directors of Consortium
                Service Management Group, Inc. (filed as Exhibit 4.1 to the registrant’s
                registrant statement on Form S-8 filed on July 2, 2007 and incorporated
                herein by reference).10.7
            
            Standby
                Equity Distribution Agreement of March 29, 2004 between Cornell Capital
                Partners, LP and Consortium Service Management Group, Inc. (filed
                as
                Exhibit 10.23 to the registrant’s Form 10-KSB for the year ended December
                31, 2004 and incorporate herein by reference).10.8
            
            Landfill
                Gas Sales Agreement between CSMG Technologies, Inc. and E.I. DuPont
                de
                Nemours and Co. Inc. and Shoreline Gas, Inc. (filed as Exhibit 10.1
                to the
                registrant’s Form 8-K filed on February 21, 2006 and incorporated herein
                by reference).14.1
            
            Code
                of Ethics for the Chief Executive Officer and Senior Financial Officers
                (filed as Exhibit 14 to the registrant’s annual report on Form 10-KSB for
                the year ended December 31, 2004 and incorporated herein by
                reference).




27


21.1
            
            Subsidiaries
                of the registrant (filed as Exhibit 21.1 to the registrant’s annual
                report on
                Form 10-K for the year ended December 31, 2007 and incorporated herein
                by
                reference).23.1*
            
            Consent
                of KBL, LLP, independent registered public accounting
                firm.31.1*
            
            Certification
                of the Chief Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a).31.2*
            
            Certification
                of the Chief Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a).32.1*
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
                1350.




*
      filed
      herewith




28


**Index
      To Consolidated Financial Statements**





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Page(s)**Report
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
                Balance Sheets as of December 31, 2007 and 2006
            
            
            F-3Consolidated
                Statements of Operations for the years endedDecember
                31, 2007 and 2006, with cumulative totals sinceJanuary
                1, 2006 the commencement of the development stage
            
            
            F-4Consolidated
                Statement of Changes in Stockholders’ Equity (Deficit)for
                the years ended December 31, 2007 and 2006
            
            
            F-5Consolidated
                Statements of Cash Flows for the years endedDecember
                31, 2007 and 2006, with cumulative totals sinceJanuary
                1, 2006 the commencement of the development stage
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7





29


**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 To
        the
        Board of Directors and Shareholders
 CSMG
        Technologies, Inc. and Subsidiaries
 Corpus
        Christi, TX
  We
        have
        audited the accompanying consolidated balance sheets of CSMG Technologies,
        Inc.
        and Subsidiaries (the “Company”) (a development stage company) as of December
        31, 2007 and 2006 and the related consolidated statements of operations,
        changes
        in stockholders’ equity (deficit), and cash flows for the years ended December
        31, 2007 and 2006 with cumulative totals since January 1, 2006 the commencement
        of the development stage. 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 standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. We were
        not
        engaged to perform an audit of the Company’s internal control over financial
        reporting. Our audits 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 audits provide a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of CSMG Technologies,
        Inc. and Subsidiaries as of December 31, 2007, and the results of its
        consolidated statements of operations, changes in stockholders’ equity
        (deficit), and cash flows for the years ended December 31, 2007 and 2006,
        with
        cumulative totals since January 1, 2006, the commencement of the development
        stage in conformity with U.S. generally accepted accounting
        principles.
 
 F-1
  The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has sustained operating losses
        and capital deficits that raise substantial doubt about its ability to continue
        as a going concern. Management’s plans in regard to these matters are also
        described in Note 1. The consolidated financial statements do not include
        any
        adjustments that might result from the outcome of this uncertainty.
 
 As
        discussed in Note 13, the Company has restated its consolidated financial
        statements for the years ended December 31, 2007 and 2006 to account for
        options
        granted by Live Tissue Connect, Inc., the majority owned subsidiary of the
        Company. These options were omitted from the previously filed consolidated
        financial statements. The adjustments decreased the net loss and deficits
        accumulated during the development stage in the amounts of $1,366,091 and
        $70,948 for the years ended December 31, 2007 and 2006, respectively. In
        addition, additional paid in capital increased $1,588,478 and $82,498 at
        December 31, 2007 and 2006, respectively and minority interest was reduced
        by
        $222,387 and $11,550 at December 31, 2007 and 2006, respectively.
 
 
 **/s/
        KBL, LLP**
 New
        York,
        NY
 February
        19, 2008, except for Note 13, which is dated May 7, 2008
 
 F-2
 **CSMG
                    TECHNOLOGIES. INC. AND SUBSIDIARIES****(FORMERLY
                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****(A
                    DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                    BALANCE SHEET****DECEMBER
                    31, 2007 AND 2006****ASSETS****RESTATED**
                
                **RESTATED****2007**
                
                **2006****CURRENT
                    ASSETS**Cash
                
                $
                1,004,376
                
                $
                868,217Inventory
                
                
                35,670
                
                
                -**Total
                    current assets**
                
                
                1,040,046
                
                
                868,217Fixed
                    assets, net of depreciation
                
                
                42,605
                
                
                3,491Intangible
                    assets
                
                
                37,157
                
                
                -Other
                    assets
                
                
                -
                
                
                53,383**TOTAL
                    ASSETS**
                
                $
                1,119,808
                
                $
                925,091**LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                    LIABILITIES**Accounts payable and accrued expenses
                
                $
                640,713
                
                $
                102,235Accrued interest payable
                
                
                1,699,124
                
                
                1,531,513Liability for stock to be issued
                
                
                143,459
                
                
                -Convertible notes payable
                
                
                6,845,000
                
                
                2,750,000Notes payable
                
                
                1,508,407
                
                
                2,758,978Other current liabilities
                
                
                279,689
                
                
                541,582**Total
                    current liabilities**
                
                
                11,116,392
                
                
                7,684,308**TOTAL
                    LIABILITIES**
                
                
                11,116,392
                
                
                7,684,308**Minority
                    interest**
                
                
                (635,590
                )
                
                (24,779
                )**STOCKHOLDERS'
                    EQUITY (DEFICIT)**Preferred stock, par value $0.001 per share, 10,000,000 shares
                    authorized
                    andno
                    shares issued and outstanding
                
                
                -
                
                
                -Common stock, par value $0.001 per share, 80,000,000 shares authorized
                    and38,018,544
                    and 33,464,418 issued and outstanding
                
                
                38,018
                
                
                33,464Additional paid-in capital
                
                
                15,476,749
                
                
                10,004,593Accumulated deficit
                
                
                (13,512,773
                )
                
                (13,512,773
                )Deficits accumulated during the development stage
                
                
                (11,330,215
                )
                
                (2,889,760
                )Stock subscribed
                
                
                -
                
                
                (488
                )Accumulated other comprehensive loss
                
                
                -
                
                
                (337,189
                )Treasury stock
                
                
                (32,773
                )
                
                (32,285
                )**Total
                    stockholders' equity (deficit)**
                
                
                (9,360,994
                )
                
                (6,734,438
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
                
                $
                1,119,808
                
                $
                925,091The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements.
  F-3
  **CSMG
                      TECHNOLOGIES, INC. AND SUBSIDIARIES****(FORMERLY
                      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****(A
                      DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                      STATEMENTS OF OPERATIONS****FOR
                      THE YEARS ENDED DECEMBER 31, 2007 AND 2006****(WITH
                      CUMULATIVE TOTALS SINCE JANUARY 1, 2006, THE****COMMENCEMENT
                      OF THE DEVELOPMENT STAGE)****RESTATED****CUMULATIVE****RESTATED**
                  
                  **TOTALS
                      SINCE****2007**
                  
                  **2006**
                  
                  **JANUARY
                      1, 2006****REVENUE**
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -**COST
                      OF REVENUES**Research
                      and development costs
                  
                  
                  2,716,242
                  
                  
                  558,488
                  
                  
                  3,274,730**Total
                      costs of revenues**
                  
                  
                  2,716,242
                  
                  
                  558,488
                  
                  
                  3,274,730**GROSS
                      (LOSS)**
                  
                  
                  (2,716,242
                  )
                  
                  (558,488
                  )
                  
                  (3,274,730
                  )**OPERATING
                      EXPENSES**General
                      and administrative
                  
                  
                  2,649,652
                  
                  
                  2,180,972
                  
                  
                  4,830,624Stock
                      based compensation
                  
                  
                  1,588,478
                  
                  
                  82,498
                  
                  
                  1,670,976Depreciation
                  
                  
                  861
                  
                  
                  384
                  
                  
                  1,245**Total
                      operating expenses**
                  
                  
                  4,238,991
                  
                  
                  2,263,854
                  
                  
                  6,502,845**NET
                      LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION FOR INCOME TAXES, MINORITY INTEREST AND****EXTRAORDINARY ITEM**
                  
                  
                  (6,955,233
                  )
                  
                  (2,822,342
                  )
                  
                  (9,777,575
                  )**OTHER
                      INCOME (EXPENSE)**Equity
                      in net income (losses) of unconsolidated companies
                  
                  
                  -
                  
                  
                  (85,118
                  )
                  
                  (85,118
                  )Loss
                      on sale of United Engineering
                  
                  
                  (112,072
                  )
                  
                  -
                  
                  
                  (112,072
                  )Interest
                      expense, net of interest income
                  
                  
                  (1,983,961
                  )
                  
                  (413,884
                  )
                  
                  (2,397,845
                  )**NET
                        LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES,**MINORITY INTEREST AND EXTRAORDINARY ITEM
                  
                  
                  (9,051,266
                  )
                  
                  (3,321,344
                  )
                  
                  (12,372,610
                  )Minority
                      interest
                  
                  
                  610,811
                  
                  
                  230,779
                  
                  
                  841,590**NET
                        LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES**AND
                        EXTRAORDINARY ITEM
                  
                  
                  (8,440,455
                  )
                  
                  (3,090,565
                  )
                  
                  (11,531,020
                  )Provision for income taxes
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -**NET
                      LOSS FROM OPERATIONS BEFORE EXTRAORDINARY ITEM**
                  
                  
                  (8,440,455
                  )
                  
                  (3,090,565
                  )
                  
                  (11,531,020
                  )Extraordinay gain
                  
                  
                  -
                  
                  
                  200,805
                  
                  
                  200,805**NET
                      (LOSS)**
                  
                  $
                  (8,440,455
                  )
                  $
                  (2,889,760
                  )
                  $
                  (11,330,215
                  )**NET
                      (LOSS) PER BASIC AND DILUTED SHARES****BEFORE EXTRAORDINARY ITEM**
                  
                  $
                  (0.23
                  )
                  $
                  (0.10
                  )
                  $
                  (0.34
                  )**NET
                      (LOSS) PER BASIC AND DILUTED SHARES**
                  
                  $
                  (0.23
                  )
                  $
                  (0.09
                  )
                  $
                  (0.34
                  )**WEIGHTED
                      AVERAGE NUMBER OF****SHARES
                      OUTSTANDING**
                  
                  
                  36,200,105
                  
                  
                  30,786,442
                  
                  
                  33,493,274The
                      accompanying notes are an integral part of these consolidated
                      financial
                      statements.
 
 F-4
 
  **CSMG
                          TECHNOLOGIES, INC. AND SUBSIDIARIES****(FORMERLY
                          CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****(A
                          DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                          STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)****FOR
                          THE YEARS ENDED DECEMBER 31, 2007 AND 2006**
  **Preferred
                              Stock**
                        
                        **Common
                              Stock**
                        
                        **Additional**Paid-in
                        
                        **Accumulated**
                        
                        **Deficits**AccumulatedDuring theDevelopment
                        
                        **Stock**
                        
                        **Accumulated**OtherComprehensiveIncome
                        
                        **Treasury****Shares**
                        
                        **Amount**
                        
                        **Shares**
                        
                        **Amount**
                        
                        **Capital**
                        
                        **Deficit**
                        
                        **Stage**
                        
                        **Subscribed**
                        
                        **(Loss)**
                        
                        **Stock**
                        
                        **Total**Balance,
                            January 1, 2006
                        
                        
                        -
                        
                        $
                        -
                        
                        
                        26,056,072
                        
                        $
                        26,056
                        
                        $
                        7,548,049
                        
                        $
                        (13,512,773
                        )
                        $
                        -
                        
                        $
                        (939
                        )
                        $
                        (339,454
                        )
                        $
                        (32,285
                        )
                        $
                        (6,311,346
                        )Common
                            shares issued for cash
                        
                        
                        -
                        
                        
                        -
                        
                        
                        4,549,122
                        
                        
                        4,549
                        
                        
                        668,340
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        672,889Common
                            shares issued for conversion ofnotes
                            and interest
                        
                        
                        -
                        
                        
                        -
                        
                        
                        2,493,109
                        
                        
                        2,493
                        
                        
                        1,504,965
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,507,458Common
                            shares issued for services
                        
                        
                        -
                        
                        
                        -
                        
                        
                        366,115
                        
                        
                        366
                        
                        
                        200,741
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        201,107Common
                            shares subscribed
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        451
                        
                        
                        -
                        
                        
                        -
                        
                        
                        451Stock
                            based compensation
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        82,498
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        82,498Net
                            income (loss) before restatement
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (2,818,812
                        )
                        
                        -
                        
                        
                        2,265
                        
                        
                        -
                        
                        
                        (2,816,547
                        )Prior
                            period adjustment, see Note 13
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (70,948
                        )
                        
                        
                        
                        
                        -
                        
                        
                        
                        
                        
                        (70,948
                        )Net
                            income (loss) after restatement
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (2,889,760
                        )
                        
                        -
                        
                        
                        2,265
                        
                        
                        -
                        
                        
                        (2,887,495
                        )Balance,
                            December 31, 2006, as restated
                        
                        
                        -
                        
                        
                        -
                        
                        
                        33,464,418
                        
                        
                        33,464
                        
                        
                        10,004,593
                        
                        
                        (13,512,773
                        )
                        
                        (2,889,760
                        )
                        
                        (488
                        )
                        
                        (337,189
                        )
                        
                        (32,285
                        )
                        
                        (6,734,438
                        )Common
                            shares issued for cash
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,086,715
                        
                        
                        1,087
                        
                        
                        619,904
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        620,991Common
                            shares issued for conversion of
                          notes
                            and interest
                        
                        
                        -
                        
                        
                        -
                        
                        
                        2,733,248
                        
                        
                        2,733
                        
                        
                        1,745,690
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,748,423Common
                            shares issued for services
                        
                        
                        -
                        
                        
                        -
                        
                        
                        744,500
                        
                        
                        744
                        
                        
                        313,669
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        314,413Common
                            shares cancelled during the period
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (10,337
                        )
                        
                        (10
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (10
                        )Common
                            shares subscribed purchased
                          as
                            treasury stock
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        488
                        
                        
                        -
                        
                        
                        (488
                        )
                        
                        -Discounts
                            on conversions of notes payable
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        922,001
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        922,001Issuance
                            of warrants
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        186,092
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        186,092Issuance
                            of options
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        96,322
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        96,322Sale
                            of United Engineering
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        337,189
                        
                        
                        -
                        
                        
                        337,189Stock
                            based compensation
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,588,478
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,588,478Net
                            income (loss) before restatement
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (7,074,364
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (7,074,364
                        )Prior
                            period adjustment, see Note 13
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (1,366,091
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (1,366,091
                        )Net
                            income (loss) after restatement
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (8,440,455
                        )
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        (8,440,455
                        )Balance,
                            December 31, 2007
                        
                        
                        -
                        
                        $
                        -
                        
                        
                        38,018,544
                        
                        $
                        38,018
                        
                        $
                        15,476,749
                        
                        $
                        (13,512,773
                        )
                        $
                        (11,330,215
                        )
                        $
                        -
                        
                        $
                        -
                        
                        $
                        (32,773
                        )
                        $
                        (9,360,994
                        )
  The
                          accompanying notes are an integral part of these consolidated
                          financial
                          statements.
  F-5
 
 **CSMG
                                TECHNOLOGIES, INC. AND SUBSIDIARIES****(FORMERLY
                                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****(A
                                DEVELOPMENT STAGE COMPANY)****CONSOLIDATED
                                STATEMENTS OF CASH FLOW****FOR
                                THE YEARS ENDED DECEMBER 31, 2007 AND 2006****(WITH
                                CUMULATIVE TOTALS SINCE JANUARY 1, 2006, THE****COMMENCEMENT
                                OF THE DEVELOPMENT STAGE)****RESTATED****CUMULATIVE****RESTATED**
                            
                            **RESTATED**
                            
                            **TOTALS
                                SINCE****2007**
                            
                            **2006**
                            
                            **JANUARY
                                1, 2006****CASH
                                FLOWS FROM OPERATING ACTIVITIES:**Net
                                (loss)
                            
                            $
                            (8,440,455
                            )
                            $
                            (2,889,760
                            )
                            $
                            (11,330,215
                            )**Adjustments
                                to reconcile net (loss)****to
                                net cash (used in) operating activities:**Stock
                                issued for services
                            
                            
                            314,413
                            
                            
                            201,107
                            
                            
                            515,520Stock
                                based compensation
                            
                            
                            1,588,478
                            
                            
                            82,498
                            
                            
                            1,670,976Discount
                                on conversion of notes payable
                            
                            
                            962,400
                            
                            
                            556,775
                            
                            
                            1,519,175Warrants
                                issued for commissions
                            
                            
                            186,092
                            
                            
                            -
                            
                            
                            186,092Options
                                issued to consultant
                            
                            
                            96,322
                            
                            
                            -
                            
                            
                            96,322Equity
                                loss from investee
                            
                            
                            -
                            
                            
                            85,118
                            
                            
                            85,118Depreciation
                            
                            
                            861
                            
                            
                            384
                            
                            
                            1,245Minority
                                interest
                            
                            
                            (610,811
                            )
                            
                            (230,779
                            )
                            
                            (841,590
                            )Write
                                off FAS 144 assets
                            
                            
                            -
                            
                            
                            476,304
                            
                            
                            476,304Loss
                                on sale of United Engineering
                            
                            
                            112,072
                            
                            
                            -
                            
                            
                            112,072**Change
                                in assets and liabilities**Increase
                                in inventory
                            
                            
                            (35,670
                            )
                            
                            -
                            
                            
                            (35,670
                            )Increase
                                (decrease) in accounts payable and accrued expenses
                            
                            
                            1,117,435
                            
                            
                            (638,725
                            )
                            
                            478,710Decrease
                                in other current liabilities
                            
                            
                            (75,893
                            )
                            
                            -
                            
                            
                            (75,893
                            )**Total
                                adjustments**
                            
                            
                            3,655,699
                            
                            
                            532,682
                            
                            
                            4,188,381**Net
                                cash (used in) operating activities**
                            
                            
                            (4,784,756
                            )
                            
                            (2,357,078
                            )
                            
                            (7,141,834
                            )**CASH
                                FLOWS FROM INVESTING ACTIVITIES:**Capital
                                expenditures
                            
                            
                            (39,975
                            )
                            
                            (3,875
                            )
                            
                            (43,850
                            )Acquisitions
                                of intangible assets
                            
                            
                            (37,157
                            )
                            
                            -
                            
                            
                            (37,157
                            )Proceeds
                                from sale of United Engineering
                            
                            
                            278,500
                            
                            
                            -
                            
                            
                            278,500**Net
                                cash provided by (used in) investing activities**
                            
                            
                            201,368
                            
                            
                            (3,875
                            )
                            
                            197,493**CASH
                                FLOWS FROM FINANCING ACTIVITIES:**Issuance
                                of stock for cash
                            
                            
                            620,991
                            
                            
                            673,339
                            
                            
                            1,294,330Repayment
                                of notes payable
                            
                            
                            (46,444
                            )
                            
                            -
                            
                            
                            (46,444
                            )Repayment
                                of convertible notes payable
                            
                            
                            (100,000
                            )
                            
                            -
                            
                            
                            (100,000
                            )Borrowings
                                of notes payable
                            
                            
                            50,000
                            
                            
                            2,555,831
                            
                            
                            2,605,831Borrowings
                                of convertible notes payable
                            
                            
                            4,195,000
                            
                            
                            -
                            
                            
                            4,195,000**Net
                                cash provided by financing activities**
                            
                            
                            4,719,547
                            
                            
                            3,229,170
                            
                            
                            7,948,717**NET
                                INCREASE IN CASH AND CASH EQUIVALENTS**
                            
                            
                            136,159
                            
                            
                            868,217
                            
                            
                            1,004,376**CASH
                                AND CASH EQUIVALENTS - BEGINNING OF YEAR**
                            
                            
                            868,217
                            
                            
                            -
                            
                            
                            -**CASH
                                AND CASH EQUIVALENTS - END OF YEAR**
                            
                            $
                            1,004,376
                            
                            $
                            868,217
                            
                            $
                            1,004,376**SUPPLEMENTAL
                                INFORMATION OF CASH FLOW ACTIVITY**Cash
                                paid during the year for interest
                            
                            $
                            240,889
                            
                            $
                            -
                            
                            $
                            240,889**SUPPLEMENTAL
                                INFORMATION ON NONCASH ACTIVITY**Conversion
                                of notes payable to common stock
                            
                            $
                            1,254,127
                            
                            $
                            1,507,458
                            
                            $
                            2,761,585Conversion
                                of accrued interest to common stock
                            
                            $
                            597,347
                            
                            $
                            -
                            
                            $
                            597,347Conversion
                                of notes payable and accrued interest for liability
                                for stock to be
                                issued
                            
                            $
                            143,459
                            
                            $
                            -
                            
                            $
                            143,459The
                                accompanying notes are an integral part of these
                                consolidated financial
                                statements.
 F-6
  **CSMG
            TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
            CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
            DEVELOPMENT STAGE COMPANY)**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
            31, 2007 AND 2006**
  **NOTE
                  1-**
              **ORGANIZATION
                  AND BASIS OF
                  PRESENTATION**
  CSMG
        Technologies Inc., formerly, Consortium Service Management Group, Inc. (the
        “Company”), a Texas corporation, was incorporated on November 17, 1992. On
        January 18, 2007, the Company changed its name to CSMG Technologies, Inc.
        and
        increased its total number of authorized shares to 90,000,000 and the number
        of
        common shares to 80,000,000.
  The
        Company is a technology management company. The technologies involve live
        tissue
        bonding and CO2 (carbon dioxide) separation of landfill gas, however, the
        carbon
        dioxide separation of landfill gas component has not been an active service
        during 2006 and 2007.
  The
        live
        tissue bonding operations is contained in Live Tissue Connect, Inc., a
        subsidiary that is owned 86% by the Company. The live tissue bonding technology
        focuses on bonding living soft biological tissue used in surgical procedures
        which eliminates the need for sutures, staples, sealants or glues. The Company
        has an agreement with the E.O. Paton Institute of Electrical Welding of the
        Ukraine National Academy of Sciences and International Association of Welding
        and owns the technology including the worldwide rights of licensing, patenting,
        manufacturing, development and distribution of this technology. To date,
        we have
        31 issued or pending patents in the United States and overseas in connection
        with the live tissue bonding equipment. In addition, in June 2007, the Company
        filed a 510(K) submission with the U.S. Food and Drug Administration for
        the
        duct and vessel sealer and two instruments. The Company has received the
        European CE Mark on the Electro surgery generator as well as having their
        technology approved for commercial development in Ukraine by the Ukraine
        Ministry of Health.
  The
        Company also has 1 patent issued in both the United States and Canada on
        the
        carbon dioxide separator technology. This was also developed in Ukraine,
        and
        promotes the economical separation of methane from carbon dioxide gas emanating
        from landfills. Landfills generate a commingled mixture of methane and carbon
        dioxide gas which prevents it from being commercially sold as fuel. The Ukraine
        technology has developed an economical carbon dioxide separator that removes
        the
        carbon dioxide to allow the methane gas to be sold to utility companies as
        well
        as other industrial and commercial customers. The first installation began
        in
        2002 in Mobile, Alabama with completion originally estimated to be in the
        second
        quarter of 2003.
 
 The
        carbon dioxide separator equipment was installed at the Chastang landfill
        in
        Mobile, Alabama which is owned by the city of Mobile but operated by Waste
        Management Inc. and Transamerican Waste Industries Inc., and has since been
        removed and put into storage. An agreement existed between Transamerican
        Waste
        Industries Inc. and Resource Technology Corporation (RTC) which gave RTC
        the
        sole and exclusive right to collect, extract and remove landfill gas from
        the
        property.
 
 F-7
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  1-**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION****(CONTINUED)**
  At
        this
        time RTC contracted with the Company to extract the methane gas. Accordingly,
        the Company installed the carbon dioxide separator at the landfill in 2002
        and
        2003. Waste Management Inc. asserted that the carbon dioxide equipment produced
        methane gas that failed to meet Mobile Gas quality specifications. As a result
        and as noted in Note 11 , Litigation, a legal dispute ensued as well as RTC filing bankruptcy.
 
 On
        February 14, 2006, the Company signed a contract with DuPont to provide up
        to
        500,000 MMbtu commercial quality gas to their plant outside Mobile, Alabama.
        There is no requirement in this contract for gas quality specifications.
        During
        2007, the Company dismantled the equipment and moved the equipment to storage
        due to the fact that there was not sufficient raw gas at the landfill. The
        contract has expired.
 
 In
        1994,
        the Company formed United Engineering Company, a Ukraine and U.S. joint stock
        company registered under the laws of Ukraine with 14 of Ukraine’s largest
        defense contractors and Ukraine State Property fund. The purpose was to perform
        dismantlement of weapons of mass destruction under the START Treaty. The
        Company
        initially had a 50% ownership that was reduced to 33.3% in 2000. The Company
        recorded this investment under the equity method, and maintained its investment
        until March 2007, when their interest was sold for net proceeds of $278,500.
 
 The
        Company recently has been focusing on their live tissue bonding technology,
        and
        has hired an internationally recognized medical device expert, a surgical
        device
        design company to design and manufacture the live tissue connect generator,
        as
        well as bringing on a major U.S. University to complete laboratory work and
        adding advisors that are surgeons, engineers and scientists to work on this
        project in the Ukraine.
 
 In
        October 2007, the Board of Directors agreed to have the Company’s majority-owned
        subsidiary Live Tissue Connect, Inc. submit to the Securities and Exchange
        Commission (SEC) an initial public offering (IPO). The Company anticipates
        this
        to occur in the first quarter of 2008.
 
 **Going
        Concern**
 
 As
        shown
        in the accompanying consolidated financial statements the Company has incurred
        a
        loss of **$** 8,440,455
        and $3,090,565 (prior to the extraordinary gain of $200,805) for the years
        ended
        December 31, 2007 and 2006, respectively, and has a working capital deficiency
        of $10,076,346 as of December 31, 2007.
  The
        Company’s management has raised funds through equity and debt offerings. In June
        2006, Empire Financial Group and the Company entered into a best efforts
        bridge
        financing transaction for $3,025,000.
 
 F-8
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  1-**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION****(CONTINUED)**
  **Going
        Concern** **(Continued)**
 
 Empire
        Financial Group was successful in raising the full $3,025,000 . The Company
        and
        Empire Financial Group has extended this offering for up to a minimum of
        $3,000,000 as well as a letter of intent relating to the raising of an
        additional $25,000,000 for a potential initial public offering of Live Tissue
        Connect, Inc., the tissue welding technology subsidiary of the Company, of
        which
        Empire has raised $3,920,000 ($100,000 was paid back to an investor during
        the
        three months ended December 31, 2007) as of December 31, 2007. The total
        of
        $6,845,000, which includes $3,025,000 and $3,920,000 raised by Empire Financial
        Group, less repayments of $100,000 is currently classified as “Convertible Notes
        Payable” on the consolidated balance sheet at December 31, 2007.
  One
        of
        the principal reasons for the Company’s ability to continue as a going concern
        involves the carbon dioxide separator business. The equipment manufactured
        removes CO2 from landfill gas, raw landfill gas that has high air content
        requires additional landfill gathering system tuning to reduce air content
        or
        additional oxygen and nitrogen removal equipment. Our system fits well is
        within
        specifications on the Company’s agreement with DuPont. The Chastang project
        however, generated no production, and cost the Company approximately $2,000,000.
        The Company has moved their equipment from the Chastang site to storage.
        Despite, the new gas purchase contract the Company entered into, the Company
        did
        impair the value of their equipment. In addition to this impairment, the
        Company
        impaired the value of obtaining their patents for both the CO2 separator
        equipment as well as the patents related to the live tissue bonding in 2006.
        The
        total of the patent impairment was approximately $650,000.
  Management’s
        plans to address these conditions include raising additional funds, through
        Empire Financial Group, as well as commercially, manufacturing and distributing
        their live tissue bonding equipment in the second quarter of 2008. The Company
        has signed contracts with leading instrument and electro surgery generator
        design and manufacturing companies and has started manufacturing of the
        commercial equipment that will be licensed or sold to perform surgeries.
  The
        Company’s long-term success is dependent upon obtaining FDA approval (the
        Company achieved the approval for the C E Marking for European Union markets)
        on
        its electro surgery generator as well as worldwide acceptance of their products.
  The
        Company is subject to certain risks common to technology-based companies.
        Principal risks to the Company include uncertainty of growth in market
        acceptance for its products; history of losses in recent years; ability to
        remain competitive in response to new technologies; costs to defend, as well
        as
        risks of losing patent and intellectual property rights; reliance on limited
        number of suppliers; reliance on outsourced manufacture of its products for
        quality control and product availability; uncertainty of demand for its products
        in certain markets; ability to manage growth effectively; dependence on key
        members of its management; and its ability to obtain adequate capital to
        fund
        future operations.
 
 F-9
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  1-**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION****(CONTINUED)**
  **Going
        Concern** **(Continued)**
  The
        consolidated financial statements do not include any adjustments relating
        to the
        carrying amounts of recorded assets or the carrying amounts and classification
        of recorded liabilities that may be required should the Company be unable
        to
        continue as a going concern.
  **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
  **Principles
        of Consolidation**
  The
        consolidated financial statements include those of the Company and its
        majority-owned subsidiary. All intercompany accounts and transactions have
        been
        eliminated in consolidation. Minority interests have been reflected in the
        consolidated financial statements for the percentage of the subsidiary not
        owned
        by the Company.
  **Development
        Stage Company**
  The
        Company commencing on January 1, 2006 entered into the development stage.
        Prior
        to January 1, 2006, the Company was operating in the carbon dioxide separator
        of
        landfill gas business exclusively. The Company has not been conducting
        significant operations in this business for 2006 and 2007, and has been in
        the
        development of their live tissue connect business. Therefore, management
        considers themselves to have commenced the development stage effective January
        1, 2006 as defined in Statement of Financial Accounting Standards (SFAS)
        No. 7,
“ *Accounting
        and Reporting by Development Stage Enterprises* ”.
        Additionally, the Company has allocated a substantial portion of their time
        and
        investment in bringing their services to the market, and the raising of capital.
        The Company has commenced the purchasing of raw materials to manufacture
        their
        generators in late 2007, and believes that they will commence revenues in
        2008.
  **Use
        of Estimates**
  The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosures of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenue
        and
        expenses during the reporting period. Actual results could differ from those
        estimates.
 
 F-10
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Cash
        and Cash Equivalents**
  The
        Company considers all highly liquid debt instruments and other short-term
        investments with a maturity of three months or less, when purchased, to be
        cash
        equivalents.
  The
        Company maintains cash and cash equivalent balances at one financial institution
        that is insured by the Federal Deposit Insurance Corporation up to $100,000.
        All
        amounts contained in this financial institution pose a risk to the Company
        however the Company believes the risk to be minimal.
  **Fixed
        Assets**
  Fixed
        assets are stated at cost, less accumulated depreciation. Depreciation is
        provided using the straight-line method over the estimated useful lives of
        the
        related assets (primarily three to five years). Costs of maintenance and
        repairs
        are charged to expense as incurred.
  **Recoverability
        of Long-Lived Assets**
  The
        Company reviews the recoverability of its long-lived assets on a periodic
        basis
        whenever events and changes in circumstances have occurred which may indicate
        a
        possible impairment. The assessment for potential impairment is based primarily
        on the Company’s ability to recover the carrying value of its long-lived assets
        from expected future cash flows from its operations on an undiscounted basis.
        If
        such assets are determined to be impaired, the impairment recognized is the
        amount by which the carrying value of the assets exceeds the fair value of
        the
        assets. Fixed assets to be disposed of by sale are carried at the lower of
        the
        then current carrying value or fair value less estimated costs to
        sell.
  **Research
        and Development**
  The
        Company annually incurs costs on activities that relate to research and
        development of new technology and products. Research and development costs
        are
        expensed as incurred.
  **Revenue
        Recognition**
  The
        Company has not generated revenue in many years. The Company anticipates
        that
        they will record revenue in accordance with Staff Accounting Bulletin 104.
        The
        criteria for recognition is as follows:
  1)
              Persuasive
                  evidence of an arrangement exists;
 2)
              Delivery
                  has occurred or services have been
                  rendered;
 3)
              The
                  seller’s price to the buyer is fixed or determinable, and
 4)
              Collectibility
                  is reasonably assured.
 
 F-11
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Comprehensive
        Income**
  The
        Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
        Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
        comprehensive income in addition to net income from operations.
 
 Comprehensive
        income is a more inclusive financial reporting methodology that includes
        disclosure of information that historically has not been recognized in the
        calculation of net income.
  **Currency
        Risk**
  The
        Company transacts business in currencies other than the U.S. Dollar. All
        currency transactions occur in the spot foreign exchange market and the Company
        does not use currency forward contracts, currency options, currency borrowings
        interest rate swaps or any other derivative hedging strategy at this point
        in
        time.
  The
        Company has determined that based on the cash flow, sales price, sales market,
        expense, financing, and inter-company transactions and arrangements indicators
        set forth in FASB 52, *Foreign
        Currency Translation* ,
        that
        the functional currency of the Company is that of the US Dollar.
  **Inventory**
  Inventory
        is recorded at the lower of cost and net realizable value and is accounted
        for
        on the first-in first-out basis (FIFO).
  **Stock-Based
        Compensation**
  On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
        Payment* ”
(“SFAS
        123R”). SFAS 123R requires that compensation cost related to share-based payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans. The provisions of SFAS 123R, as amended, are effective
        for
        small business issuers beginning as of the next interim period after December
        15, 2005. The Company has adopted these provisions as of January 1, 2006
        and
        this adoption did not have a material effect on the Company’s
        operations.
  F-12
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Stock-Based
        Compensation** **(Continued)**
  On
        January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
        Payment” (“FAS 123R”) which requires recognition of stock-based compensation
        expense for all share-based payments based on fair value. Prior to January
        1,
        2006, the Company measured compensation expense for all of its share-based
        compensation using the intrinsic value method prescribed by Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees” (“APB 25”) and related interpretations. The Company has provided pro
        forma disclosure amounts in accordance with FAS No. 148, “Accounting for
        Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
        Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
        123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
        its stock-based compensation.
 
 The
        Company has elected to use the modified-prospective approach method. Under
        that
        transition method, the calculated expense in 2006 is equivalent to compensation
        expense for all awards granted prior to, but not yet vested as of January
        1,
        2006, based on the grant-date fair values estimated in accordance with the
        original provisions of FAS 123. Stock-based compensation expense for all
        awards
        granted after January 1, 2006 is based on the grant-date fair values estimated
        in accordance with the provisions of FAS 123R. The Company recognizes these
        compensation costs, net of an estimated forfeiture rate, on a pro rata basis
        over the requisite service period of each vesting tranche of each award.
        The
        Company considers voluntary termination behavior as well as trends of actual
        option forfeitures when estimating the forfeiture rate.
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
        The
        fair value of the option issued is used to measure the transaction, as this
        is
        more reliable than the fair value of the services received. The fair value
        is
        measured at the value of the Company’s common stock on the date that the
        commitment for performance by the counterparty has been reached or the
        counterparty’s performance is complete. The fair value of the equity instrument
        is charged directly to compensation expense and additional paid-in
        capital.
  The
        Company’s warrants issued in May 2007, were not stock based compensation and
        were recorded in accordance with EITF 96-18. The Company recognized $186,092
        in
        expense for the year ended December 31, 2007.
  The
        Company’s options issued in 2007 were valued in accordance with SAFAS 123R. The
        Company recognized $96,322 in expense for the year ended December 31, 2007.
        The
        options issued in Live Tissue Connect, Inc. to the board were valued at
        $1,588,478 and $82,498 for the years ended December 31, 2007 and 2006,
        respectively and are considered stock based compensation and reflected as
        such
        in the consolidated statements of operations.
  F-13
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Segment
        Reporting**
  The
        Company follows the provisions of SFAS 131, “Disclosures about Segments of an
        Enterprise and Related Information.” This standard requires that companies
        disclose operating segments based on the manner in which management
        disaggregates the Company in making internal operating decisions. The Company
        believes that there is only one operating segment at this time as their CO2
        separator business is inactive.
  **Fair
        Value of Financial Instruments**
  The
        carrying amounts reported in the consolidated balance sheet for cash and
        cash
        equivalents, and accounts payable approximate fair value because of the
        immediate or short-term maturity of these financial instruments. For the
        notes
        payable, the carrying amount reported is based upon the incremental borrowing
        rates otherwise available to the Company for similar borrowings.
  **Income
        Taxes**
  Under
        Financial Accounting Standards Board Statement No. 109, “Accounting for Income
        Taxes,” the liability method is used in accounting for income taxes. Under this
        method, deferred tax assets and liabilities are determined based on differences
        between financial reporting and tax bases of assets and liabilities, and
        are
        measured using the enacted tax rates and laws that will be in effect when
        the
        differences are expected to reverse.
  **Uncertainty
        in Income Taxes**
  In
        July
        2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
        Uncertainty in Income Taxes.” This interpretation requires recognition and
        measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
        15,
        2006. Management has adopted FIN 48 for 2007, and they evaluate their tax
        positions on an annual basis, and has determined that as of December 31,
        2007,
        no additional accrual for income taxes is necessary.
  **(Loss)
        Per Share of Common Stock**
  Basic
        net
        (loss) per common share (“EPS”) is computed using the weighted average number of
        common shares outstanding for the period. Diluted earnings per share includes
        additional dilution from common stock equivalents, such as stock issuable
        pursuant to the exercise of stock options and warrants. Common stock equivalents
        are not included in the computation of diluted earnings per share when the
        Company reports a loss because to do so would be anti-dilutive for the periods
        presented.
  F-14
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **(Loss)
        Per Share of Common Stock** **(Continued)**
  All
        options and warrants to purchase shares of common stock and convertible notes
        were not included as they would be considered anti-dilutive as the Company
        had a
        loss for both periods.
  The
        following is a reconciliation of the computation for basic and diluted EPS:
  **Years
                    Ended****December
                    31,**
                
                **December
                    31,****2007**
                
                **2006****restated**
                
                **restated**Net
                    (loss)
                
                $
                (8,440,455
                )
                $
                (2,889,760
                )Weighted-average
                    common sharesBasic
                
                
                36,200,105
                
                
                30,786,442Options
                
                
                1,125,000
                
                
                975,000Warrants
                
                
                890,941
                
                
                200,000Diluted
                
                
                38,216,046
                
                
                31,961,442Basic
                    net (loss) per share
                
                $
                (0.23
                )
                $
                (0.09
                )Diluted
                    net (loss) per share
                
                $
                (0.23
                )
                $
                (0.09
                )
 **Recent
        Issued Accounting Standards**
  In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
        standard defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles, and expands disclosure about fair
        value measurements. This statement is effective for financial statements
        issued
        for fiscal years beginning after November 15, 2007. Early adoption is
        encouraged. The adoption of SFAS 157 is not expected to have a material impact
        on the consolidated financial statements.
 
 In
        February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities - Including an Amendment of FASB Statement
        No.
        115”, (“FAS 159”) which permits entities to choose to measure many financial
        instruments and certain other items at fair value at specified election dates.
        A
        business entity is required to report unrealized gains and losses on items
        for
        which the fair value option has been elected in earnings at each subsequent
        reporting date. This statement is expected to expand the use of fair value
        measurement. FAS 159 is effective for financial statements issued for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal
        years.
 
 F-15
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Recent
        Issued Accounting Standards** **(Continued)**
  In
        December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
        Consolidated Financial Statements, an amendment of Accounting Research Bulletin
        No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
        ownership interests in subsidiaries held by parties other than the parent,
        changes in a parent’s ownership of a noncontrolling interest, calculation and
        disclosure of the consolidated net income attributable to the parent and
        the
        noncontrolling interest, changes in a parent’s ownership interest while the
        parent retains its controlling financial interest and fair value measurement
        of
        any retained noncontrolling equity investment. SFAS 160 is effective for
        financial statements issued for fiscal years beginning after December 15,
        2008,
        and interim periods within those fiscal years. Early adoption is prohibited.
        Management is determining the impact that t he
        adoption of SFAS No. 160 will have on the Company’s consolidated financial
        position, results of operations or cash flows.
 
 In
        December 2007, the FASB issued SFAS 141R, *Business Combinations* (“SFAS
        141R”), which replaces FASB SFAS 141, *Business Combinations.* This
        Statement retains the fundamental requirements in SFAS 141 that the acquisition
        method of accounting be used for all business combinations and for an acquirer
        to be identified for each business combination. SFAS 141R defines the acquirer
        as the entity that obtains control of one or more businesses in the business
        combination and establishes the acquisition date as the date that the acquirer
        achieves control.  SFAS 141R will require an entity to record
        separately from the business combination the direct costs, where previously
        these costs were included in the total allocated cost of the
        acquisition.  SFAS 141R will require an entity to recognize the assets
        acquired, liabilities assumed, and any non-controlling interest in the acquired
        at the acquisition date, at their fair values as of that date.  This
        compares to the cost allocation method previously required by SFAS No.
        141.  SFAS 141R will require an entity to recognize as an asset or
        liability at fair value for certain contingencies, either contractual or
        non-contractual, if certain criteria are met.  Finally, SFAS 141R will
        require an entity to recognize contingent consideration at the date of
        acquisition, based on the fair value at that date.  This Statement
        will be effective for business combinations completed on or after the first
        annual reporting period beginning on or after December 15,
        2008.  Early adoption of this standard is not permitted and the
        standards are to be applied prospectively only.  Upon adoption of this
        standard, there would be no impact to the Company’s results of operations and
        financial condition for acquisitions previously
        completed. The
        adoption of SFAS No. 141R is not expected to have a material effect on the
        Company’s consolidated financial position, results of operations or cash
        flows.
 
 F-16
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Recent
        Issued Accounting Standards** **(Continued)**
  In
        December 2007, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 110, “ *Use
        of a Simplified Method in Developing Expected Term of Share
        Options* ”
(“SAB
        110”). SAB 110 expenses the current view of the staff that it will accept a
        company’s election to use the simplified method discussed in Staff Accounting
        Bulletin No. 107, “ *Share
        Based Payment* ”,
        (“SAB
        107”), for estimating the expected term of “plain vanilla” share options
        regardless of whether the company has sufficient information to make more
        refined estimates. SAB 110 became effective for the Company on January 1,
        2008.
        The adoption of SAB 110 is not expected to have a material impact on the
        Company’s financial position.
 
 Other
        accounting standards that have been issued or proposed by the FASB or other
        standards-setting bodies that do not require adoption until a future date
        and
        are not expected to have a material impact on the consolidated financial
        statements upon adoption.
 
  **NOTE
                  3-**
              **INVENTORY**
  Inventory
        consists of the following at December 31, 2007:
 Parts
                    and materials
                
                $
                47,560Less:
                    Reserve for obsolescence
                
                
                (11,890
                )Total,
                    net
                
                $
                35,670
  **NOTE
                  4-**
              **FIXED
                  ASSETS**
  Fixed
        assets consist of the following as of December 31, 2007:
 **Estimated
                    Useful****Lives
                    (Years)**Computer
                    equipment
                
                
                5
                
                $
                97,141Less:
                    Accumulated depreciation
                
                
                
                
                
                (54,536
                )Total,
                    net
                
                
                
                
                $
                42,605
  F-17
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  4-**
              **FIXED
                  ASSETS****(CONTINUED)**
  Depreciation
        expense was $861 and $384 for the years ended December 31, 2007 and 2006,
        respectively. The Company wrote off $8,118 of fully depreciated equipment
        in the
        year ended December 31, 2007.
  **NOTE
                  5-**
              **INTANGIBLE
                  ASSETS**
  Intangible
        assets consist of patent costs on the live tissue connect technology. Until
        the
        Company receives approval on these patents, no amortization will be expensed.
        Upon approval, the Company anticipates the amortization to be over a period
        of
        fifteen years.
  **NOTE
                  6-**
              **CONVERTIBLE
                  NOTES PAYABLE**
  The
        Company from July 27, 2006 through December 31, 2007 raised $6,945,000 (of
        which
        $100,000 was repaid during 2007) through Empire Financial Group in the form
        of
        convertible notes. The notes commenced interest accrual on January 1, 2007,
        at
        15% per annum, and are convertible into Live Tissue Connect, Inc. shares
        at 50%
        of the IPO of the LTC’s common stock price. The Company has accrued $741,897 in
        interest for the year ended December 31, 2007. The total due the investors
        as of
        December 31, 2007 is $7,586,897, which includes $6,845,000 of principal and
        $741,897 of accrued interest.. The entire balance is reflected as a current
        liability on the Company’s consolidated balance sheet.
  Empire
        received 290,941 warrants on May 18, 2007 as part of their commission for
        the
        raising of the money. The Company recorded these warrants in accordance with
        EITF 96-18 and recognized an expense in the amount of $186,092.
  **NOTE
                  7-**
              **NOTES
                  PAYABLE**
  The
        Company from time to time entered into various note agreements with shareholders
        of the Company. The 13 notes that remain as of December 31, 2007 commenced
        from
        2000 through 2005, and accrue interest at rates ranging from 8% to 15%.
  The
        remaining principal of these 13 notes as of December 31, 2007 is $1,508,407.
        Accrued interest through December 31, 2007 on these notes is $957,227, for
        a
        total amount due as of December 31, 2007 of $2,465,634. The balance due under
        the notes at December 31, 2006 was $2,758,978.
  The
        Company’s management has been very successful over the past few years in
        converting these notes into shares of common stock. For the year ended December
        31, 2007, the Company has been successful in converting $1,748,423 in notes
        plus
        accrued interest into 2,733,248 shares of stock. In addition, the Company
        recorded a discount in the amount of $922,001 to additional paid in capital
        based on the beneficial conversion price.
  F-18
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  7-**
              **NOTES
                  PAYABLE****(CONTINUED)**
  Included
        in the notes payable are:
  ***Cornell
        Capital***
  On
        March
        29, 2004, the Company entered into an equity line of credit with Cornell
        Capital
        Partners whereby the Company may issue and sell to Cornell up to $10,000,000
        in
        common stock. Under this arrangement, Cornell advanced the Company $1,000,000
        in
        2004, all of which has been repaid through conversions to common stock.
  The
        Company in 2005 was advanced $600,000 under a convertible debenture. In
        accordance with this agreement, the Company has been repaying this through
        issuances of stock under Rule 144. The Company on October 18, 2007 repaid
        the
        remaining $242,000 in principal along with interest in the amount of $132,687
        with the issuance of 535,267 shares of common stock to YA Global Investments,
        L.P. (formerly Cornell Capital Partners, L.P.). There is no further indebtedness
        to YA Global Investments, L.P. These shares were issued pursuant to an exemption
        from registration under Section 4(2) of the Securities Act of 1933, as amended.
        The purchaser of these shares is aware that they are restricted. There were
        no
        warrants or options issued in the Cornell transaction.
  ****   **Included
        in notes payable but remain in litigation are the
        following:**
 ***Stonegate
        Management, Ltd.***
  The
        Company in 2001 entered into four one-year note agreements with Stonegate
        Management in the original principal balance of $630,000. Accrued interest
        through December 31, 2007 on these notes amounts to $494,500, for a total
        amount
        due under these notes of $1,124,500. The notes accrue interest at rates ranging
        between 8% and 10% per annum.
  In
        relation to these notes, the Company on December 12, 2005, was served a suit
        in
        the Circuit Court for Hillsborough County Florida by Nature Coast Collections,
        Inc. The suit named the Company as well as certain officers, Donald Robbins
        and
        Gordon Allison as guarantors of the four notes. Nature Coast Collections,
        Inc.
        is the claimed assignee of the original payee, Stonegate Management, Ltd.,
        a
        Costa Rican entity. The Company filed a motion for dismissal of the proceedings
        for lack of jurisdiction in Florida, and this was granted.
  On
        June
        30, 2006, the Company and the two officers were again served by Nature Coast
        Collections, Inc., this time in the Federal District Court for the Southern
        District of Texas. The Company has answered the complaint and filed a
        counterclaim alleging, among other matters, that Nature Coast Collections,
        Inc.
        is an affiliate of RTC, a debtor in bankruptcy, whom the Company entered
        into a
        transaction with in regards to their CO2 separation equipment. The Company
        alleges that they should be authorized to offset its losses caused by the
        contractual relationship with RTC against the claims brought on by Nature
        Coast
        Collections, Inc. The Company has moved to transfer these proceedings to
        the
        Federal District Court for the Northern District of Illinois, where the
        bankruptcy proceedings are.
 
 F-19
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  7-**
              **NOTES
                  PAYABLE****(CONTINUED)**
  ***Stonegate
        Management, Ltd.*** ***(Continued)***
  Nature
        Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
        Donald S.  Robbins and Gordon W.  Allison ,
        Case
        No. 2:06-cv-273 originally pending in the Southern District of Texas
        District Court and recently ordered transferred to the Northern District
        of
        Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
        arising out of a series of disputed promissory notes bringing the total claim
        over $900,000 and under $1,000,000. The Company has answered setting forth
        several affirmative defenses and counterclaims focused on the affiliation
        of the
        Plaintiff with an offshore affiliate of a customer of the Company and based
        on
        misrepresentation.  Discovery has been completed and the Company has filed
        a motion for summary judgment with respect to the Plaintiff’s claims, the
        briefing of which by the parties has yet to be fully completed. No trial
        date
        has been set.
  ***Banco
        Panamericano***
  The
        Company is in default on a note with an initial balance of $203,800 to Banco
        Panamericano that became due April 1, 2002. On February 10, 2005, Banco
        Panamericano filed suit in the Circuit Court of Cook County, Illinois for
        $514,920 (balance accrued as of December 31, 2007 including interest at 12%
        is
        $379,837).
  The
        note
        was funded in large part to assist in funds needed for the Chastang transaction,
        and the Company alleges that Banco Panamericano is not a bank, but a Nebraska
        corporation that is affiliated with RTC and that the proceeds were to be
        repaid
        from the proceeds of the sale of the methane gas that never occurred based
        on
        RTC’s failure to perform under the contract.
  The
        Company believes they are the injured party and that the litigation properly
        belongs in RTC’s Chapter 11 proceedings in the federal bankruptcy court. On
        December 6, 2005, the case was moved to the United States Bankruptcy Court.
  Banco
        Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
        LLC , 
        Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
        District Court as Case No. 06 C 7195.  Plaintiff claims damages in the
        amount of $514,920 as of February 9, 2005, together with interest and costs,
        arising out of a disputed promissory note bringing the total claim to
        $1,013,648.  The Company has answered setting forth several affirmative
        defenses and counterclaims focused on the affiliation of the Plaintiff with
        a
        customer of the Company and based on misrepresentation.  Discovery has been
        completed and Plaintiff has submitted a contested motion for summary judgment
        that is under consideration by the Court. A trial date of December 10, 2007,
        has
        been continued pending the outcome of this motion.
 
 The
        entire balance of shareholder notes is reflected as current liabilities as
        they
        are all overdue.
 
 F-20
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  8-**
              **STOCKHOLDERS’
                  EQUITY (DEFICIT)**
  ***Preferred
        Stock***
  The
        Company has 10,000,000 authorized shares of preferred stock, par value
        $.001.
  On
        December 28, 1995, the Company authorized the issuance of 75,669 shares of
        Series A preferred stock, $10.00 face amount, $.001 par value which paid
        a
        cumulative dividend on net corporate profit equal to 8% of the face amount
        of
        the outstanding stock. If the Company did not realize profits, preferred
        stock
        dividends are not accruable. Such preferred stock is preferred over all common
        stock in the event of corporate liquidation and dissolution to the extent
        of its
        unredeemed face amount.
  On
        September 29, 2000, the Board of Directors approved the conversion of these
        shares into 1,210,704 common shares.
  As
        of
        December 31, 2007 and 2006, there are no shares issued and
        outstanding.
  ***Common
        Stock***
  On
        January 18, 2007, the Company increased the authorized shares of common stock
        to
        80,000,000.
  As
        of
        December 31, 2007 and 2006, the Company had 38,018,544 and 33,464,418 shares
        issued and outstanding.
  For
        the
        years ended December 31, 2007 and 2006, the Company had issued the following
        stock:
  1,086,715
        and 4,549,122 shares issued for cash in the amount of $620,991 and $672,889,
        respectively..
  744,500
        and 366,115 shares issued for services at a value of $314,413 and $201,107,
        respectively.
  2,733,248
        and 2,493,109 shares issued in conversion of notes payable and accrued interest
        in the amount of $1,748,423 and $1,507,458, respectively.
 
 F-21
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  8-**
              **STOCKHOLDERS’
                  EQUITY (DEFICIT)****(CONTINUED)**
  ***Options***
  The
        Company currently has three stock option plans. The following table summarizes
        the activity of the Company’s stock option plan.
 December
                    31, 2007Weighted-averageNumber
                    of
                
                exerciseOptions
                
                priceDecember
                    31, 2007:Outstanding
                    - beginning of period
                
                
                975,000
                
                $
                0.42Granted
                
                
                150,000
                
                
                0.71Exercised/Expired
                
                
                (-
                )
                
                -Outstanding
                    - end of period
                
                
                1,125,000
                
                $
                0.46Exercisable
                    at end of period
                
                
                1,125,000
                
                $
                0.46
  The
        Company’s options expire at various times through 2017. All options issued in
        2003 through 2005 were issued at or above market value. The Company issued
        50,000 options to a consultant in February 2007 and 100,000 options to a
        consultant in October 2007 that were vested. These options were expensed
        at a
        value of $96,322 by utilizing the black-scholes method.
  In
        addition, Live Tissue Connect, Inc. granted 2,875,000 and 1,000,000 options
        in
        the years ended December 31, 2007 and 2006, respectively. Of those options
        granted 2,800,000 and 1,000,000 were vested and Live Tissue Connect, Inc.
        recorded $1,588,478 and $82,498 in stock based compensation (see Note
        13).
  ***Warrants***
  The
        Company has issued the following warrants as of December 31, 2007:
 **Exercise**
                
                **Date****Warrants**
                
                **Price**
                
                **Issued**
                
                **Term**200,000
                
                $
                0.40
                
                
                5/15/2006
                
                
                7.5
                    years400,000
                
                $
                0.40
                    - 0.75
                
                
                11/1/2006
                
                
                7
                    years290,941
                
                $
                0.57
                
                
                5/18/2007
                
                
                7
                    years890,941
 
 F-22
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  8-**
              **STOCKHOLDERS’
                  EQUITY (DEFICIT)****(CONTINUED)**
  ***Warrants
        (Continued)***
 The
          290,941 Warrants issued in May 2007 were valued utilizing the Black - Scholes
          method as follows:
 Stock
                    Price
                $.74Strike
                    Price
                $.57Expected
                    Life of Warrant
                7
                    yrs.Annualized
                    Volatility
                100.61
                    %Discount
                    Rate
                4.50%Annual
                    Rate of Quarterly Dividends
                NoneCall
                    Option Value
                $.6396
  **NOTE
                  9-**
              **COMMITMENTS**
  **Rental**
  The
        Company leases office space under an operating lease that has initial or
        remaining non-cancelable lease terms and expires in May 2008. The lease
        agreement provides for an annual 3% escalation of the base rent. As of December
        31, 2007, the following presents the approximate future minimum lease payments
        required under this lease:
  **For
                    the Periods Ended****December
                    31,**2008
                
                $
                6,340
  Rent
        expense for the years ended December 31, 2007 and 2006 was $14,788 and $14,157
        respectively.
  **NOTE
                  10-**
              **PROVISION
                  FOR INCOME TAXES**
  Deferred
        income taxes will be determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes are measured based on
        the tax rates expected to be in effect when the temporary differences are
        included in the Company’s tax return. Deferred tax assets and liabilities are
        recognized based on anticipated future tax consequences attributable to
        differences between financial statement carrying amounts of assets and
        liabilities and their respective tax bases.
  F-23
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  10-**
              **PROVISION
                  FOR INCOME TAXES****(CONTINUED)**
  At
        December 31, 2007, deferred tax assets consist of the following:
 Net
                    operating losses
                
                $
                6,247,750Valuation
                    allowance
                
                
                (6,247,750
                )$
                -
  At
        December 31, 2007, the Company had net operating loss carryforward in the
        approximate amount of $17,850,716 available to offset future taxable income
        through 2027. The Company established valuation allowances equal to the full
        amount of the deferred tax assets due to the uncertainty of the utilization
        of
        the operating losses in future periods.
  A
        reconciliation of the Company’s effective tax rate as a percentage of income
        before taxes and federal statutory rate for the years ended December 31,
        2007
        and 2006 is summarized below.
  2007
              
              2006Federal
                  statutory rate
              (35.0)%
              
              (35.0)%State
                  income taxes, net of federal benefits
              0.0
              
              0.0Valuation
                  allowance
              35
              
              35.00%
              
              0%
  **NOTE
                  11-**
              **LITIGATION**
  Banco
        Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
        LLC , 
        Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
        District Court as Case No. 06 C 7195.  Plaintiff claims damages in the
        amount of $514,920 as of February 9, 2005, together with interest and costs,
        arising out of a disputed promissory note bringing the total claim to
        $1,013,648.  The Company has answered setting forth several affirmative
        defenses and counterclaims focused on the affiliation of the Plaintiff with
        a
        customer of the Company and based on misrepresentation.  Discovery has been
        completed and Plaintiff has submitted a contested motion for summary judgment
        that is under consideration by the Court. A trial date of December 10, 2007,
        has
        been continued pending the outcome of this motion.
  F-24
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  11-**
              **LITIGATION****(CONTINUED)**
  Nature
        Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
        Donald S.  Robbins and Gordon W.  Allison ,
        Case
        No. 2:06-cv-273 originally pending in the Southern District of Texas
        District Court and recently ordered transferred to the Northern District
        of
        Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
        arising out of a series of disputed promissory notes bringing the total claim
        over $900,000 and under $1,000,000. The Company has answered setting forth
        several affirmative defenses and counterclaims focused on the affiliation
        of the
        Plaintiff with an offshore affiliate of a customer of the Company and based
        on
        misrepresentation.  Discovery has been completed and the Company has filed
        a motion for summary judgment with respect to the Plaintiff’s claims, the
        briefing of which by the parties has yet to be fully completed. No trial
        date
        has been set.
 
 There
        is
        a dispute, not subject to a court proceeding, between Waste Management Company,
        Inc. (“Waste Management”) and the Company with regard to the Chastang Waste Site
        in Chastang, Alabama.  Waste Management was to maintain the site so as to
        produce marketable levels of waste site gas.  The site has failed to
        produce such volume and Waste Management has requested the Company to remove
        its
        equipment from the site.  The Company has commenced the disassembly of the
        equipment in preparation for removal of the equipment from the site. A written
        demand for removal was received from Waste Management on August 9, 2007.
        The
        equipment has been removed from the landfill site and placed in
        storage.
 
 CSMG
        Technologies, Inc. v.  Gordon W.  Allison ,
        Case
        No. 4:07-cv-00715 in the Southern District of Texas District Court. In
        Gordon Allison’s answer to the Company’s complaint seeking unspecified damages
        in connection with claims based upon fraudulent statements, breach of fiduciary
        duty and promissory estoppel with respect to investments in projects Gordon
        Allison involved the Company, Allison filed a counterclaim seeking damages
        of
        approximately $328,041 principal and interest for amounts allegedly due under
        the terms of a November 5, 2003 promissory note issued to him by the Company,
        unpaid salary of $150,000, unspecified payment for services rendered,
        reimbursement of expenses estimated at $23,000 and punitive damages in an
        unspecified amount. The litigation is in the discovery stage, and the Company
        believes the counterclaim is without merit. The Company is vigorously defending
        the counterclaim.
  **NOTE
                  12-**
              **SUBSEQUENT
                  EVENT**
  The
        Company entered into a lease agreement on February 20, 2008 for their subsidiary
        Live Tissue Connect, Inc.’s corporate headquarters in Santa Barbara,
        California.
 
 F-25
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  13-**
              **RESTATEMENT
                  OF PRIOR FINANCIAL
                  STATEMENTS**
  The
        Company has restated its consolidated financial statements for the years
        ended
        December 31, 2007 and 2006 to account for the correction of an error related
        to
        an adjustment made to record the value of the granting of stock options by
        Live
        Tissue Connect, Inc. The adjustments decreased the net loss and deficits
        accumulated during the development stage in the amounts of $1,366,091 and
        $70,948 for the years ended December 31, 2007 and 2006, respectively. In
        addition, additional paid in capital increased $1,588,478 and $82,498 at
        December 31, 2007 and 2006, respectively and minority interest was reduced
        by
        $222,387 and $11,550 at December 31, 2007 and 2006, respectively. The net
        loss
        per share for the year ended December 31, 2007 decreased ($.03) from ($.20)
        to
        ($.23). There was no change in the Company’s net loss per share for the year
        ended December 31, 2006.
 
 The
        following charts reflect the changes of the individual line items changed
        in the
        consolidated financial statements.
 **December
                    31, 2006**Net
                    loss prior to restatement
                
                $
                (2,818,812
                )(1)
                
                
                (70,948
                )Net
                    loss after restatement
                
                $
                (2,889,760
                )Deficits
                    accumualted during the development stage-
                    prior to restatement
                
                $
                (2,818,812
                )(1)
                
                
                (70,948
                )Deficits
                    accumualted during the development stage-
                    after restatement
                
                $
                (2,889,760
                )Loss
                    per share - prior to restatement
                
                $
                (0.09
                )(1)
                
                
                -Loss
                    per share - after restatement
                
                $
                (0.09
                )
 (1)
            Reflects correction of an error related to the value attributable to
            the
            1,000,000 options vested
 F-26
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
  **NOTE
                  13-**
              **RESTATEMENT
                  OF PRIOR FINANCIAL STATEMENTS****(CONTINUED)**
 **December
                    31, 2006****Previously**
                
                
                
                
                
                **Cumulative*****Statement
                    of Operations***
                
                **Reported**
                
                **Restated**
                
                **Change**
                
                **Column**Stock
                    based compensation
                
                -
                
                82,498
                
                (82,498)
                
                (82,498)Minority
                       interest
                
                
                (219,229
                )
                
                (230,779
                )
                
                11,550
                
                
                11,550Net
                    loss
                
                
                (2,818,812
                )
                
                (2,889,760
                )
                
                (70,948
                )
                
                (70,948
                )***Balance
                    Sheet***Additional
                    paid-in capital
                
                
                9,922,095
                
                
                10,004,593
                
                
                82,498Minority
                    interest
                
                
                (13,229
                )
                
                (24,779
                )
                
                (11,550
                )Deficits
                    accumulated during thedevelopment
                    stage
                
                
                (2,818,812
                )
                
                (2,889,760
                )
                
                (70,948
                )***Statement
                    of Changes in Stockholders' (Deficit)***Additional
                    paid-in capital
                
                
                9,922,095
                
                
                10,004,593
                
                
                82,498Net
                    loss for the period
                
                
                (2,818,812
                )
                
                (2,889,760
                )
                
                (70,948
                )***Statement
                    of Cash Flow***Net
                    loss
                
                
                (2,818,812
                )
                
                (2,889,760
                )
                
                (70,948
                )
                
                (70,948
                )Stock
                    based compensation
                
                
                -
                
                
                82,498
                
                
                82,498
                
                
                82,498Minority
                    interest
                
                
                (219,229
                )
                
                (230,779
                )
                
                (11,550
                )
                
                (11,550
                )
 **December
                    31, 2007**Net
                    loss prior to restatement
                
                $
                (7,074,364
                )(1)
                
                
                (1,366,091
                )Net
                    loss after restatement
                
                $
                (8,440,455
                )Deficits
                    accumualted during the development stage-
                    prior to restatement
                
                $
                (9,893,176
                )(1)
                
                
                (1,437,039
                )Deficits
                    accumualted during the development stage-
                    after restatement
                
                $
                (11,330,215
                )Loss
                    per share - prior to restatement
                
                $
                (0.20
                )(1)
                
                
                (0.03
                )Loss
                    per share - after restatement
                
                $
                (0.23
                )(1)
                    Reflects correction of an error related to the value attributable
                    to the
                    1,000,000 options vestedin
                    2006 and the 2,800,000 options vested in
                    2007
 F-27
 **CSMG
                TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2007 AND 2006**
 
 **NOTE
                  13-**
              **RESTATEMENT
                  OF PRIOR FINANCIAL STATEMENTS****(CONTINUED)**
 **December
                    31, 2007****Previously**
                
                
                
                
                
                **Cumulative*****Statement
                    of Operations***
                
                **Reported**
                
                **Restated**
                
                **Change**
                
                **Column**Stock
                    based compensation
                
                
                -
                
                
                1,588,478
                
                
                (1,588,478
                )
                
                (1,670,976
                )Minority
                    interest
                
                
                (388,424
                )
                
                (610,811
                )
                
                222,387
                
                
                233,937Net
                    loss
                
                
                (7,074,364
                )
                
                (8,440,455
                )
                
                (1,366,091
                )
                
                (1,437,039
                )***Balance
                    Sheet***Additional
                    paid-in capital
                
                
                13,805,773
                
                
                15,476,749
                
                
                1,670,976Minority
                    interest
                
                
                (401,653
                )
                
                (635,590
                )
                
                (233,937
                )Deficits
                    accumulated during thedevelopment
                    stage
                
                
                (9,893,176
                )
                
                (11,330,215
                )
                
                (1,437,039
                )***Statement
                    of Changes in Stockholders' (Deficit)***Additional
                    paid-in capital
                
                
                13,805,773
                
                
                15,476,749
                
                
                1,670,976Net
                    loss for the period
                
                
                (7,074,364
                )
                
                (8,440,455
                )
                
                (1,366,091
                )***Statement
                    of Cash Flow***Net
                    loss
                
                
                (7,074,364
                )
                
                (8,440,455
                )
                
                (1,366,091
                )
                
                (1,437,039
                )Stock
                    based compensation
                
                
                -
                
                
                1,588,478
                
                
                1,588,478
                
                
                1,670,976Minority
                    interest
                
                
                (388,424
                )
                
                (610,811
                )
                
                (222,387
                )
                
                (233,937
                )




F-28





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 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.




**CSMG TECHNOLOGIES,
              INC.**Date:May
              20, 2008
            By:
            /s/ Donald
              S.
              RobbinsDonald S. Robbins,
              Chief Executive
                Officer


Date:May
              20, 2008
            By:
            /s/ K. Bruce JonesK. Bruce Jones,
              Chief Financial
                Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.





**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                Donald S. Robbins
            
            President,
                Chief Executive Officer, and
            
            May
                20, 2008Donald
                S. Robbins
            
            Director
                (principal executive officer)/s/
                Esmeralda G. Robbins
            
            Director
            
            May
                20, 2008Esmeralda
              G. Robbins/s/
                Conrad Derdeyn
            
            Director
            
            May
                20, 2008Conrad
              Derdeyn/s/
                K. Bruce Jones
            
            Chief
                Financial Officer
            
            May
                20, 2008K.
              Bruce Jones
            
            (principal
              financial
              officer and principal accounting officer)/s/
                Robert Jay Machen
            
            Director
            
            May
                20, 2008Robert
              Jay Machen