U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                   [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                        OF THE SECURITIES EXCHANGE ACT OF
                1934 For the fiscal year ended December 31, 2005

                                       OR

                    [ ] TRANSITION UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the transition period from ________ to ________


                    Consortium Service Management Group, Inc.
             (Exact name of registrant as specified in its charter)

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

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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past twelve months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing  requirements  for the past 90 days. Yes [X]
No [ ]



<PAGE>

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

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

State issuer's revenues for its most recent fiscal year: $414

State the aggregate market value of the 21,968,396  voting and non-voting common
equity held by non-affiliates computed by reference to the $0.39 average bid and
asked price of such common equity, as of March 28, 2006: $8,567,674.

As of March 21, 2006, there were 28,291,322  shares of the  Registrant's  Common
Stock, par value $0.001 per share, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,  briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities  Act"). The listed
documents should be clearly described for identification  purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990). None

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]





















                                       ii
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Item 1   Description of Business   ........................................    1
         Business Development      ........................................    1
         Business of the Company   ........................................    3
         Raw Materials, Suppliers and Manufacturing .......................    5
         Distribution Methods      ........................................    6
         Competition               ........................................    6
         Patents, Trademarks and Licenses .................................    6
         Government Approval and Regulations ..............................    7
         Research and Development  ........................................    7
         Cost of Compliance with Environmental Laws .......................    7
         Seasonality               ........................................    7
         Employees                 ........................................    7

Item 2   Description of Property   ........................................    7

Item 3   Legal Proceedings         ........................................    7

Item 4   Submission of Matters to a Vote of Security Holders ..............    9

Item 5   Market for Common Equity and Related Stockholder Matters .........    9

Item 6   Management's Discussion and Analysis .............................   11
         Sales                     ........................................   11
         Selling, General and Administrative Expenses .....................   11
         Net Loss                  ........................................   11
         Liquidity and Capital Resources ..................................   11
         Outlook                   ........................................   11
         Off-Balance Sheet Arrangements ...................................   12
         Contractual obligations   ........................................   13

Item 7   Financial Statements      ........................................   13

Item 8   Changes In and Disagreements With Accountants on Accounting
            and Financial Disclosure ......................................   30

Item 8A  Controls and Procedures   ........................................   30

Item 8B  Other Information         ........................................   30

Item 9   Directors, Executive Officers, Promoters and Control Persons;
            Compliance with Section 16(a) of the Exchange Act .............   30



                                      iii

<PAGE>

         Compliance with Section 16(a) of the Exchange Act ................   32
         Audit Committee and Audit Committee Financial Expert .............   33
         Code of Ethics            ........................................   33

Item 10  Executive Compensation    ........................................   33
         Stock Options             ........................................   34
         Employment Contracts      ........................................   34

Item 11  Security Ownership of Certain Beneficial Owners
            and Management   ..............................................   34

Item 12  Certain Relationships and Related Transactions ...................   35

Item 13  Exhibits                  ........................................   36

Item 14  Principal Accountant Fees and Services ...........................   39

Signatures                         ........................................   41




















                                       iv
<PAGE>

ITEM 1.  DESCRIPTION OF BUSINESS.

Business Development.
---------------------

         We were  incorporated  on November  17, 1992 in the State of Texas.  We
conduct our  business  from our  headquarters  in Corpus  Christi,  Texas;  from
offices in Atlanta,  Georgia,  Alexandria,  Virginia;  and from offices 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 prestigious organizations in
Ukraine.  They have, as their stockholders or members, many of Ukraine's leading
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 U.S. 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 -

         o        our  platform,   medical,   Live  Biological   Tissue  Bonding
                  technology,  which  bonds  human  tissue  without  the  use of
                  sutures,   staples,   sealants  or  glues.   More  than  5,000
                  successful human surgeries have been performed using more than
                  70 types of  procedures  in clinical  trials in Ukraine  using
                  more than 30 different types of surgical procedures,

         o        the  390,000-pound   proprietary   Landfill  Gas  Purification
                  System,  installed at a municipal  waste landfill in Chastang,
                  Alabama,  that processes raw landfill gas to pipeline quality,
                  and

         o        the  environmentally  friendly,  large-farm,  Anaerobic Animal
                  Waste Processing System.

         We  are  the  largest  shareholder  and  foreign  investor  in  "United
Engineering  Closed Joint Stock Company with Foreign  Investment,"  a successful
Ukraine private  engineering company we organized in 1994. The Ukraine company's
name is United Engineering  Company ("UEC"). It is called a "joint stock company
with a foreign  investor."  The  foreign  investor is us. UEC is  authorized  by
Ukraine law, among other things, to perform  classified and secret  construction
works related to the national security of Ukraine.

         We own 33-1/3  percent of the Ukraine  company,  33-1/3 is owned by key
UEC  executive  employees  and  members of the  Supervisory  Council  and 33-1/3
percent is owned by several Ukraine companies or organizations.

         After  identifying  state-of-the-art  technologies  that appear to have
strong commercial  application,  we frequently finance the costs of research and
development, patent applications,  manufacturing, and market distribution, under
the condition that we own these  technologies  and all patents.  Our Live Tissue
Bonding and CO2 Separator Projects are such projects.



                                       1
<PAGE>

         Our share of the initial  start-up  costs of UEC have been written off,
and  the UEC  December  31,  2004  investment  account  of  $224,134  represents
one-third  of the net book value of the company  using U.S.  GAAP.  When profits
occur,  UEC pays us a 10 percent  dividend the  following  year  prorated on our
percentage  of the  ownership.  The remaining 90 percent is reinvested by UEC to
avoid  borrowing  funds from  Ukraine  banks at interest  rates that have ranged
between 35 percent to 190 percent.

         The economic laws in Ukraine  change  often,  and our offices deal with
the changing laws on a weekly basis. In Ukraine and throughout the former Soviet
Union  there is  constant  change  in the  economic  conditions  as well as high
inflation.  We have seen bank loan interest  rates  fluctuate from a high of 190
percent  per  annum  to a low  of 35  percent  per  annum.  We and  the  Ukraine
shareholders  in UEC  reinvest the majority of our profits to avoid paying these
high loan rates.

         UEC has  experienced  hyperinflation  during some years.  This has been
neutralized  somewhat as a result of the UEC contracts being  negotiated in U.S.
dollars  and UEC's  having  been able to take  advantage  of the  exchange  rate
fluctuations.  Once the U.S.  funds are received by UEC and converted to Hryvna,
the  exchange  rate works  against us, as the amount of profit and  dividends is
adjusted to the December 31 currency  exchange  rate.  The primary step taken to
offset the currency  exchange  problem and inflation  problem is for UEC to hold
the U.S. currency as long as possible before converting to Hryvna.  UEC has also
invested in a number of inflation  sensitive  assets that it uses in  day-to-day
operations,  such as  ownership  of its  offices  in Kiev,  Dneipropetrovsk  and
Pervomaysk.  Other  difficulties such as language barrier and local customs have
been solved by hiring quality Ukrainian, bi-lingual,  English-speaking staff and
training them to meet our standard and expectations of doing business.

         There are no  restrictions  related to our  investment in UEC including
restrictions on its ability to declare and record dividends.

         Inside  Ukraine,  we have assisted UEC in its  negotiation of contracts
for the dismantling of the Ukraine nuclear and non-nuclear missiles,  silos, and
related  equipment.  This  dismantling was required by the treaty known as START
and  will be paid for by the U.S.  and  other  western  countries.  The  Ukraine
members of UEC  designed,  built and  commanded  these  missiles and silos,  are
logical  organizations  to  dismantle  them,  and  are  expected  to  receive  a
substantial portion of the contracts to dismantle them.

         Since 1995 UEC has completed  contracts with U.S.  contractors for more
than $6.0  million with  respect to ICBM  dismantlement  in Ukraine and for more
than  DM4.7  million  in  contracts  with  the  German   Government  and  German
contractors for new methods of dismantling ICBM silos. The START treaty work was
completed by the end of 2002.

         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 Equipment Project and the Carbon
Dioxide Separator Project set forth below.



                                       2
<PAGE>

Business of the Company
-----------------------

         Live  Tissue  Bonding  Equipment.   The  E.O.  Paton  Electric  Welding
Institute of Kiev,  Ukraine 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 take and apparently leaves no or
minimal trace scar tissues after a lapse of six to seven months.

         The equipment bonds the soft biological tissue using specially designed
surgical tools. No glues, sutures, staples or other foreign matter are used. The
process  is best  described  as a  welding  process.  The scar  tissue is either
minimal  or  non-existent.  Tests  conducted  in  Louisville,  Kentucky  by U.S.
surgeons on rabbits'  stomachs  resulted in scar tissue only forty  microns wide
six months after surgery.  It appears that the Ukraine scientists have developed
a superior,  all-purpose,  seamless method of bonding soft  biological  tissues,
which method is  characterized  by simple  manipulation  applicable to different
surgical operations and the fast restoration of tissues without the formation of
coarse  scars.  Apparently  there is no need for prolonged  special  training of
surgeons and surgical personnel.

         E.O.  Paton  Institute  of  Electric  Welding of the  Ukraine  National
Academy of Sciences and  International  Association  of Welding "IAW" filed U.S.
and international  patent applications on the process in February 1997. Two U.S.
and one Australian patents have been issued. A European patent has been approved
and is in the process of being issued, but no other patents have been issued. We
own the  technology  and have been  assigned the  exclusive  world rights of the
patents - should  they be  issued.  See  Exhibit  10.3 filed as part of our Form
10-SB.

         Until the end of 2005 all  surgeries  were  performed  using  prototype
equipment in the Ukraine  hospitals  during  clinical  trials.  IAW has received
approval from the Ukraine Ministry of Health to commercialize the tissue bonding
products  in  Ukraine.  In late  2005 our  Ukraine  partner  received  its first
commercial  order from the  Ministry of Health in Ukraine for 10 tissue  welding
sets of surgical equipment. We will not participate in the revenues of this sale
but will benefit from the  additional  funding into the tissue  welding  project
development.

         We  have  begun  the  process  for FDA  discovery  and  developing  the
regulatory  and  commercial  equipment  models for  submission  to FDA.  We have
engaged U.S. regulatory and equipment consultants to assist in this process.

         To date we have submitted no applications,  requests or testing results
to the Federal  Drug  Administration  but plan to during the next 12 months.  We
have not marketed the bonding equipment in Ukraine or any other non-U.S. country
but we plan to market the  commercial  equipment  once  regulatory  approval  is
received.  We have continued our plans to manufacture  prototypes in Ukraine and
are continuing  clinical trials in Ukraine for comprehensive  human testing.  We
began this clinical work in May 2000. To date we have  completed more than 5,000
successful  human  surgeries  and more  than 70  procedure  types at 10  Ukraine
hospitals.  We are currently  negotiating with a group of private  investors and
international medical device companies, who are familiar with our company's need
additional development funds.



                                       3
<PAGE>

         In 2002 we formed Live Tissue  Connect,  Inc., a Delaware  corporation,
through which we will develop our Tissue Bonding  technology.  We own 86 percent
of Live Tissue Connect, Inc.

         We  estimate  that in excess of $3.5  million  have  been  expended  in
developing  the  project  and that $3.0  million  of  additional  funds  must be
expended to bring this product to market.  On March 8, 2005 Live Tissue  Connect
executed an agreement  with ConMed  Corporation  of Utica,  New York pursuant to
which ConMed was granted  exclusive  worldwide  product  licensing and marketing
rights to bring our  patented,  platform,  life-biological  tissue  bonding  and
welding  technology to the U.S. and world markets.  The agreement expired on May
31,  2005  without  action by ConMed or us.  Until now we have used a  universal
power source that performs  types of  procedures.  We are now  developing  power
sources  designated  for specific  types of  procedures  to enable us to license
different  procedure types to different medical device  distribution  companies.
The first tested power source  prototype of this specific  procedure is for duct
and vessel  sealing and will be completed  early in the second quarter 2006. The
second  prototype  for  end-to-end,   end-to-side  or  keyhole  reconnection  of
intestines  will be completed at the end of the second  quarter 2006. We plan to
begin U.S. FDA and European CE Mark filings during the fourth quarter 2006. U.S.
and Australian  patents have been issued,  and European patent  applications are
approved  and are in the process of being  issued.  Other  international  patent
applications have been filed.

         We successfully  demonstrated  live tissue welding on porcine models in
demonstrations  during May, June and September of 2004 for the medical community
in Louisville, Kentucky, New York, Massachusetts and Ohio.

         This  project  is still  in the  development  stage,  even  though  the
Ukrainians have created a finished  prototype product and a line of more that 60
surgical instruments.  Improvements in the instruments are possible, and testing
on live tissue of humans to U.S.  testing  standards  may be  required  for some
procedures.   Approval  of  the  process  and  equipment  by  the  Federal  Drug
Administration  is  required.  We  anticipate  that  some  applications  of  the
technology  will be approved by the F.D.A.  by 2007 and that full  approval will
follow by 2008.

         Additionally,  in 2006 we will be  marketing  the  equipment in several
countries that recognize the Ukraine Ministry of Health approval.

         Anaerobic Farm-Waste Disposal Equipment. We have not found this product
to be marketable and are considering  discontinuance of the product.  In January
2006 we closed the Oklahoma  City  Anaerobic  Farm Waste  location and moved the
project to be under the direction of the Corpus Christi office.

         Carbon Dioxide Separator. We own the patented exclusive world 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 have installed the
first set of equipment at a landfill in Chastang (Mobile), Alabama.



                                       4
<PAGE>

         The status of our CO2 separator project in Chastang County,  Alabama is
that the installation  was completed  during March 2003.  Start-up and equipment
adjustment  were  delayed  while  waiting for the landfill gas owner to complete
installation  of the  end-user  pipeline  and  gas  metering  system.  This  was
installed  near the end of March  just as our  Ukraine  supervisory  team had to
return to Ukraine. In addition, the landfill gas quality was well below expected
levels and required  repairs to the gas  gathering  system to reduce air intake.
The landfill gas owner  coordinated  and completed these repairs during the next
few  weeks,  finishing  toward  the end of May.  The  Ukraine  supervisory  team
returned in early June to oversee  service,  start-up and adjust the  equipment.
Poor weather caused some delays but this was completed in about two weeks. As we
prepared to begin start-up operations and equipment adjustment, Waste Management
Inc.  ("WMI",  the  operator  of  the  landfill)  ordered  Resource   Technology
Corporation  "RTC" (the holder of the gas  ownership  contract) off the landfill
and contended that our CO2 separator  equipment  produces methane gas that fails
to meet gas quality specifications and that, therefore, the agreement to buy the
gas  is  terminated.   This   contention  was  litigated  in  RTC's  chapter  11
reorganization  proceeding.  During the court  proceedings  in February 2006 the
company learned that RTC had erroneously misstated to WMI that the equipment was
fully operational and processing the landfill gas into  commercially  usable gas
after March 2003. In fact,  CSMG had refused to bring the Ukraine  start-up team
back to the Chastang landfill until RTC properly replaced leaking well heads and
closed other air leaks in the raw landfill gas collection  system.  During March
2003 the  company  made two tests of the  processed  raw  landfill  gas during a
30-minute period to evaluate the  effectiveness of the CO2 removal  equipment at
the site for removing CO2 from the landfill  gas. At the time of testing RTC had
not  adjusted  the well heads to stop air leakage  into the system.  The raw gas
specifications  were 43% CH4 - 42% CO2 and 15% O2 and N combined.  Test 1 of the
processed gas showed CO2 to be at a 3.33% level and test 2 after minor equipment
adjustments showed CO2 at a 2.5% level. The CO2 separator removes CO2 but not O2
and N. O2 and N control is a function of tuning or managing  the gas  collection
system.  CSMG  has the  additional  technology  to  remove  the N and O2 if such
equipment  is  necessary.  In May 2003 CSMG brought the Ukraine team to Chastang
after the collection system had been repaired, but WMI filed for contract breach
against RTC after learning of the misstatement.

         On December 16, 2004 we entered into a contract with WMI to operate the
CO2 separator at Chastang, Alabama. The agreement was approved in February 2005
by the RTC trustee and the U.S. Bankruptcy Court; however, the settlement
agreement was appealed by RTC insider creditors and on January 11, 2006 the
appeals court refused to hear the appeal.

         We 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  does  not  need  to  meet  national  gas  pipeline  quality
specifications  to fulfill  the DuPont  contract,  but based on current  raw gas
analysis we believe the gas produced will be well above the required contractual
specification.   We  are  currently  negotiating  with  pipeline  companies  for
installation of a 6.2-mile pipeline.

         Raw Materials, Suppliers and Manufacturing
         ------------------------------------------

         In March 2005 we signed an exclusive,  worldwide  product licensing and
marketing  agreement with ConMed Corporation of Utica, New York for it to design



                                       5

<PAGE>

and manufacture  hand  instruments for our issue bonding  equipment and to sell,
distribute and service the instruments worldwide. Neither ConMed nor we acted on
the agreement by its expiration date, and it expired.

         The carbon  dioxide  separator  plants  will be  manufactured  in Sumy,
Ukraine by Sumy Frunze, again at a cost less than what it would cost in the U.S.

         Distribution Methods
         --------------------

         We will  manufacture the tissue welding units in Eastern Europe for the
Eastern  Europe,   China,  and  India  markets.  U.S.  and  European  regulatory
prototypes and equipment for these markets will be  manufactured  in the U.S. or
Europe.

         We have had a number of inquiries from major landfill operators and are
currently working with a major landfill company that is interested in installing
our units on several of their landfills.  The interested parties are waiting for
the start-up of the Chastang site to make their decisions.

         Competition
         -----------

         Live tissue bonding equipment.  We have the only equipment in the world
that  reconnects  live  tissues  without the use of staples,  sutures,  glues or
sealant. We are in competition only with older 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 make CO2 separators in the U.S. but,
based upon our  experience  in the  industry,  we  believe  none will be able to
compete  with  the  quality  of our  separators  or with  our  price.  It is our
observation  that their prices are  multiples of what we believe we will be able
to charge for our  plants.  Their  separators  produce  no better  than 75 to 90
percent pure methane; based on the CO2 separator plants in operation in Ukraine,
we believe ours will produce up to 98-percent pure methane.

         Patents, Trademarks and Licenses
         --------------------------------

         The live tissue bonding  equipment is the subject of patents and patent
applications  filed by the Ukraine inventor in the Ukraine,  the U.S., and other
countries.  The patents and the patent  applications  for the U.S., the European
Patent Convention,  Australia,  Russia,  Ukraine, China, India, Canada and Japan
have been assigned to us. Two U.S. and one Australian  patents have been issued.
One European  patent has been approved and we are waiting issue.  We are advised
by our patent  attorneys that another U.S. patent has been approved,  and we are
waiting for the patent to issue.

         The CO2 separator equipment U.S. patent has been issued.

         We own the CO2 separator patented  technology,  equipment and all world
rights.  We will 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.



                                       6
<PAGE>

         Government Approval and Regulations
         -----------------------------------

         The live  tissue  bonding  equipment  must  obtain the  approval of the
Federal  Drug  Administration  before it can be sold to be used on humans in the
U.S.

         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 2005, we expended  $133,105 on research and development.  During
2004, we expended $454,190 on research and development.

         Cost of Compliance with Environmental Laws
         ------------------------------------------

         Our  anaerobic  farm waste  disposal  plants are designed to dispose of
farm waste in a manner  that meets all  environmental  regulations.  The same is
true with  regard to our CO2  separator  plants.  All  costs of  complying  with
environmental  regulations are costs of the projects and reduce our share of the
gross revenue produced from the installation and use of our equipment.

         Seasonality
         -----------

         There is no seasonal aspect of our business.

         Employees
         ---------

         We employ six persons  full time in the U.S.  and two persons full time
in Kiev, Ukraine.

ITEM 2.  DESCRIPTION OF PROPERTY.

         We lease office space in the following cities as follows:

                                 Approximate        Monthly       Term of
                                 Square Feet        Rental         Lease
                                 -----------        ------        -------
         Corpus Christi, TX        1,000            $1,099        3 years
         Kiev, Ukraine                800           $1,200        Month-to-Month

ITEM 3.  LEGAL PROCEEDINGS.

         The  registrant  ("CSMG")  was  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 CSMG  entered  into a
short-term  promissory  note dated  February 15, 2002 ("the Note") by which CSMG



                                       7
<PAGE>

borrowed from Banco  Panamericano  $203,800 at 12% interest,  the Note being due
April 1, 2002. The complaint  alleges that the Note was secured by all of CSMG's
equipment,  inventory,  accounts,  general intangibles and other properties. The
complaint  alleges  that  the  Note is in  default  and  that  CSMG  owed  Banco
Panamericano $514,920 as of February 9, 2005.

         CSMG  alleges  as  follows  with  regard  to the  allegations  of Banco
Panamericano:

         o        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.
         o        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.
         o        CSMG  lacked the funds to perform  its  obligations  under the
                  Contract. RTC got its affiliate, Banco Panamericano,  to agree
                  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.
         o        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.
         o        The intention of RTC and Banco Panamericano from the beginning
                  was  to  get  CSMG  to  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.

         CSMG believes that it, 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.  CSMG filed its Motion to have the  proceeding  referred to the United
States  Bankruptcy  Court  for the  Northern  District  of  Illinois  where  the
bankruptcy  proceeding  of RTC  continues to pend.  The Federal  District  Court
referred the  proceeding  to the United States  Bankruptcy  Court on December 6,
2005.

         The  registrant  ("CSMG") was sued on September 6, 2005 by Nature Coast
Collections,  Inc. in the Circuit Court for Hillsborough County, Florida, Nature
Coast Collections,  Inc. v. Consortium Service Management Group, Inc., Donald S.
Robbins and Gordon W. Allison,  Case No.  05-7894.  The  complaint  alleges that



                                       8
<PAGE>

Nature Coast Collections,  Inc. is the assignee of the original payee, Stonegate
Management,  ltd., a Costa Rican entity,  of four  promissory  notes executed by
CSMG,  Donald S. Robbins,  as guarantor and Gordon W. Allison as guarantor.  The
amount  claims in the suit is the  aggregate  principal  sum of  $630,000,  with
interest, costs, and attorney fees.

         CSMG had the proceeding  removed to the Federal  District Court for the
Middle District of Florida.  CSMG has  subsequently  filed its motion to dismiss
the  proceedings  for lack of  jurisdiction  in Florida.  This motion to dismiss
remains pending.

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

         There were no matters  submitted to a vote of the  stockholders  of our
company during 2005 through the solicitation of proxies or otherwise.

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

         The  company's  Common Stock is quoted on the OTC Bulletin  Board.  Its
symbol is "CTUM," or,  depending upon the Internet  service that quotes Bulletin
Board stocks, CTUM.OB.

         We filed a 1934 Exchange Act registration statement with the Commission
that became effective November 15, 1999. However,  our financial  statements did
not meet the U.S.  GAAP  requirements,  and our stock was  "demoted" to the Pink
Sheets until January 16, 2003, when the SEC staff accepted our revised financial
statements and we became eligible again to be quoted on the Bulletin Board.  Our
difficulties  with  our  financial  statements  were  caused  by the  accounting
practices in Ukraine that had not been reconciled with U.S. GAAP.

         Our common stock first traded on April 21, 1998.  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
                                    ----       ---
         2004
                  1st Qtr           0.55       0.35
                  2nd Qtr           0.75       0.36
                  3rd Qtr           0.70       0.15
                  4th Qtr           0.28       0.14

         2005

                  1st Qtr           1.02       0.13
                  2nd Qtr.          0.22       0.07
                  3rd Qtr.          0.10       0.035
                  4th Qtr.          0.083      0.03



                                       9
<PAGE>
<TABLE>
<CAPTION>

Holders
-------

         As of March 21, 2006 there were  approximately 322 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 retain any earnings to finance future growth.

         Securities Authorized for Issuance Under Equity Compensation Plans.
         -------------------------------------------------------------------

         We have  no  compensation  plans  under  which  equity  securities  are
authorized for issuance.

         Recent Sales of Unregistered Securities.
         ----------------------------------------

         Set forth below are the sales of our common stock since August 31, 2005
and through March 21, 2006 in transactions exempt from registration  pursuant to
the  provisions of  Regulation D, Rule 506.  While these shares were sold on the
dates set forth below,  the shares were  actually  issued on February 16 and 17,
2006.


          ---------- -------------------- --------- ---------- ---------------------------------
                                          No. of    Price      Type of
          Date       Person               Shares    Per Share  Consideration
          ---------- -------------------- --------- ---------- ---------------------------------
          ---------- -------------------- --------- ---------- ---------------------------------
          <S>        <C>                  <C>       <C>        <C>
          08-31-05   Neal Allen           166,667   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          09-20-05   Sam  Allen           166,667   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          10-06-05   Robert Machen        100,000   $0.05      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          10-17-05   Robert  Boone         50,000   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          10-21-05   Abimael Perez         33,333   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          10-23-05   John Ross             50,000   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          02-16-06   K. Bruce Jones        83,333   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-11-06   Bruce Burger         375,000   $0.04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-11-06   William  Weldon      250,000   $0.04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-11-06   Abimael  Perez        35,250   $0.04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-11-06   Joseph Kutz          125,000   $0,04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-07-06   Steve Raible          50,000   $0.04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          01-07-06   Sheril Palmer-Ball   300,000   $0.04      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          02-08-06   Donald Robbins       200,000   $0.06      Services as CEO valued at $12,400
          ---------- -------------------- --------- ---------- ---------------------------------
          01-11-06   Robert Machen        200,000   $0.06      Cash
          ---------- -------------------- --------- ---------- ---------------------------------
          ---------- -------------------- --------- ---------- ---------------------------------
</TABLE>

         All of the  persons  purchasing  shares of common  stock  were known to
management,  they were all  accredited  investors and had access to all material
information concerning the issuer.



                                       10
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

         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."

         Sales
         -----

         We had revenues of $414 in FY 2005 compared with $414 revenues of in FY
2004. We reported a loss of $3,261,409 in FY 2005 and a loss of $2,357,682 in FY
2004, of which losses $91,471 and $31,532, respectively,  were attributed 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.

         Selling, General and Administrative Expenses
         --------------------------------------------

         We increased our general and  administrative  expenses from  $1,872,562
during FY 2004 to $3,037,307 during FY 2005. The activities which these expenses
were  intended to benefit were our human tissue  bonding  project and our carbon
dioxide  separator  project.  The last of these  projects  - which is based upon
excellent  Ukraine-developed  equipment  that can be  manufactured  in  Ukraine,
brought to the U.S. and installed at  considerable  savings to the employment of
U.S.  equipment of  comparable or inferior  quality - represents a  considerable
part of our business plan for the future.

         Net Loss
         --------

         We increased  our fiscal year 2004 net loss of  $2,357,682,  or $0.21 a
share, to a net loss of $3,261,409 or $0.17 a share in FY 2005.

         Liquidity and Outlook
         ---------------------

         We have never operated at a profit. We were able to stay in operation
during 2005 only from the proceeds of $832,265 from the sale of common stock, an
increase in Notes Payable of $51,264, the accrual of $695,415 in interest
payable, and an increase of $503,105 in accounts payable. Some $136,416 of our
loss were attributed to depreciation and amortization.

         Outlook
         -------

         The  statements  made in this  Outlook  are based on current  plans and
expectations. These statements are forward-looking,  and actual results may vary
considerably from those that are planned.

         The Cornell Capital Partners Transaction:
         -----------------------------------------

         On March 29, 2004,  we entered into an Equity Line of Credit  Agreement
with Cornell Capital  Partners.  Under this agreement,  we may issue and sell to
Cornell  Capital  Partners  common stock for a total purchase price of up to $10
million.  Subject to certain  conditions,  we are  entitled  to draw down on the



                                       11
<PAGE>

Equity  Line of Credit now that the common  stock to be issued  under the Equity
Line of Credit is registered with the Securities and Exchange Commission and the
registration statement is declared effective.  The purchase price for the shares
is equal to 95% of, or a 5% discount to, the market  price,  which is defined as
the lowest  closing bid price of the common  stock  during the five trading days
following the notice date. We have the right, but not the obligation, to require
Cornell Capital to purchase shares in the company's  common stock in amounts not
to exceed  $140,000  per draw up to a maximum of $420,000 per month with a total
of $10 million over a consecutive  24-month  period.  Cornell  Capital  Partners
received a fee  debenture of $390,000,  in the form of  convertible  debentures.
Cornell also received a $10,000 legal fee.  Cornell Capital Partners is entitled
to retain a fee of 5% of each advance. The net effect of the 5% discount and the
5% retainage of each advance is that Cornell  Capital  Partners shall pay 90.25%
of the  applicable  closing  bid price for each  share of our common  stock.  In
addition,  we have  entered  into a placement  agent  agreement  with  Newbridge
Securities,  a  registered  broker-dealer.   Pursuant  to  the  placement  agent
agreement,  we will pay a one-time placement agent fee in shares of common stock
equal to approximately $10,000 based on the stock price on the date we agreed to
engage the placement agent.

         We received  $1,000,000  under a loan  agreement  with Cornell in July,
August and  December  2004 which is being repaid at the rate of $25,000 per week
through the Cornell Equity Line of Credit Agreement.  These funds are being used
for operations of the parent and subsidiaries. In addition we converted $390,000
of outstanding investor loans to restricted 144 stock.

         As of December 31, 2005 we have sold  4,207,827  shares of common stock
to Cornell Capital for $1,840,000 pursuant to the Equity Line of Credit. We have
escrowed  10,153,369  shares with Cornell's  escrow agent to use as repayment of
current credit line balance and future credit line use.

         Cornell  Capital  Partners,  L.P.,  has sold  13,865,775  shares of our
common stock acquired pursuant to a Standby Equity  Distribution  Agreement with
us and 1,516,638  shares of our common stock under a convertible  debenture that
we issued to Cornell  Capital for fees in  connection  with the issuance of that
debenture.  There is still an  additional  9,132,056  shares of our common stock
that are unissued under the registration statement that we could require Cornell
to purchase  for our current or future  funding  pursuant to the Standby  Equity
Distribution Agreement.

Off-Balance Sheet Arrangements

         Our company has not entered  into any  transaction,  agreement or other
contractual  arrangement  with an entity  unconsolidated  with us under which we
have

         o        an obligation under a guarantee contract,
         o        a retained or contingent interest in assets transferred to the
                  unconsolidated  entity or similar  arrangement  that serves as
                  credit,  liquidity  or market risk  support to such entity for
                  such assets,
         o        an  obligation,  including a  contingent  obligation,  under a
                  contract   that  would  be  accounted   for  as  a  derivative
                  instrument, or



                                       12
<PAGE>
<TABLE>
<CAPTION>

         o        an obligation,  including a contingent obligation, arising out
                  of a variable  interest  in an  unconsolidated  entity that is
                  held by,  and  material  to,  us where  such  entity  provides
                  financing,  liquidity,  market risk or credit risk support to,
                  or engages in leasing,  hedging,  or research and  development
                  services with, us.

Contractual obligations

         The  following  table sets  forth,  as of the end of the latest  fiscal
year-end  balance  sheet,  information  with  respect  to our known  contractual
obligations.

-------------------------- -----------------------------------------------------------------------
                                                    Payments Due-by Period
-------------------------- -----------------------------------------------------------------------
     Contractual                              Less Than                            More Than
     Obligations              Total            1 Year     1-3 Years    3-5 Years    5 Years
-------------------------- ----------------- ----------- ------------ ----------- ----------------
<S>                        <C>               <C>         <C>          <C>         <C>
Long-Term Debt
Obligations                $5,729,988        $5,280,988  $ 300,000
-------------------------- ----------------- ----------- ------------ ----------- ----------------
Capital Lease
Obligations
                           $        0
-------------------------- ----------------- ----------- ------------ ----------- ----------------
Operating Lease
Obligations                $ 2,299 a month                                        $ 2,299 a month
                           $27,558 a year                                         $27,558 a year
-------------------------- ----------------- ----------- ------------ ----------- ----------------
Other Long-Term
Liabilities Reflected on
Our Balance Sheet under
GAAP                       $        0
-------------------------- ----------------- ----------- ------------ ----------- ----------------
-------------------------- ----------------- ----------- ------------ ----------- ----------------
Total                      $5,757,546        $5,308,546  $   300,000
-------------------------- ----------------- ----------- ------------ ----------- ----------------
</TABLE>

         Our  future  results  of  operations  and  the  other   forward-looking
statements  contained in this Offering  Circular,  in particular  the statements
regarding  projected  operations in the present fiscal year, involve a number of
risks and  uncertainties.  In addition to the factors discussed above, among the
other  factors  that could cause  actual  results to differ  materially  are the
following:  the loss of any of several key personnel;  a judgment  against us in
the  litigation  with  Banco  PanAmericano;  delays in  bringing  to market  our
live-tissue bonding technology.

ITEM 7.  FINANCIAL STATEMENTS.
                                                                            Page

         Independent Auditors Report                                          14
         Balance Sheet December 31, 2005 and 2004                             15
         Statement of Operations Year Ended December 31,
                  2005 and 2004                                               17
         Statement of Cash Flows Year Ended December 31,
                  2005 and 2004                                               18
         Statement of Changes in Stockholders' Equity from
                  January 1, 2000 to December 31, 2005                        19
         Notes to Financial Statements                                        20










                                       13
<PAGE>

             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


To the Shareholders and Board of Directors
Consortium Service Management Group, Inc. and Subsidiaries

I have  audited  the  accompanying  consolidated  balance  sheets of  Consortium
Service  Management  Group,  Inc. and  Subsidiaries  as of December 31, 2005 and
December 31, 2004,  and the related  statements of  operations,  changes in cash
flows  and  stockholders'  equity  for the years  then  ended.  These  financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.

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

In my opinion,  the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Consortium Service
Management Group, Inc. and Subsidiaries as of December 31, 2005 and December 31,
2004,  and the results of its  operations  and its cash flows for the years then
ended, in conformity with U.S. generally accepted accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As disclosed in Note 2 to the
financial statements,  the Company has suffered recurring losses from operations
that raises  substantial doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


/s/ Gary Skibicki, CPA, PC

Gary Skibicki, CPA, PC
Oklahoma City, OK
March 27, 2006


                                       14
<PAGE>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31,

                                     ASSETS

                                                        2005           2004
                                                     -----------    -----------
CURRENT ASSETS
Cash                                                 $      --      $    88,908
                                                     -----------    -----------
             Total Current Assets                           --           88,908


FIXED ASSETS
Furniture and Equipment                                   61,409         61,409
    Less Accumulated Depreciation                        (61,409)       (61,409)
                                                     -----------    -----------
             Total Fixed Assets                             --             --


OTHER ASSETS
Investment - United Engineering Company                  136,236        224,134
Investment - CO2 Equipment                                  --        1,470,881
     Less Accumulated Depreciation                          --          (96,735)
CO2 Equipment Patent                                       8,000          8,000
Tissue Bonding Patent                                    530,170        379,040
     Less Accumulated Amortization                       (61,866)       (30,514)
                                                     -----------    -----------
             Total Other Assets                      $   612,540    $ 1,954,806


             Total Assets                            $   612,540    $ 2,043,714
                                                     ===========    ===========





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


                                       15
<PAGE>
<TABLE>
<CAPTION>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                                  DECEMBER 31,

                                   LIABILITIES

                                                               2005            2004
                                                           ------------    ------------
<S>                                                        <C>             <C>
CURRENT LIABILITIES
  Bank Overdraft                                           $      1,534    $       --
  Accounts Payable                                              820,788         317,683
  Interest Payable                                            1,394,017         698,602
  Payroll Taxes Payable                                          90,968          79,390
  Notes Payable to Stockholders                               3,903,828       3,852,564
  CO2 Equipment Payable                                         206,749         206,749
  Fee Debenture Payable                                            --           126,000
                                                           ------------    ------------
             Total Current Liabilities                        6,417,884       5,280,988

Long-Term Liabilities
Long Term Contract IAW                                          300,000         300,000
Fee Debenture Payable                                              --           149,000
                                                           ------------    ------------
                                                                300,000         449,000

Total Liabilities                                             6,717,884       5,729,988

Minority Interest in Consolidated Subsidiary                    206,000         206,000


STOCKHOLDERS' EQUITY
  Common stock $.001 par value, 40,000,000
  shares authorized; 26,056,072 shares issued
  and 25,036,546 shares outstanding at December 31, 2005
  and 16,517,580 shares issued and 13,268,591 shares
  outstanding at December 31, 2004                               26,057          16,518

Additional Paid in Capital                                    7,548,050       6,721,052

Accumulated Other Comprehensive (Loss)                         (339,454)       (343,027)

Accumulated (Deficit)                                       (13,512,773)    (10,251,364)

Stock Subscriptions                                                (939)         (3,168)

Treasury Stock                                                  (32,285)        (32,285)
                                                           ------------    ------------
             Total Stockholders' Equity                      (6,311,344)     (3,892,274)


             Total Liabilities and Stockholders' Equity    $    612,540    $  2,043,714
                                                           ============    ============
</TABLE>


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

                                       16
<PAGE>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                  DECEMBER 31,

                                                       2005            2004
                                                   ------------    ------------

Revenues                                           $        414    $        414

General and Administrative Expenses                   3,037,307       1,872,562
Funded R & D                                               --              --
Cost of Funded R & D                                    133,105         454,190
Net R & D Cost                                          133,105         454,190
                                                   ------------    ------------
         Operating (Loss)                            (3,169,998)     (2,326,338)

Interest Income                                              60             188

Interest in Income of Unconsolidated Companies          (91,471)        (31,532)
                                                   ------------    ------------
         (Loss) from Continuing Operations           (3,261,409)     (2,357,682)

Income Taxes                                               --              --

         Net (Loss)                                $ (3,261,409)   $ (2,357,682)
                                                   ============    ============

Net (Loss) Per Share Common Stock                         (0.17)          (0.21)

Weighted Average Common Shares Outstanding           19,545,500      11,096,502







Basic and diluted  earnings per share are the same. The corporation is reporting
a net loss for the reporting periods and any potentially dilutive securities are
antidilutive (reduce net loss) and therefore not presented.










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

                                       17
<PAGE>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      JANUARY 1, 2004 TO DECEMBER 31, 2005

                                                         2005           2004
                                                     -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)                                           $(3,261,408)   $(2,357,682)
Equity (Loss) from Investees                              91,471         31,532
Depreciation                                             105,064         99,263
Amortization                                              31,352         10,000
Common Stock for Interest                                   --          198,674
Common Stock for Services                                  6,500        151,990
Increase (Decrease) in Accounts Payable                  503,105       (366,454)
Increase in Federal Payroll Taxes Payable                 11,578         53,344
Increase in Interest Payable                             695,415        499,336
Increase (Decrease) Fee Debenture Payable               (275,000)       275,000
Impairment Loss CO2 Equipment                          1,417,647           --
                                                     -----------    -----------
        Net Cash (used in) Operating Activities         (674,276)    (1,404,997)


CASH FLOWS FROM INVESTING ACTIVITIES
Purchase CO2 Equipment and Patent                       (299,695)      (163,413)
                                                     -----------    -----------
        Net Cash (used in) Investing Activities         (299,695)      (163,413)


CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds Stock                                       832,265        967,438
Net Proceeds Notes Payable                                51,264        676,762
                                                     -----------    -----------
        Net Cash provided by Financing Activities        883,529      1,644,200


NET INCREASE (DECREASE) IN CASH AND
       CASH EQUIVALENTS                                 (90,442)        75,790

Cash and Cash Equivalents at Beginning of Year            88,908         13,118
                                                     -----------    -----------
Cash and Cash Equivalents at End of Year             $    (1,534)   $    88,908
                                                     ===========    ===========




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

                                       18
<PAGE>
<TABLE>
<CAPTION>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      JANUARY 1, 2004 TO DECEMBER 31, 2005
                                                                                Accumulated
                                                                 Additional       Other
                                  No. Common         Par          Paid In      Comprehensive
Description                      Shares (Ea.)       Value         Capital      Income (Loss)
-------------------------------------------------------------------------------------------
<S>                                 <C>          <C>            <C>            <C>
Balance January 1, 2004             9,175,874    $      9,175   $  5,410,293   $   (343,375)
Common Stock Sold 2004              2,653,600           2,654        602,848           --
Common Stock Issued for Services      526,830             527        151,463           --
Common Stock Issued for Interest      458,810             460        198,214           --
Common Stock Issued for Notes         534,190             534        358,234           --
Common Stock Escrowed               3,168,276           3,168           --             --
Net (Loss) Year Ended 2004               --              --             --             --
Other Comprehensive (Loss)               --              --             --             --
Foreign Exchange (Loss)                  --              --             --              348
-------------------------------------------------------------------------------------------
Balance December 31, 2004          16,517,580    $     16,518   $  6,721,052   $   (343,027)
                                                 ==========================================
   Treasury Stock                     (80,713)                                         --
   Stock Subscriptions             (3,168,276)
                                  -----------
   Shares Outstanding              13,268,591
                                  ===========

Escrowed Stock Sold 2004
Common Stock Sold 2005              8,589,679           8,590        820,508           --
Common Stock Issued for Services       10,000              10          6,490           --
Common Stock Issued for Interest         --              --             --             --
Common Stock Issued for Notes            --              --             --             --
Common Stock Escrowed                 938,813             939           --             --
Net (Loss) Year Ended 2005               --              --             --             --
Other Comprehensive (Loss)               --              --             --             --
Foreign Exchange Gain                    --              --             --            3,573
-------------------------------------------------------------------------------------------
Balance December 31, 2005          26,056,072    $     26,057   $  7,548,050   $   (339,454)
                                                 ==========================================
   Treasury Stock                     (80,713)
   Stock Subscriptions               (938,813)
                                  -----------
   Shares Outstanding              25,036,546
                                  ===========

                                   Accumulated     Treasury          Stock
Description                          Deficit         Stock         Subscribed        Total
----------------------------------------------------------------------------------------------
Balance January 1, 2004           $ (7,893,682)        (32,285)                     (2,849,874)
Common Stock Sold 2004                    --              --                           605,502
Common Stock Issued for Services          --              --                           151,990
Common Stock Issued for Interest          --              --                           198,674
Common Stock Issued for Notes             --              --                           358,768
Common Stock Escrowed                     --              --            (3,168)           --
Net (Loss) Year Ended 2004          (2,357,682)           --                        (2,357,682)
Other Comprehensive (Loss)                --              --                              --
Foreign Exchange (Loss)                   --              --                               348
----------------------------------------------------------------------------------------------
Balance December 31, 2004         $(10,251,364)   $    (32,285)   $     (3,168)   $ (3,892,274)
==============================================================================================
   Treasury Stock                         --                                              --


Escrowed Stock Sold 2004                                                                3,168
Common Stock Sold 2005                    --              --                          829,098
Common Stock Issued for Services          --              --                            6,500
Common Stock Issued for Interest          --              --                             --
Common Stock Issued for Notes             --              --                             --
Common Stock Escrowed                     --              --              (939)          --
Net (Loss) Year Ended 2005          (3,261,409)           --                       (3,261,409)
Other Comprehensive (Loss)                --              --                             --
Foreign Exchange Gain                     --              --                            3,573
----------------------------------------------------------------------------------------------
Balance December 31, 2005          (13,512,773)   $    (32,285)   $       (939)   $ (6,311,344)
==============================================================================================
</TABLE>

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


                                       19
<PAGE>

                   CONSORTIUM SERVICES MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                      DECEMBER 31, 2005, DECEMBER 31, 2004

                                     NOTE 1
                         SIGNIFICANT ACCOUNTING POLICIES

                              Nature of Operations

Consortium Service Management Group, Inc. (the "Company"),  a Texas corporation,
was incorporated on November 17, 1992.

The technologies involve live tissue bonding, CO2 (carbon dioxide) separation of
landfill  gas, and  anaerobic  animal waste  disposal.  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 Electric  Welding
of the Ukraine  National  Academy of Sciences and  International  Association of
Welding  and owns the  technology  including  the  world  rights  on  licensing,
patenting,  manufacturing,  development and distribution of this technology. The
live biological tissue bonding process has been approved by the Ukraine Ministry
of Health for human surgical  procedures and patents for the equipment have been
obtained for the United States and Australia  with other U.S. and  international
patents pending.

The Company owned U.S.  patent has been issued on the carbon  dioxide  separator
technology,  also developed in Ukraine,  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 isolates methane gas to the extent that
it can 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  equipment  is now  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. 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.  To  accomplish  this carbon  dioxide  equipment
manufactured by Ukraine subcontractors and owned by the Company was installed at
the landfill during 2002 and 2003.  Waste  Management  Inc.  asserted the carbon
dioxide  equipment  produced  methane gas that failed to meet Mobile Gas quality
specifications  and accordingly  contended the above agreement  terminated.  RTC
maintained that the Ukraine gas conversion system was fully operational prior to
the March 31, 2003 contract deadline and that specification  problems associated
with  processed  gas  were   contributed  to  by  Waste   Management   Inc.  and
Transamerican  Waste  Industries  Inc. This resulted in a legal dispute that was
complicated  by RTC being in  Chapter  11  bankruptcy.  In July 2003 RTC filed a
lawsuit with the United States  Bankruptcy  Court Northern  District of Illinois
Eastern  Division  to  resolve  this  dispute  and in the  spring  of  2005  the
Bankruptcy  Court  ruled and on  appeal  the  United  States  District  Court of
Illinois  affirmed the  following  decision:  CSMG proposed and the above Courts
each agreed that CSMG would pay the bankruptcy  estate $75,000 and in return RTC
would  release its right to collect,  extract and remove  landfill  gas from the
property.  CSMG would also withdraw its $6 million  administrative  claim and in
return the bankruptcy estate would release any rights it had to collect gas from
the landfill.

The status of our CO2 separator project in Chastang County,  Alabama is that the
installation was completed during March 2003. Start-up and equipment adjustments
were delayed while  waiting for the landfill gas owner to complete  installation
of the end-user  pipeline and gas metering  system.  This was installed near the
end of March just as our Ukraine  supervisory team had to return to Ukraine.  In
addition,  the landfill gas quality was well below expected  levels and required
repairs to the gas gathering system to reduce air intake. The landfill gas owner
coordinated  and completed  these repairs  during the next few weeks,  finishing
toward the end of May. The Ukraine  supervisory  team  returned in early June to
oversee,  service,  start-up and adjust the equipment.  Poor weather caused some



                                       20
<PAGE>

delays but these were  completed  in about two weeks.  As we  prepared  to begin
start-up operations and equipment adjustments, Waste Management Inc. ("WMI", the
operator of the landfill) ordered Resource  Technology  Corporation  ("RTC", the
holder of the gas ownership  contract)  off the landfill and contended  that our
CO2  separator  equipment  produced  methane gas that failed to meet gas quality
specifications and, therefore, the agreement to buy the gas was terminated. This
contention was litigated in RTC's chapter 11 reorganization  proceeding.  During
the  court  proceedings  in  February,  2006 the  company  learned  that RTC had
erroneously  misstated  to WMI that the  equipment  was  fully  operational  and
processing the landfill gas into commercially  usable gas after March,  2003. In
Fact CSMG,  had refused to bring the Ukraine  start-up team back to the Chastang
until RTC properly replaced leaking well heads and closed other air leaks in the
raw landfill gas  collection  system.  During  March,  2003 the company made two
tests of the  processed  raw landfill gas during a 30 minute  period to evaluate
the effectiveness of the CO2 removal equipment at the site for removing CO2 from
the Chastang  site landfill gas. At the time of testing RTC had not adjusted the
well heads to stop air leakage into the system. The raw gas specifications  were
43% CH4 - 42% CO2 and 15% O2 and N combined.  Test 1 of the processed gas showed
CO2 to be at a 3.33% level and test 2 after minor equipment  adjustments  showed
CO2 at a 2.5% level.  The CO2  separator  removes CO2 but not O2 and N. O2 and N
control is a function of tuning or managing the gas collection system.  CSMG has
the additional technology to remove the N and O2 if such equipment is necessary.
In May,  2003 CSMG  brought the Ukraine  team to Chastang  after the  collection
system had been  repaired  but WMI filed for contract  breach  against RTC after
learning of the misstatement.

On  December  16,  2004 we entered  into a contract  with WMI to operate the CO2
separator at Chastang,  Alabama. The agreement was approved in February, 2005 by
the RTC trustee and the U.S. Bankruptcy Court, however, the settlement agreement
was appealed by RTC insider  creditors and on January 11, 2006 the appeals court
refused to hear the appeal.

We signed a contract  with DuPont on February  14, 2006 to provide up to 500,000
MMbtu  commercial  quality gas to their plant outside Mobile,  Alabama.  The gas
does not need to meet national gas pipeline  quality  specifications  to fulfill
the DuPont  contract but based on current raw gas analysis the company  believes
the gas produced will be well above the required contractual  specification.  We
are currently  negotiating  with pipeline  companies for installation of the 6.2
mile pipeline.

At the end of  December  2005 the  Company  has  invested  $1,619,446  on carbon
dioxide  separator  equipment  with  $206,749  remaining  due and payable to the
Ukraine  manufacturer  Sumy  Frunze  Machine  Building  Science  and  Production
Association.

Accounting  standards  require that  long-lived  assets or assets to be held and
used be measured against net cash inflows to test if carrying values exceed fair
values. The carbon dioxide separator equipment was originally  installed in 2003
but because of litigation no cash in flows have been generated to date. Although
a gas purchase  contract was recently obtained by the Company and litigation was
recently favorably resolved,  accounting standard FAS 144 has a requirement that
because  no cash  flow has been  generated  as of  December  31,  2005,  the CO2
equipment  has been  written  down to a zero  value with an  impairment  loss of
$1,417,647 included in 2005 operating expenses. While this affects the financial
statements  of the company it does not affect the actual value of the  equipment
or the  ability of the  company to perform on its  contract  for the sale of the
gas.

The third  technology  developed in Ukraine is an anaerobic animal waste process
that via a closed loop system eliminates animal waste, odors and microorganisms.
The  Company  owns the  exclusive  marketing  and  distribution  rights for this
equipment.  A by-product of this process is an organic fertilizer that will also
be  marketed  in the U.S.  and Canada in  accordance  with  rights  owned by the
Company. The company has not been successful in marketing this technology and is
considering  discontinuing  the  product  in order to focus more on its two core
technologies.  The company has shut down the Oklahoma City Anaerobic Farm Waste,
Inc location.

The Company does not internally separate financial information including results
of operations by segments such as geographic areas, products, major customers or
operating segments. With the major component of earnings in past years coming
from earnings of United Engineering Company (UEC), and losses in more recent
years such as 2005 and 2004, management considers it impractical to further
segment financial information.



                                       21
<PAGE>

Investments in companies in which the Company has an equity interest of at least
20% are  accounted  for under the equity  method.  Under this method the Company
records  its  share of  income  or  losses  as  Interest  Income  or  Losses  of
Unconsolidated  Companies  with  corresponding  increases  or  decreases  in the
investment account. Investments in which the Company has a controlling financial
interest  represented  by either direct or indirect  controlling  interest (more
than 50%) are  consolidated.  In 2002 Live Tissue Connect,  Inc. was formed (86%
Company  owned) to  manage  live  tissue  bonding  activities,  and in 2001 CSMG
Gastech,  LLC  (89.7%  Company  owned)  was  formed  to  manage  carbon  dioxide
operations.  In 1999 Anaerobic Farm Waste,  Inc. was incorporated  (100% Company
owned) to manage that  technology.  The 2005 and 2004  financial  statements are
presented with parent and these majority owned  subsidiaries  consolidated  with
intercompany transactions and accounts eliminated.

Cash and Cash Equivalents

For purposes of the statements of cash flows,  the Company  considers all highly
liquid  investments  with  maturities  of  less  than  three  months  to be cash
equivalents.

Revenue Recognition

The  Company  has  experienced  long and  uncertain  collection  time frames and
accordingly the general policy is revenue is recognized as received.

Furniture, Fixtures and Equipment

Furniture,  fixtures  and  equipment  are  stated at cost and are  straight-line
depreciated  over the estimated  economic  lives of the assets,  primarily  five
years. Equipment with no continuing value is written off.

Foreign Operations

Foreign currency  transactions and financial statements are translated into U.S.
dollars in accordance  with Statement of Financial  Accounting  Standards No. 52
"Foreign Currency Translations." All balance sheet accounts have been translated
using the exchange rate at the balance  sheet date.  Income  Statement  accounts
have been translated  using the average exchange rates for the year. The Company
owns a 33.3% interest in UEC which was organized in and operates in Ukraine.  In
2005 the  average  exchange  rate used to record  income was  .19808  functional
currency to U.S.  dollars and the year end  exchange  rate used to value the UEC
investment account was .19820 functional  currency to U.S. dollars.  In 2004 the
average  exchange rate used to record income was .19310  functional  currency to
U.S.  dollars and the year end  exchange  rate used to value the UEC  investment
account was .1930 functional currency to U.S. dollars.

The  summarized  2005  and  2004  financial  information  of  UEC  presented  in
accordance  with U.S.  GAAP and  translated  into U.S.  dollars is  presented as
follows:

                           UNITED ENGINEERING COMPANY
                             DNIPROPETROVSK, UKRAINE


                                                            2005         2004
                                                         ---------    ---------

Current Assets                                           $ 126,500    $ 241,900
Non Current Assets                                         408,800      465,000
                                                         ---------    ---------
         Total Assets                                      535,300      706,900
                                                         =========    =========

Current Liabilities                                        127,000       34,600
Non Current Liabilities                                          0            0
                                                         ---------    ---------
         Total Liabilities                                 127,000       34,600

Equity                                                     408,300      672,300
                                                         ---------    ---------
         Total Liabilities and Equity                    $ 535,300    $ 706,900
                                                         =========    =========

Sales                                                    $ 846,600    $ 968,900


                                       22
<PAGE>


Gross Profit                                               (56,000)     145,400
Operating Expense                                          225,600      240,100
                                                         ---------    ---------
         Net (Loss)                                      $(281,600)   $ (94,700)
                                                         =========    =========

UEC's equity decreased by $(264,000) from 2004 to 2005 of which 1/3 or $(87,898)
is  reflected  in the decrease of the UEC  investment  account from  $224,134 to
$136,236.  The  change  comprises  an  operating  loss of  $(91,471)  which  was
partially  set  off  by  a  foreign  exchange  gain  of  $3,573  reported  under
Accumulated Other Comprehensive Income (Loss) on the balance sheet.

Loss Per Share

The  computation  of loss per  share of  common  stock is based on the  weighted
average number of shares outstanding. The Company had net losses of $(3,261,409)
in 2005 and $(2,357,682) in 2004 and accordingly  basic and diluted earnings per
share are the same because any dilutive or potentially dilutive securities would
be antidilutive.

Issuance of Shares for Services and Interest

Valuation  of shares for services and interest is based on the fair market value
of services and the stated interest rates on notes payable.

In 2005  10,000  shares were issued in  exchange  for $6,500 in  management  and
marketing services.  The cost of the services has been charged to operations and
additional paid in capital has been increased by $6,490  representing the excess
of the cost of the services over the par value of the common stock issued.

In 2004 526,830  shares were issued in exchange for $151,990 in  management  and
marketing services.  The cost of the services has been charged to operations and
additional  paid in capital  has been  increased  by $151,463  representing  the
excess  of the cost of the  services  over the par  value  of the  common  stock
issued.  Also in 2004 the  Company  issued  458,810  shares of common  stock for
interest on notes payable to  shareholders  with the cost charged to operations,
and additional paid in capital  increased by $458,351  representing the interest
expense over the par value of the common stock issued.

Preferred Stock

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 does not realize profits,  preferred stock
dividends are not accruable. Such preferred Series A 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  converting all preferred
shares  outstanding  to common  stock.  In 2001  75,669  preferred  shares  were
converted  to  1,210,704  common  shares as  compensation  for  unpaid  services
recorded at $756,690  in  compensation  expense  with  corresponding  entries to
common stock and paid in capital.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

Accounting Pronouncements Adopted

During  2005 the  Financial  Accounting  Standards  Board  issued the  following
statements on financial accounting standards (SFAS).



                                       23
<PAGE>

     (1) SFAS No. 152 - Accounting for real estate time shares
     (2) SFAS No. 153 - Exchanges of non monetary assets
     (3) SFAS No. 154 - Accounting changes and error corrections

Although  these  standards  were  issued  in 2005  SFAS No.  152 and 153 are not
effective  until fiscal years  beginning after June 15, 2005 and SFAS 154 is not
effective until fiscal years beginning after December 15, 2005.

During  2004 the  Financial  Accounting  Standards  Board  issued the  following
statements on financial accounting standards (SFAS).

     (1) SFAS No. 151 - Inventory costs, an amendment of ARB No 43, chapter 4.

Adoption  of SFAS No 151  will  not  have a  material  effect  on the  Company's
financial  position,  results  of  operations,  or  on  disclosures  within  the
financial  statements.  (SFAS 151 is effective for fiscal years  beginning after
June 15, 2005.)

Income Taxes

The Company  records its income tax  provision in accordance  with  Statement of
Financial Standards No. 109, "Accounting for Income Taxes." (See Note 3)

                                     NOTE 2
                BASIS OF PRESENTATION AND CONSIDERATIONS RELATED
                     TO CONTINUED EXISTENCE (GOING CONCERN)

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred a net loss
of $(3,261,409)  for the year ended December 31, 2005 and  $(2,357,891)  for the
year ended  December  31, 2004 and these  factors  combined  with prior year net
losses  raises  substantial  doubt as to the  Company's  ability to obtain  debt
and/or equity financing and achieve profitable operations.

On March 29, 2004 the Company  entered  into an equity line of credit  agreement
with Cornell Capital  Partners  whereby CSMG may issue and sell to Cornell up to
$10 million in common  stock.  The  purchase  price for the shares is 95% of the
market price defined as the lowest closing bid price during five preceding days.
The Company can sell shares to Cornell in dollar amounts not to exceed  $140,000
per draw or $420,000 per month for a total of $10 million  during a  consecutive
24-month  period.  The cost of this  arrangement  is Cornell  retains 5% of each
equity  advance  in  addition  to the 5% market  discount  that  results in CSMG
obtaining  90.25% of the market  price of each  stock  sale.  Additionally,  the
Company  paid  Cornell  $10,000 in legal fees and  $390,000  in  placement  fees
financed by Cornell and repaid from commons  stock sale  proceeds.  The $400,000
plus a $10,000  one-time  placement  fee has been charged to operations in 2004.
Under the agreement Cornell advanced the Company $1,000,000 in 2004 of which all
has been repaid via stock sales in accord with the above arrangement.

As of  December  31,  2005 we have sold  13,865,775  shares  of common  stock to
Cornell  Capital for  $1,840,000  pursuant  to the Equity Line of Credit.  As of
December 31, 2005 we have escrowed 938,813 shares with Cornell's escrow agent to
use as  repayment  of current  credit line  balance and future  credit line use.
Cornell Capital  Partners,  L.P., which has sold 13,865,775 shares of our common
stock acquired pursuant to a Standby Equity Distribution Agreement and 1,516,638
shares of our  common  stock  under a  convertible  debenture  that we issued to
Cornell Capital for fees that has been repaid. We currently owe Cornell $550,000
which is planned to be repaid from additional  stock sales.  There are 9,132,056
shares   remaining  that  may  be  acquired   pursuant  to  the  standby  Equity
Distribution  Agreement  a portion  of which  will be used to repay the  current
amount of $550,000 owed to Cornell at December 31, 2005.

The Company's management intends to continue to raise additional operating funds
through equity and or debt offerings and the sale of  technologies  but there is
no assurance these efforts will always be successful.  The possible consequences
of not obtaining  additional  funding beyond  existing  sources from the sale of
technologies is that there will not be sufficient money to operate the Company.



                                       24
<PAGE>

In 2002 the Company began carbon dioxide separator equipment installation at the
Chastang  landfill in Mobile,  Alabama.  By the end of 2005 the Company invested
$1,619,446 in carbon dioxide  separator  equipment with  installation  completed
during the first  quarter of 2003.  Included  in this  amount  are  $206,749  in
payables  owed to the  Ukraine  manufacturer  and as of the  date of this  audit
report no sustained  production of methane gas  processing  has occurred nor has
any gas been sold.  We signed a contract  with  DuPont on  February  14, 2006 to
provide  up to 500,000  MMbtu  commercial  quality  gas to their  plant  outside
Mobile,  Alabama.  The gas does not need to meet  national gas pipeline  quality
specifications  to fulfill  the  DuPont  contract  but based on current  raw gas
analysis the company  believes the gas produced  will be well above the required
contractual specification.  We are currently negotiating with pipeline companies
for installation of the 6.2 mile pipeline.

The possible  consequences of not obtaining additional funding by either debt or
equity financing or from technology sales will be operations  ceasing  resulting
in liquidation.

                                     NOTE 3
                                  INCOME TAXES

The Company  records its income tax  provision in accordance  with  Statement of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income Taxes" which
requires the use of the  liability  method of  accounting  for  deferred  income
taxes.

With the Company not generating taxable income since inception, no provision for
income  taxes  has been  provided.  At  December  31,  2005 net  operating  loss
carryforwards  will exceed $8,000,000  making it reasonably  uncertain if any of
these loss carryforwards will result in tax benefits.

During the third quarter 2005 the Internal  Revenue  Service filed a federal tax
lien for unpaid  payroll  taxes on the  Company for $93,217 and on March 7, 2006
the Company reached a tentative  agreement with the Internal  Revenue Service to
make monthly payments of $5,000 until repaid.

                                     NOTE 4
                     INVESTMENT - UNITED ENGINEERING COMPANY

At  December  31,  1999 the  Company  was a 50% owner of UEC, a Ukraine and U.S.
joint stock company registered under the laws of Ukraine. The other 50% of UEC's
equity were owned by several  Ukraine  organizations  one of which was the State
Property  Fund of Ukraine.  UEC is a Ukraine  closed  joint stock  company  with
foreign investment, the Company being the foreign investor, that holds a Ukraine
license to perform classified and secret construction works relating to projects
that are in the Ukraine  national  security  sector.  To complete its authorized
capital during the year ending December 31, 2000,  approximately 9 UEC employees
were  given  the   opportunity   to  purchase   stock  and  paid  26,100  gryvna
(approximately  $4,760 U.S. dollars) for 5,000 shares.  The sale of stock to its
employees completed the full complement of its 20,000 registered shares that was
authorized  by UEC with the  Company  owning  6,666  shares or 33.3%  ownership.
Although the Company now owns only a 33.3%  interest in UEC all major  decisions
require a 75% stockholder  approval which enables CSMG to have an active role in
setting  policy.  For the year ended  December 31, 2005 UEC in U.S.  dollars had
revenues of  $846,600,  assets of  $535,300,  liabilities  of $127,000 and a net
worth of $408,300.  For the year ended December 31, 2004 revenues were $968,900,
assets were $706,900, liabilities were $34,600 with a net worth of $672,300.

A portion of  investment,  which is included in the UEC investment  account,  is
considered a Founders Fund and has special priority in the event of liquidation.
In  1994  the  Company  made  its  original  investment  in UEC  which  included
contributing  $73,843 in autos,  equipment  and  furniture.  The Company and UEC
agreed that,  in the event of UEC  liquidating,  $73,843  would be repaid to the
Company in preference  to all  creditors.  As an incentive to encourage  foreign
investment,   the  Ukraine   government  has   guaranteed   repayment  if,  upon
liquidation,  UEC  has  insufficient  funds  to  do  so.  This  special  funding
arrangement continues to exist and for presentation purposes is included as part
of the UEC investment account on the balance sheet.



                                       25
<PAGE>

                                     NOTE 5
                                  SUBSIDIARIES:
                                CSMG GASTECH, LLC
                           ANAEROBIC FARM WASTE, INC.
                            LIVE TISSUE CONNECT, INC.

In 2001 CSMG Gastech,  LLC was formed in which the Company owns 89.7%  interest.
The  consolidated  financial  statements  show  $206,000 in  Membership  Capital
representing the investment of 8 members.  CSMG Gastech,  LLC is a Texas Limited
Liability  Company  formed  February  15,  2001  to  produce  landfill  gas  for
commercial sale.

Anaerobic Farm Waste, Inc. is an Oklahoma corporation formed January 21, 1999 to
sell  anaerobic  farm waste  technologies  primarily  to the  United  States and
Canadian  markets.  With  efforts  to market  unsuccessful  in 2004 and 2005 the
Oklahoma City location was shut down. Anaerobic Farm Waste, Inc. is 100% Company
owned. As of March 27, 2006 Anaerobic Farm Waste,  Inc. was not in good standing
with the State of Oklahoma during 2005-2006 due to an  administrative  oversight
of failing to file and pay minimum corporation franchise taxes of $10.

Live  Tissue  Connect,  Inc.  is a Delaware  corporation  formed  May 22,  2002.
Although  the  purpose of the  corporation  can be any  lawful  act or  activity
permitted for Delaware corporations,  its specific purpose is to develop, market
and sale live  tissue-bonding  technologies  throughout  the world.  Live Tissue
Connect, Inc. is 86% Company owned.


                                     NOTE 6
                          NOTES PAYABLE TO STOCKHOLDERS

Notes  to  shareholders  as of  December  31,  2005  consists  of 91  short-term
(generally one year) and interest  bearing notes with varying maturity dates the
most common  interest rate being 11% per annum on the unpaid  balance.  December
31, 2005 notes payable to shareholders  totaled $3,903,828 with interest expense
of $684,513 as follows:

             a.  Cash paid                          $ 50,818
             c.  Accrued interest                    633,695
                                                    --------
                                                    $684,513
                                                    ========

December 31, 2004 notes payable to shareholders totaled $3,852,564 with interest
expense of $490,282 as follows:

             a.  Cash paid                          $ 30,219
             b.  Common stock issued for interest    198,672
             c.  Accrued interest                    261,391
                                                    --------
                                                    $490,282
                                                    ========

Loan Defaults

The Company currently owes Stonegate Management  approximately  $925,424 in past
due  principal  and interest as of December 31, 2005 on four notes with original
indebtedness of $362,000,  $100,000,  $53,000 and $115,000 which all came due in
2002.  The  Company's  attorney  has  been in  negotiations  for  over a year to
restructure a repayment  schedule with the most current  proposal to pay $50,000
each quarter commencing April 1, 2005. The proposed payments would be $25,000 in
cash with the other  $25,000  paid in common stock  shares,  the exact amount to
vary each quarter  depending on the per share market value.  The above  proposal
has not been responded to.

The  registrant  ("CSMG") was served a suit on December 12, 2005 by Nature Coast
Collections,  Inc. in the Circuit Court for Hillsborough County, Florida, Nature
Coast Collections,  Inc. v. Consortium Service Management Group, Inc., Donald S.
Robbins and Gordon W. Allison,  Case No.  05-7894.  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
CSMG,  Donald S. Robbins,  as guarantor and Gordon W. Allison as guarantor.  The
amount  claimed in the suit is the  aggregate  principal  sum of $630,000,  with
interest, costs, and attorney fees.



                                       26
<PAGE>

CSMG had the  proceeding  removed to the Federal  District  Court for the Middle
District  of  Florida.  CSMG has  subsequently  filed its motion to dismiss  the
proceedings for lack of jurisdiction in Florida.  This motion to dismiss remains
pending.

The Company is also 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 circuit court of Cook County,  Illinois for $514,920
and it is unclear on what the ultimate  outcome of this litigation will be. This
event has been  reported  on Form 8K on October  22,  2004  which is  reiterated
below.

On August 24, 2004 we received from Banco Panamericano, Inc. a notice of default
of a senior,  secured note in the amount of $203,800  (the  "Note").  The notice
related to a Consolidated  Loan,  Guaranty and Security Agreement dated February
15,  2002  between us and Banco  Panamericano.  The notice was dated  almost two
years earlier, on December 10, 2002.

We  believe  that the  notice was  backdated  and relied on facts  stated in the
notice that had not yet  occurred  and were  patently  false.  The amount of the
obligation  under the Note had not yet been fully  advanced to us as of the date
of the  notice,  and so the  Note  was not due on the  date  of the  notice.  In
addition,  the notice  stated that we had failed to pay a judgment of $32,091 to
an electrical company.  The obligation to the electrical company,  however,  did
not arise until the  electrical  work was  completed in the Spring of 2003,  the
litigation related to our obligation to the electrical company was not commenced
until  the Fall of 2003,  the  judgment  against  us in favor of the  electrical
company was not entered  until March 2004,  and we  satisfied  the  judgment and
obtained a release of the judgment lien on August 31, 2004.

It is true that the Note was  eventually  fully funded and we have an obligation
under the Note.  However,  we have an offset to the claim of Banco  Panamericano
that exceeds the  obligation  under the Note.  We were at all times  relevant to
this matter in a contractual  relationship with Resource Technology  Corporation
("RTC")  regarding the  installation of equipment owned by us that would extract
methane gas from the Chastang Landfill in Mobile, Alabama that RTC would deliver
to Waste  Management  for sale and for the benefit of both RTC and our  company.
The person that controlled RTC also  controlled  Banco  Panamericano  and caused
Banco  Panamericano to make the loan to us. The project stalled and has not been
completed to our great  financial loss when RTC defaulted on its  obligations to
Waste  Management and other creditors at the landfill.  RTC filed for bankruptcy
protection in 2003 (Case No.  99-35434,  U. S. Bankruptcy Court for the Northern
District of Illinois).  RTC's  management  was replaced by a trustee  because of
improper payments made by the debtor to RTC-affiliated companies.

We filed a claim in the RTC  bankruptcy  case in the  amount of  $5,024,261,  an
amount that has increased since such filing.  Creditors in the case,  because of
alleged illegal  payments by RTC to its  affiliates,  are attempting to have the
bankruptcy   judge  include  the  various  RTC   affiliates,   including   Banco
Panamericano, as additional debtors in the case.

The  registrant  ("CSMG") was 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 CSMG  entered  into a  short-term
promissory note dated February 15, 2002 ("the Note") by which CSMG borrowed from
Banco Panamericano  $203,800 at 12% interest,  the Note being due April 1, 2002.
The  complaint  alleges  that the Note was  secured by all of CSMG's  equipment,
inventory,  accounts,  general  intangibles and other properties.  The complaint
alleges  that the Note is in  default  and that  CSMG  owed  Banco  Panamericano
$514,920 as of February 9, 2005.

     CSMG  alleges  as  follows  with  regard  to  the   allegations   of  Banco
     Panamericano:

     o    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.

     o    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


                                       27
<PAGE>
<TABLE>
<CAPTION>

          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.

     o    CSMG lacked the funds to perform its  obligations  under the Contract.
          RTC got its  affiliate,  Banco  Panamericano,  to agree  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.

     o    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.

     o    The intention of RTC and Banco  Panamericano from the beginning was to
          get CSMG to 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.

CSMG  believes  that it, 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.
CSMG  filed its Motion to have the  proceeding  referred  to the  United  States
Bankruptcy  Court for the  Northern  District of Illinois  where the  bankruptcy
proceeding of RTC continues to pend.  The Federal  District  Court  referred the
proceeding to the United States Bankruptcy Court on December 6, 2005

For the above  reasons,  we believe that we have an offset to the claim of Banco
Panamericano.

On March 2, 2004 a default  judgement  was  entered  against  the Company in the
amount of $32,091 in favor of Bagby and Russell Electric Company.  The judgement
was the result of an unpaid invoice for electrical work performed installing the
carbon dioxide equipment at Chastang landfill in Mobile,  Alabama and the amount
was fully paid on July 21, 2004.

The Company also has a past due accounts  payable of $20,784 for legal  services
dating back to 2001 and 2002 which has been turned over to a collection  agency.
The collection  agency has been advised that statute of limitations has expired,
however,  the Company recognized that an indebtedness exists that will be repaid
if and when funds are available.

                                     NOTE 7
                                  STOCK OPTIONS

At the beginning of 2003 there were 1,500,000 stock options outstanding with the
following plan provisions:

              Option Period         Original                                                               Market
                  From                No of           Options              Options           Option       Price at
Plan Date      Grant Date           Options           Issued             Exercised           Price       Grant Date
---------      ----------           -------           ------             ---------           -----       ----------
<C>        <C>                     <C>          <C>                    <C>                  <C>           <C>
12/31/98   10 years; 5 years if    1,500,000    850,000 on 1/31/98                          .165 / Sh     .15 / Sh
           optionee owns more                   215,000 on 1/28/05                          .280 / Sh     .17 / Sh
           than 10% of voting                   435,000 on 9/28/05                          .330 / Sh     .17 / Sh
           stock at time of grant                                     850,000 on 12/30/03   .165 / Sh     .40 / Sh

5/8/03     10 years; 5 years if    1,000,000    865,000 on 5/8/03                           .605 / Sh     .55 / Sh
           optionee owns more
           than 10% of voting
           stock at time of grant
</TABLE>



                                       28
<PAGE>

Total options outstanding at December 31, 2003:
12/31/1998 plan               600,000
5/8/2003 plan                 800,000
                            ---------
         Total              1,400,000

At the end of December 2003,  850,000 stock options were exercised at the option
price of .165.  Each officer was given  425,000  shares of stock in exchange for
reducing  liabilities and returning  80,713 shares of CSMG stock to the treasury
at a price per share of .40. On December 1, 2003 CSMG stock opened at .35 and on
December 31, 2003 closed at .45.  Compensation  expense of $199,750 was recorded
which  represents  the excess of the option  price,  .165 over market  value .40
reduced by $107,965 in  satisfaction  of liabilities  and $32,285 in surrendered
stock.  Par  value  capital  stock  was  increased  by $850 and paid in  capital
increased by $339,150.

On January 26, 2005 the Board of Directors  extended the option expiration dates
on the 215,000  options issued on January 28, 2000 and 435,000 options issued on
September 28, 2000 by 5 years each. Specifically,  the original expiration dates
of January 28,  2005 and  September  28, 2005 have been  extended to January 28,
2010 and September 28, 2010 respectively.  115,000 options expired after a board
member  resigned  and his  options  were  not  exercised  within  90 days  after
resignation.




















                                       29
<PAGE>

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

         During the two most recent  fiscal years or any later  interim  period,
our principal  independent  accountant  has not resigned,  declined to stand for
reelection of been dismissed.

ITEM 8A. CONTROLS AND PROCEDURES.

         Evaluation  of  disclosure  controls  and  procedures.   The  Company's
management,  with the participation of the Company's Chief Executive Officer and
Chief  Financial  Officer,  has  evaluated  the  effectiveness  of the Company's
disclosure  controls  and  procedures  as of December  31,  2005.  Based on this
evaluation,  the Company's Chief Executive  Officer and Chief Financial  Officer
concluded that the Company's disclosure controls and procedures are effective.

ITEM 8B. OTHER INFORMATION.

         Not applicable.

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

         Set  forth  below  are the  names  and  terms of  office of each of the
directors,  executive  officers and  significant  employees of the company and a
description of the business experience of each.

                                                                     Director's
                                                         Director       Term
      Person                Positions and Offices         Since        Expires
------------------          ---------------------        --------    -----------

Esmeralda G. Robbins, 61    Chairman of the Board           1992         2006
                            of Directors

Donald S. Robbins, 61       President, Chief                1992         2006
                            Executive Officer and
                            Director

Gordon W. Allison, 79       Director                        1992         2006

K. Bruce Jones, 65          Chief Financial Officer         2005         2006

Herman Hohauser, 65         Executive Vice President        2005         2006
                            and Secretary                   2005         2006

Robert Jay Machen, 74       Director                        2003         2006

Conrad Derdeyn, 72          Director                        2003         2006

         Esmeralda G. Robbins.  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



                                       30
<PAGE>

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 Consortium  Service Management Group and has been its Chairman of the
Board  since  1992.  She is the spouse of Donald S.  Robbins,  president  of the
company.

         Donald S. Robbins,  President and Chief Executive Officer.  Mr. Robbins
is a founder of our company and currently  serves as President,  Chief Executive
Officer and Board  Member.  Mr.  Robbins  has been  instrumental  in  developing
relationships  with the company's foreign and domestic partners and oversees the
management  of  the  company,  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 for humans and animals
and CO2  separation  technologies  for landfill gas and  anaerobic  animal waste
processing.  Prior  to  founding  our  company,  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 is also
President and CEO of Live Tissue Connect, Inc. and Chairman and CEO of Anaerobic
Farm Waste, Inc., both of which are subsidiaries of our company.  Mr. Robbins is
on the Supervisory Council of United Engineering Company and 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.  He devotes all his
time to the affairs of our  company.  Mr.  Robbins is the spouse of Esmeralda G.
Robbins, the chairman of our board of directors.

         Gordon W. Allison,  Secretary.  Mr. Allison is a founder of our company
and is a Board Member. Mr. Allison has an exceptional track record, with over 35
years in the insurance  services  industry,  of which 28 years were in executive
management  level positions for public  companies.  Mr. Allison served as a bank
director and served as a Trustee of Oklahoma City  University  for 21 years.  He
has  received a number of industry  and public  service  honors and  awards.  He
devotes all his time to the affairs of our company.

         K. Bruce Jones,  Chief Financial  Officer.  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.

         Herman J. Hohauser,  Esq., Executive Vice President and Secretary.  Mr.
Hohauser 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



                                       31
<PAGE>

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 U.S.
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.  He received his BEE degree from
the University of Florida in 1962 and his JD degree from  Washington  College of
Law in 1971.

         Robert Jay Machen.  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 U.S. 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.

         Conrad Derdeyn.  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  U.S.  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).

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

         Based  solely upon a review of Forms 3 and 4  furnished  to the company
under Rule 16a-3(e) of the Securities Exchange Act during its most recent fiscal
year and Forms 5 furnished to the company with respect to its most recent fiscal
year and any  written  representations  received  by the  company  from  persons
required to file such forms, the following persons - either officers,  directors
or  beneficial  owners  of more than ten  percent  of any class of equity of the
company  registered  pursuant  to Section 12 of the  Securities  Exchange  Act -
failed  to file on a timely  basis  reports  required  by  Section  16(a) of the
Securities  Exchange  Act during the most  recent  fiscal  year or prior  fiscal
years:



                                       32
<PAGE>
<TABLE>
<CAPTION>

                                                                    No. of Failures
                                             No. of Transactions       to File a
                      No. of Late Reports    Not Timely Reported    Required Report
                      -------------------    -------------------    ---------------
<S>                   <C>                    <C>                 <C>
Esmeralda G. Robbins           0                      0                   0
Donald S. Robbins              0                      0                   0
Gordon W. Allison              0                      0                   0
James Workman                  0                      0                   0
Robert Jay Machen              0                      0                   0
Conrad Derdeyn                 0                      0                   0
K. Bruce Jones                 0                      0                   0
</TABLE>

Audit Committee and Audit Committee Financial Expert

         We have an  audit  committee.  There is no  audit  committee  financial
expert  serving on the audit  committee.  However,  the audit  committee has the
authority  to hire a  financial  expert  any  time it has the  need  for  expert
financial advice.

Code of Ethics

         We have  adopted a Code of Ethics that  applies to our chief  executive
officer,  chief  financial  officer,  and - should we acquire  such -  principal
accounting officer or controller or persons performing similar functions. A copy
of the Code of Ethics is filed as an exhibit to this Form 10-KSB annual report.

ITEM 10. EXECUTIVE COMPENSATION.

         The following  sets forth the  remuneration  received in the last three
fiscal years by Don Robbins, our president, and where noted, Gordon Allison, our
former executive vice president, in all capacities. No other officer or employee
has received total remuneration of $100,000 or more in any of such years.

<TABLE>
<CAPTION>
------ --------- -------------------------------- --------------------------- -----------------------
                      Annual Compensation                   Awards                 Payout
------ --------- -------------------------------- --------------------------- -----------------------
                                                                 Securities
                                                                 Underlying
                                    Other Annual  Restricted     Options/     LTIP      All Other
Year   Name      Salary     Bonus   Compensation  Stock Awards   SARS(#)      Payouts   Compensation
------ --------- ---------- ------- ------------- -------------- ------------ --------- -------------
<C>    <C>       <C>        <C>     <C>           <C>            <C>          <C>       <C>
2005   Robbins   $ 10,606   0       0             0              0            0         0
------ --------- ---------- ------- ------------- -------------- ------------ --------- -------------
2004   Robbins   $138,170   0       0             0              0            0         (1)
------ --------- ---------- ------- ------------- -------------- ------------ --------- -------------
2004   Allison   $102,733   0       0             0              0            0         (1)
------ --------- ---------- ------- ------------- -------------- ------------ --------- -------------
2003   Robbins   $ 49,063   0       0             0              0            0         (1)
------ --------- ---------- ------- ------------- -------------- ------------ --------- -------------
</TABLE>




                                       33
<PAGE>
<TABLE>
<CAPTION>

         Stock Options. Set forth below is information  concerning each exercise
of stock  options  during the last  fiscal  year by each of the named  executive
officers and the fiscal year-end values of unexercised  options,  provided on an
aggregated basis:

                                                  No. of Shares
                                                    Underlying       Value of Unexercised
                                               Unexercised Options       In-the-Money
                       Shares                       at FY-End          Options at FY-End
                      Acquired        Value        Exercisable/          Exercisable/
         Name       or Exercised    Realized      Unexercisable          Unexercisable
         ----       ------------    --------      -------------          -------------
<S>                 <C>             <C>            <C>                        <C>
Donald S. Robbins     425,000       $121,125       525,000/0(1)               0/0
Gordon W. Allison     425,000       $121,125       525,000/0(1)               0/0

</TABLE>

(1)      Stock options for Donald Robbins and Gordon Allison that were to expire
         were extended for an additional five years.

         Employment Contracts.
         ---------------------

         We have no employment contracts.

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

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The table below sets forth,  as of March 31, 2006, the number of shares
of Common Stock of the company  beneficially  owned by each officer and director
of the  company,  individually  and as a group,  and by each person known to the
company  to be the  beneficial  owner of more than five  percent  of the  Common
Stock.

                                                       Number of
                                                       Shares of
         Name and Address                            Common Stock      Percent
         ----------------                            ------------      -------

         Esmeralda G. Robbins(1)                         300,000         1.1
         701 CCNB North Tower
         500 North Shoreline
         Corpus Christi, TX 78471

         Donald S. Robbins(1)                          2,001,904(2)      7.1
         701 CCNB North Tower
         500 North Shoreline
         Corpus Christi, TX 78471



                                       34
<PAGE>


         Gordon W. Allison                             1,448,935(2)      5.1
         12205 Maple Ridge Road
         Oklahoma City, Oklahoma 73120


         Robert Machen                                 1,272,582         4.5
         5327 Westerdale Drive
         Fulshear, TX 77441

         Conrad Derdeyn                                  472,822(3)      1.7
         11534 Spicewood Parkway
         Austin, TX 78750-2602

         K. Bruce Jones                                  626,683(4)      2.2
         Building 22, Suite 300
         610 Village Drive
         Marietta, GA 30067

         Herman Hohauser                                 200,000(4)       *
         6212 Berlee Drive
         Alexandria, VA 22312

         Officers and Directors                        6,322,926        22.3
         as a group (7 persons)
         -------------------------

*        Less than one percent.
(1)      Esmeralda G. Robbins and Donald S. Robbins are wife and husband.
(2)      Includes options to purchase 525,000 shares of common stock.
(3)      Includes the right to convert promissory notes of the company to 40,323
         shares of stock.
(4)      Includes options to purchase 100,000 shares of common stock.

Changes in Control
------------------

         There are no  arrangements  which may  result in a change in control of
the company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         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 material interest.



                                       35
<PAGE>

ITEM 13. EXHIBITS.

         The following  exhibits are filed, by  incorporation  by reference,  as
part of this Form 10-KSB:

         Exhibit No.                          Description
         -----------                          -----------

              3       -     Amended and Restated  Articles of  Incorporation  of
                            Consortium Service Management Group, Inc.*

              3.1     -     Bylaws of Consortium Service Management Group, Inc.*

              10      -     Founders' Agreement of United Engineering Company*

              10.1    -     Statutes (Bylaws) of United Engineering Company*

              10.2    -     Agreement  of  April  24,  1996  between  Consortium
                            Service Management Group, Inc. and The L Group, Inc.
                            concerning tissue bonding technology*  (rescinded in
                            January 2000)

              10.3    -     Agreement of July 9, 1996 between Consortium Service
                            Management  Group,  Inc. and  International  Welding
                            concerning tissue bonding technology*

              10.4    -     Agreement among Consortium Service Management Group,
                            Inc.,  United   Engineering   Company  and  Ivan  V.
                            Semenenko,  the inventor of the anaerobic farm waste
                            technology*

              10.5    -     Agreement of June 9, 1998 among  Consortium  Service
                            Management  Group,  Inc.,  The Sumy  Frunze  Machine
                            Building  Science and  Production  Association,  and
                            United Engineering  Company concerning the anaerobic
                            farm waste technology*

              10.6    -     Agreement  between   Consortium  Service  Management
                            Group,  Inc.  and  Western  Waste  Management,  Inc.
                            concerning the anaerobic farm waste technology*

              10.7    -     Agreement  between   Consortium  Service  Management
                            Group,   Inc.  and  Aardema  Dairy   concerning  the
                            anaerobic farm waste technology*

              10.8    -     Agreement  between   Consortium  Service  Management
                            Group, Inc. and John and Ruth Beukers concerning the
                            anaerobic farm waste technology*



                                       36
<PAGE>

              10.9    -     Agreement  of December  1998  between  International
                            Welding  Association of Kiev, Ukraine and Consortium
                            Service Management Group, Inc. concerning the carbon
                            dioxide separator technology*

              10.10   -     Operating   Agreement   of  June  14,  2001  between
                            Consortium   Service   Management  Group,  Inc.  and
                            Resource Technology Corporation***

              10.11   -     Contract Agreement Effective August 14, 2000 between
                            Consortium Service Management  Group/Anaerobic  Farm
                            Waste Co. and Rondeau Anaerobic***

              10.12   -     Contract    IAW-USA     002-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.13   -     Contract    IAW-USA     003-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.14   -     Contract    IAW-USA     004-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.15   -     Contract    IAW-USA     005-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.16   -     Contract    IAW-USA     006-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.17   -     Contract    IAW-USA     007-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***



                                       37
<PAGE>

              10.18   -     Contract   IAW-USA  008-PR   between   International
                            Association  Welding,  Kiev,  Ukraine and Consortium
                            Service Management Group, Inc.***

              10.19   -     Natural  Gas  Purchase  Agreement  of June 20,  2000
                            between  Texas  Energy  Transfer  Company,  Ltd. and
                            Resource Technology Corp.****

              10.20   -     Agency  Agreement  between Joint Stock Company "Sumy
                            Frunze   Machine-Building   Science  and  Production
                            Association"  of  Ukraine  and  Consortium   Service
                            Management Group, Inc.+

              10.21   -     2003  Stock  Option  Plan  adopted  by the  board of
                            directors of Consortium  Service  Management  Group,
                            Inc.++

              10.22   -     Joint Development and Exclusive License Agreement of
                            March 8, 2005 between Live Tissue Connect,  Inc. and
                            ConMed Corporation.+*

              10.23   -     Standby Equity  Distribution  Agreement of March __,
                            2004  between  Cornell  Capital  Partners,   LP  and
                            Consortium Service Management Group, Inc. ++*

              10.24   -     Landfill   Gas   Sales   Agreement    between   CSMG
                            Technologies,  Inc.  and E.I.  DuPont de Nemours and
                            Co. Inc. and Shoreline Gas, Inc.++++

              14      -     Code of Ethics for the Chief  Executive  Officer and
                            Senior Financial Officers. ++*

              16      -     Letter dated January 29, 2000 from Jaak (Jack) Olesk
                            to Consortium  Service  Management  Group,  Inc. Re:
                            Termination as Auditor**

              31      -     Certification of Chief Executive Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 302 of the Sarbanes-Oxley Act of 2002.

              31.1    -     Certification of Chief Financial Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 302 of the Sarbanes-Oxley Act of 2002.

              32      -     Certification of Chief Executive Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 906 of the Sarbanes-Oxley Act of 2002.



                                       38
<PAGE>

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

              99      -     Ukraine  Ministry  of  Health,   State   Department,
                            Certificate of State Registration No. 1105-193***

              99.1    -     Extract  of  U.S.  Patent  No.   6,562,037  May  13,
                            2003.+++

              99.2    -     Extract  of  U.S.  Patent  No.   6,733,498  May  11,
                            2004.+++


         *Previously  filed  with  Form  10-SB;   Commission  File  No.  0-27359
         incorporated herein.

         **Previously filed with Amendment No. 1 to Form 10-SB;  Commission File
         No. 0-27359 incorporated herein.

         ***Previously filed with Amendment No. 2 to Form 10-SB; Commission File
         No. 0-27359 incorporated herein.

         ****Previously filed with Amendment No. 1 to Form 10-QSB for the period
         ended  September 30, 2002;  Commission  File No.  0-27359  incorporated
         herein.

         +Previously  filed with Form  10-KSB for the year  ended  December  31,
         2002; Commission File No. 0-27359 incorporated herein.

         ++Previously filed with Amendment No. 1 to Form 10-QSB for the period
         ended March 31, 2003; Commission File No. 0-27359 incorporated herein.

         +++Previously  filed with Form  10-QSB  for the  period  ended June 30,
         2004; Commission File No. 0-27359 incorporated herein.

         +*Previously  filed with Form 8-K (Date of Report  March 8, 2005) filed
         03-09-05, Commission File No. 0-27359 incorporated herein.

         ++*Previously  filed  with Form  10-KSB  for the year  ended  12-31-04,
         Commission File No. 0-27359 incorporated herein.

         ++++Previously  filed as  Exhibit  10.1  with  Form 8-K (Date of Report
         February  14,  2006)  filed  02-21-06,  Commission  File No.  000-27359
         incorporated herein.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         Audit Fees. Our principal independent accountant 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



                                       39
<PAGE>

normally  provided  in  connection  with  statutory  and  regulatory  filings or
engagements for those two fiscal years:

                  Fiscal Year ended December 31, 2005         $25,629
                  Fiscal Year ended December 31, 2004         $15,520

         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, 2005         $ 6,900
                  Fiscal Year ended December 31, 2004         $ 6,700

         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, 2005         $-0-
                  Fiscal Year ended December 31, 2004         $-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, 2005         $-0-
                  Fiscal Year ended December 31, 2004         $-0-

         Pre-Approval  of Audit and  Non-Audit  Services.  The  Audit  Committee
charter  requires that the committee  pre-approve  all audit,  review and attest
services and non-audit services before such services are engaged.

















                                       40
<PAGE>

                                   SIGNATURES

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

                                    CONSORTIUM SERVICE MANAGEMENT
                                    GROUP, INC.



Date:  April 3, 2006                By /s/ Donald S. Robbins
                                      ------------------------------------------
                                      Donald S. Robbins, Chief Executive Officer

         In accordance with the Exchange Act, this report has been signed by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.



Date:  April 3, 2006                   /s/ Donald S. Robbins
                                      ------------------------------------------
                                      Donald S. Robbins, President, Chief
                                      Executive Officer  and Director



Date:  April 3, 2006                   /s/ Esmeralda G. Robbins
                                      ------------------------------------------
                                      Esmeralda G. Robbins, Chairman of the
                                      Board and Director



Date:  April 3, 2006                   /s/ Herman Hohauser
                                      ------------------------------------------
                                      Herman Hohauser, Executive Vice President
                                      and Secretary



Date:  April 3, 2006                   /s/ Gordon W. Allison
                                      ------------------------------------------
                                      Gordon W. Allison, Director



Date:  April 3, 2006                   /s/ Robert Jay Machen
                                      ------------------------------------------
                                      Robert Jay Machen, Director




                                       41
<PAGE>


Date:  April 3, 2006                   /s/ Conrad Derdeyn
                                      ------------------------------------------
                                      Conrad Derdeyn, Director



Date:  April 3, 2006                   /s/ K. Bruce Jones
                                      ------------------------------------------
                                      K. Bruce Jones, Chief Financial Officer
                                      and Director






















                                       42
<PAGE>


                    Consortium Service Management Group, Inc.
                           Commission File No. 0-27359

                                  EXHIBIT INDEX

                                   FORM 10-KSB
                   For the fiscal year ended December 31, 2005


         The following  exhibits are filed, by  incorporation  by reference,  as
part of this Form 10-KSB:

         Exhibit No.                          Description
         -----------                          -----------

              3       -     Amended and Restated  Articles of  Incorporation  of
                            Consortium Service Management Group, Inc.*

              3.1     -     Bylaws of Consortium Service Management Group, Inc.*

              10      -     Founders' Agreement of United Engineering Company*

              10.1    -     Statutes (Bylaws) of United Engineering Company*

              10.2    -     Agreement  of  April  24,  1996  between  Consortium
                            Service Management Group, Inc. and The L Group, Inc.
                            concerning tissue bonding technology*  (rescinded in
                            January 2000)

              10.3    -     Agreement of July 9, 1996 between Consortium Service
                            Management  Group,  Inc. and  International  Welding
                            concerning tissue bonding technology*

              10.4    -     Agreement among Consortium Service Management Group,
                            Inc.,  United   Engineering   Company  and  Ivan  V.
                            Semenenko,  the inventor of the anaerobic farm waste
                            technology*

              10.5    -     Agreement of June 9, 1998 among  Consortium  Service
                            Management  Group,  Inc.,  The Sumy  Frunze  Machine
                            Building  Science and  Production  Association,  and
                            United Engineering  Company concerning the anaerobic
                            farm waste technology*

              10.6    -     Agreement  between   Consortium  Service  Management
                            Group,  Inc.  and  Western  Waste  Management,  Inc.
                            concerning the anaerobic farm waste technology*

              10.7    -     Agreement  between   Consortium  Service  Management
                            Group,   Inc.  and  Aardema  Dairy   concerning  the
                            anaerobic farm waste technology*



                                       1
<PAGE>

              10.8    -     Agreement  between   Consortium  Service  Management
                            Group, Inc. and John and Ruth Beukers concerning the

              10.9    -     Agreement  of December  1998  between  International
                            Welding  Association of Kiev, Ukraine and Consortium
                            Service Management Group, Inc. concerning the carbon
                            dioxide separator technology*

              10.10   -     Operating   Agreement   of  June  14,  2001  between
                            Consortium   Service   Management  Group,  Inc.  and
                            Resource Technology Corporation***

              10.11   -     Contract Agreement Effective August 14, 2000 between
                            Consortium Service Management  Group/Anaerobic  Farm
                            Waste Co. and Rondeau Anaerobic***

              10.12   -     Contract    IAW-USA     002-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.13   -     Contract    IAW-USA     003-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.14   -     Contract    IAW-USA     004-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.15   -     Contract    IAW-USA     005-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.16   -     Contract    IAW-USA     006-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***

              10.17   -     Contract    IAW-USA     007-PR-19.04.2000    between
                            International  Association  Welding,  Kiev  and E.O.
                            Paton Electric  Welding  Institute  National Academy
                            Science  Ukraine and Consortium  Service  Management
                            Group, Inc.***



                                       2
<PAGE>

              10.18   -     Contract   IAW-USA  008-PR   between   International
                            Association  Welding,  Kiev,  Ukraine and Consortium
                            Service Management Group, Inc.***

              10.19   -     Natural  Gas  Purchase  Agreement  of June 20,  2000
                            between  Texas  Energy  Transfer  Company,  Ltd. and
                            Resource Technology Corp.****

              10.20   -     Agency  Agreement  between Joint Stock Company "Sumy
                            Frunze   Machine-Building   Science  and  Production
                            Association"  of  Ukraine  and  Consortium   Service
                            Management Group, Inc.+

              10.21   -     2003  Stock  Option  Plan  adopted  by the  board of
                            directors of Consortium  Service  Management  Group,
                            Inc.++

              10.22   -     Joint Development and Exclusive License Agreement of
                            March 8, 2005 between Live Tissue Connect,  Inc. and
                            ConMed Corporation.+*

              10.23   -     Standby Equity  Distribution  Agreement of March __,
                            2004  between  Cornell  Capital  Partners,   LP  and
                            Consortium Service Management Group, Inc. ++*

              10.24   -     Landfill   Gas   Sales   Agreement    between   CSMG
                            Technologies,  Inc.  and E.I.  DuPont de Nemours and
                            Co. Inc. and Shoreline Gas, Inc.++++

              14      -     Code of Ethics for the Chief  Executive  Officer and
                            Senior Financial Officers. ++*

              16      -     Letter dated January 29, 2000 from Jaak (Jack) Olesk
                            to Consortium  Service  Management  Group,  Inc. Re:
                            Termination as Auditor**

              31      -     Certification of Chief Executive Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 302 of the Sarbanes-Oxley Act of 2002.

              31.1    -     Certification of Chief Financial Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 302 of the Sarbanes-Oxley Act of 2002.

              32      -     Certification of Chief Executive Officer pursuant to
                            18 U.S.C.  Section  1350,  as  adopted  pursuant  to
                            Section 906 of the Sarbanes-Oxley Act of 2002.


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

              99      -     Ukraine  Ministry  of  Health,   State   Department,
                            Certificate of State Registration No. 1105-193***

              99.1    -     Extract  of  U.S.  Patent  No.   6,562,037  May  13,
                            2003.+++



                                       3
<PAGE>

              99.2    -     Extract  of  U.S.  Patent  No.   6,733,498  May  11,
                            2004.+++


         *Previously  filed  with  Form  10-SB;   Commission  File  No.  0-27359
         incorporated herein.

         **Previously filed with Amendment No. 1 to Form 10-SB;  Commission File
         No. 0-27359 incorporated herein.

         ***Previously filed with Amendment No. 2 to Form 10-SB; Commission File
         No. 0-27359 incorporated herein.

         ****Previously filed with Amendment No. 1 to Form 10-QSB for the period
         ended  September 30, 2002;  Commission  File No.  0-27359  incorporated
         herein.

         +Previously  filed with Form  10-KSB for the year  ended  December  31,
         2002; Commission File No. 0-27359 incorporated herein.

         ++Previously filed with Amendment No. 1 to Form 10-QSB for the period
         ended March 31, 2003; Commission File No. 0-27359 incorporated herein.

         +++Previously  filed with Form  10-QSB  for the  period  ended June 30,
         2004; Commission File No. 0-27359 incorporated herein.

         +*Previously  filed with Form 8-K (Date of Report  March 8, 2005) filed
         03-09-05, Commission File No. 0-27359 incorporated herein.

         ++*Previously  filed  with Form  10-KSB  for the year  ended  12-31-04,
         Commission File No. 0-27359 incorporated herein.

         ++++Previously  filed as  Exhibit  10.1  with  Form 8-K (Date of Report
         February  14,  2006)  filed  02-21-06,  Commission  File No.  000-27359
         incorporated herein.




                                       4