UNITED
      STATES


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, 2006





OR





o
      TRANSITION UNDER
      SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from ________ to ________








**CSMG
      Technologies, Inc.**


(Name
      of
      Small Business Issuer in its Charter)




Texas
            
            0-27359
            
            74-2653437(State
                of Incorporation
              or
                Organization)
            
            (Commission
                File Number)
            
            (IRS
                Employer
              I.D.
                Number)




501
                  North Shoreline Drive, Suite 701 NorthCorpus
                  Christi, TX
                (Address
                  of Principal Executive
                  Offices)
              
              78471
                (Zip
                  Code)


361-887-7546


(Issuer’s
      Telephone Number, Including Area Code)





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. o





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
o









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. o





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





State
      issuer’s revenues for its most recent fiscal year: $-0-.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of March
      1,
      2007: $28,799,399.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. 33,464,418





DOCUMENTS
      INCORPORATED BY REFERENCE


None





Transitional
      Small Business Disclosure Format (check one): Yes o        
No x









**TABLE
      OF CONTENTS**




PageItem
                  1
              Description
                  of Business
              1Business
                  Overview
              1Business
                  of the Company
              4Manufacturing
              7Distribution
                  Methods
              7Competition
              7Patents,
                  Trademarks and Licenses
              7Government
                  Approval and Regulations
              8Research
                  and Development
              8Employees
              8Item
                  2
              Description
                  of Property
              8Item
                  3
              Legal
                  Proceedings
              8Item
                  4
              Submission
                  of Matters to a Vote of Security Holders
              10Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              11Item
                  6
              Management’s
                  Discussion and Analysis
              14Sales
              14Selling,
                  General and Administrative Expenses
              14Net
                  Loss
              14Liquidity
                  and Capital Resources
              14Outlook
              15Off-Balance
                  Sheet Arrangements
              15Contractual
                  obligations
              16Item
                  7
              Financial
                  Statements
              16Item
                  8
              Changes
                  In and Disagreements With Accountants on Accountingand
                  Financial Disclosure
              16Item
                  8A
              Controls
                  and Procedures
              16Item
                  8B
              Other
                  Information
              17Item
                  9
              Directors,
                  Executive Officers, Promoters, Control Persons andCorporate
                  Governance; Compliance with Section 16(a)of
                  the Exchange Act
              17Compliance
                  with Section 16(a) of the Exchange Act
              19Corporate
                  Governance
              20Code
                  of Ethics
              20
  i
  Item
                  10
              Executive
                  Compensation
              20Employment
                  Contracts
              20
 Item
                    11
                Security
                    Ownership of Certain Beneficial Ownersand
                    Management
                21Changes
                    in Control
                22Item
                    12
                Certain
                    Relationships and Related Transactions,and
                    Director Independence
                22Item
                    13
                Exhibits
                22Item
                    14
                Principal
                    Accountant Fees and Services
                24Signatures
  ii


**FORWARD-LOOKING
      STATEMENTS**




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








**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS.**





**Business
      Overview**





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





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





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





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





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





In
      1994
      we organized United Engineering Company (“UEC”), a Ukrainian company. In Ukraine
      it is referred to as a “joint stock company with a foreign investor.” We own
      one-third of UEC. The remaining owners are Ukraine companies and individuals.
      UEC is authorized by Ukraine law, among other things, to perform classified
      and
      secret construction works related to the national security of Ukraine. From
      1995
      to 2002 UEC negotiated contracts with U.S. and German contractors to dismantle
      the Ukraine nuclear and non-nuclear missiles, silos and related equipment under
      the START treaty. Such contracts were for amounts of approximately $6 million
      for U.S. contractors and DM4.7 million for German contractors, primarily for
      dismantling ICBM silos.




3




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





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.





**Business
      of the Company**





**Live
      Tissue Bonding Equipment** **.** The E.O.
      Paton Institute of Electric Welding of the Ukraine National Academy of Sciences,
      Kiev, Ukraine (the “Paton Institute”) and the International Association of
      Welding (“IAW”), developed equipment that bonds and reconnects blood vessels and
      other soft tissues and organs using radio frequency fusion in substantially
      less
      time than other technologies. Animal testing resulted in minimal scar tissue
      formation . To date this equipment and technology has been used in more than
      7,000 human surgeries in Ukraine. In addition, our experience is that there
      is
      no need for prolonged special training of surgeons and surgical personnel to
      use
      this equipment.





To
      date,
      four United States patents, one European Union patent and one Australian patent
      have been issued and approximately 22 pending patent applications in the United
      States and overseas in connection with this live tissue bonding equipment.
      In
      addition, the Ukraine Ministry of Health has approved the technology for
      commercial development in Ukraine.





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





Until
      the
      end of 2006, all surgeries with the equipment were performed using prototype
      equipment in Ukraine hospitals during human clinical trials. During the Ukraine
      human clinical trials, we developed a device prototype that has performed more
      than 80 types of surgical procedures. Subsequently, we successfully developed
      and tested a specialized device for duct and vessel sealing. This is the first
      of several specialized devices we intend to develop using the prototype
      equipment. At the end of third quarter of 2006, we began developing a second
      specialized device designed for intestinal surgery that we expect to be ready
      for demonstration in May 2007. We believe that developing specialized devices
      for specific surgical procedures will enable us to license our technology for
      use in different surgical procedures to different medical device distribution
      companies. To date we have identified 13 different surgical procedure device
      types for license. We are currently in negotiations with potential
      licensees.




4




Approval
      of the process and equipment by the United States Food and Drug Administration
      (“FDA”) is required before we can market, distribute or use our equipment in the
      United States. We have begun the process for FDA discovery and developing the
      regulatory and commercial equipment models for submission to the FDA. Additional
      human testing may be required to obtain FDA approval. In November 2006, we
      engaged a regulatory and equipment consultant to assist in obtaining FDA
      approval. We plan to file with the FDA and for the European CE (Conformité
Européne) Mark in early 2007. We are working with qualified US medical device
      and instrument manufacturers to manufacture the commercial equipment.
      Additionally, we have retained a qualified firm to complete FDA
      Filings.





We
      are
      beginning to market the bonding equipment in Ukraine or other Eastern European
      countries and plan to market the equipment in the United States and other
      countries if regulatory approval is received. We have continued our plans to
      manufacture prototypes in Ukraine and are continuing clinical trials in Ukraine
      for comprehensive human clinical product development. We began this clinical
      work in May 2000. To date, 7,000 successful human surgeries have been completed
      utilizing more than 80 types of surgical procedures . We are currently
      negotiating with international medical device companies for possible license
      agreements.





In
      late
      2005, our Ukraine partner received its first commercial order, from the Ukraine
      Ministry of Health, for ten sets of equipment. We will not participate in the
      revenues of this sale but will benefit from the additional funding of the
      development of the technology. We will participate in the revenues from all
      future sales. Additionally, in 2006 we will be marketing the equipment in
      several countries that recognize the Ukraine Ministry of Health approval.





We
      estimate that in excess of $5.5 million have been expended in developing the
      tissue bonding technology and that $2.0 million of additional funds must be
      expended to commercialize this technology.





**Anaerobic
      Farm-Waste Disposal Equipment** **.** We have
      not found this product to be marketable and have discontinued the
      product.





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




5




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
      have installed the first unit at a landfill in Chastang County, Alabama in
      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 for breach of contract. 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 a breach of contract action against RTC after
      learning of the misstatement.





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. There is a dispute between WMI and the company with regard to the
      Chastang Waste Site in Chastang, Alabama. WMI was to maintain the site so as
      to
      produce marketable levels of waste site gas. The site has failed to produce
      such
      volume and WMI has countered by demanding the company remove its equipment
      from
      the site. Discussions to resolve the issues are on-going. If the actions being
      taken at the site by WMI are deemed to be insufficient for supporting commercial
      sales of treated waste gas, the company expects to seek an alternate
      site.





6





**Manufacturing**





**Live
      Tissue Bonding equipment** **.** To move
      the Live Tissue Bonding product into market, we are currently working with
      retained medical device experts, manufacturers, and FDA consultants to move
      the
      product into the commercial market in the United States and Europe. We expect
      to
      complete the first generation of U.S. devices and instruments in the second
      quarter of 2007. We expect to manufacture the tissue bonding/welding units
      in
      Eastern Europe for the Eastern Europe, China, and India markets. We expect
      to
      manufacture the Live Tissue Bonding units for the United States and European
      markets in the United States and Europe, respectively.





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




**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 compete with existing conventional
      surgical methods of wound closing technologies such as sutures, staples, glues
      and sealant. We anticipate that our technology will supplement most other
      methods of bonding human soft tissue and blood vessels.





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





**Patents,
      Trademarks and Licenses**





**Live
      Tissue Bonding equipment** **.** We own
      the Live Tissue Bonding technology and all worldwide rights. Patents and patent
      applications for the United States, the European Patent Convention, Australia,
      Russia, Ukraine, China, India, Canada and Japan have been assigned to us. Four
      United States patents, one Australian patent, one Canadian patent and one
      European Patent Convention patent have been issued. One European patent has
      been
      approved and we are waiting its issuance. We have seven patents issued and
      22
      patent applications pending.





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




7




**Government
      Approval and Regulations**





**Live
      Tissue Bonding equipment** **.** The Live
      Tissue Bonding equipment must obtain the approval of the Federal Drug
      Administration (the “FDA”) before it can be sold to be used on humans in the
      United States. We expect to file with the FDA for such approval during
      2007.





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





**Research
      and Development**





During
      2006, we expended $558,488 on research and development. During 2005, we expended
      $133,105 on research and development. We expect to invest an additional $2.0
      million in 2007 for research and development in bring the Live Tissue Bonding
      product to market.





**Employees**





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





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY.**





We
      rent
      office space in the following cities as follows:


Approximate
                  Square Feet
              
              Monthly
                  Rent
              
              TermCorpus
                  Christi, TX
              
              
              1,000
              
              $
              1,113
              
              
              Expires
                  May 1, 2008Kiev,
                  Ukraine
              
              
              800
              
              $
              1,200
              
              
              Month-to-Month


We
      rent
      our office space in Corpus Christi through an arrangement with Donald Robbins,
      our President and Chief Executive Officer and a director, who is the tenant
      on
      the lease, and we pay the rent directly to the landlord. Effective June 1,
      2007,
      our monthly rent will increase to $1,146 for the remainder of the
      term.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS.**





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 alleged that the Note was secured by all of CSMG’s equipment,
      inventory, accounts, general intangibles and other properties. The complaint
      alleged that the Note is in default and that CSMG owed Banco Panamericano
      $514,920 as of February 9, 2005.




8




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




·**
            Banco
                Panamericano is not a bank but a Nebraska corporation that is affiliated
                with Resource Technologies Corporation (“RTC”), a company that is a debtor
                in a federal chapter 11 reorganization
                case.


·**
            CSMG
                and RTC had entered into a contract (the “Contract”) whereby CSMG would
                provide equipment (the “Equipment”), at CSMG’s cost, to filter landfill
                gas from a landfill operated by RTC located in Alabama so as to provide
                marketable methane gas. Among RTC’s obligations under the Contract was a
                commitment to provide a pipeline hookup to the purchaser of the gas.
                CSMG
                and RTC would share in the proceeds from the sale of the methane
                gas.


·**
            CSMG
                lacked the funds to perform its obligations under the Contract, RTC
                arranged for its affiliate, Banco Panamericano, to lend CSMG $203,800
                to
                enable CSMG to meet these obligations. It was understood by CSMG,
                RTC and
                Banco Panamericano that CSMG would liquidate the Note from its share
                of
                the proceeds of sale of the methane
                gas.


·**
            CSMG
                installed the Equipment but RTC never performed its obligations under
                the
                Contract and Banco Panamericano never loaned any funds to CSMG. Rather,
                Banco Panamericano advised CSMG, from time to time, that CSMG had
                incurred
                several indistinctly-described financial obligations to RTC and that
                Banco
                Panamericano had advanced the funds subject to the Note to its affiliate,
                RTC, to cover such obligations. Such allegations of CSMG indebtedness
                to
                RTC were not true.


·**
            The
                intention of RC and Banco Panamericano from the beginning was to
                have CSMG
                execute the Note - secured by the Equipment, to cause the Note to
                go into
                default, and to obtain title to the Equipment through the rights
                of a
                secured creditor.





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.





CSMG
      answered the complaint and filed counterclaims. 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 a motion to have the
      proceeding referred to the United States Bankruptcy Court for the Northern
      District of Illinois where the bankruptcy proceeding of Resource Technology
      Corporation is pending. The Federal District Court referred the proceeding
      to
      the United States Bankruptcy Court on December 6, 2005. At the status call
      on
      October 26, 2006, the Court stated that it would review the issue of CSMG’s
      standing to bring a substantive consolidation suit in the United States
      Bankruptcy Court, which decision is expected to be made in the first quarter
      of
      2007. No discovery has commenced.





On
      June
      30, 2006, CSMG was served by Nature Coast Collections, Inc. in the Federal
      District Court for the Southern District of Texas, *Nature
      Coast Collections, Inc. v. Consortium Service Management Group, Inc., Donald
      S.
      Robbins and Gordon W. Allison* .
      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. CSMG has answered
      the
      complaint and filed a counterclaim alleging, among other matters, that Nature
      Coast Collections, Inc. is an affiliate of the debtor in the bankruptcy
      proceeding in the Northern District of Illinois referred to above, Resource
      Technology Corporation, and that CSMG should be authorized to offset its losses
      caused by its contractual relationship with Resource Technology Corporation
      against the claims of Nature Coast Collections, Inc. CSMG has moved the Federal
      District Court for the Southern District of Texas to transfer the proceeding
      to
      the Federal District Court for the Northern District of Illinois so that the
      litigation can be referred to the United States Bankruptcy Court for the
      Northern District of Illinois. No discovery has commenced.




9




**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
      the fourth quarter of 2006 through the solicitation of proxies or
      otherwise.





On
      January 3, 2007, we held our 2006 Annual Meeting of Shareholders, which was
      adjourned from its original scheduled date of December 20, 2006, and the
      following matters were presented:





1.  The
      following directors, constituting all of our directors, were elected at the
      meeting to serve until their respective successors are duly elected and
      qualified and received the number of votes set forth opposite their respective
      names.





For
                Election
            
            Against/
              Withheld
                AuthorityDonald
                S. Robbins
            
            
            24,015,263
            
            
            278,048Esmeralda
                G. Robbins
            
            
            23,932,763
            
            
            360,548Conrad
                Derdeyn
            
            
            24,056,263
            
            
            237,048K.
                Bruce Jones
            
            
            23,961,263
            
            
            332,048Robert
                Jay Machen
            
            
            24,018,623
            
            
            274,688





2.  A
      proposal to amend the company’s Articles of Incorporation to increase the total
      number of authorized shares to 90,000,000 and the number of shares of common
      stock to 80,000,000 was approved, with 23,677,675 votes for, 611,032 votes
      against and 4,604 abstentions.





3.  A
      proposal to amend the company’s Articles of Incorporation to change the name of
      the company to “CSMG Technologies, Inc.” was approved, with 24,064,809 votes
      for, 192,502 votes against and 36,000 abstentions.




10




4.  A
      proposal to approve an amendment to the company’s 2003 Stock Option Plan to
      increase the number of shares available for grant under the plan to 3,300,000
      was approved, with 11,334,864 votes for, 891,544 votes against and 33,160
      abstentions.





5.  Gary
      Skibicki, CPA, PC was ratified as the company’s independent auditors for the
      2006 fiscal year, with 24,203,323 votes for, 83,888 votes against and 6,100
      abstentions.





**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.





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
              
              Low20051st
                  Qtr
              
              
              1.02
              
              
              0.132nd
                  Qtr.
              
              
              0.22
              
              
              0.073rd
                  Qtr.
              
              
              0.10
              
              
              0.0354th
                  Qtr.
              
              
              0.083
              
              
              0.0320061stQtr
              
              
              0.51
              
              
              0.362ndQtr.
              
              
              0.43
              
              
              0.213rdQtr.
              
              
              0.78
              
              
              0.2554thQtr.
              
              
              0.64
              
              
              0.25





**Holders**





As
      of
      December 31, 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 use 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.




11




**Recent
      Sales of Unregistered Securities.**





Set
      forth
      below are the sales of our common stock since January 1, 2006 in transactions
      exempt from registration pursuant to the provisions of Section 4(2) of the
      Securities Act of 1933, as amended, and Regulation D, Rule 506 issued under
      that
      Act.





**Date**
            **Person**
            **No.
                of**
              **Shares**
            **Price**
              **Per
                Share**
            **Type
                of**
              **Consideration**1/7/06
            Steve
                Raible
            50,000
            $0.04
            Cash1/7/06
            Sheril
                Palmer-Ball
            300,000
            $0.04
            Cash1/11/06
            Bruce
                Burger
            375,000
            $0.04
            Cash1/11/06
            William
                Weldon
            250,000
            $0.04
            Cash1/11/06
            Abimael
                Perez
            35,250
            $0.04
            Cash1/11/06
            Joseph
                Kutz
            125,000
            $0,04
            Cash1/11/06
            Robert
                Machen
            200,000
            $0.06
            Cash1/12/06
            Sandra
                Allen
            250,000
            $0.04
            Cash2/8/06
            Donald
                Robbins
            200,000
            $0.06
            Services
                rendered2/16/06
            K.
                Bruce Jones
            83,333
            $0.06
            Cash2/21/06
            Sterling
                FBO John Nolen IRA
            20,000
            $0.20
            Cash3/16/06
            Robert
                Williams IRA
            57,259
            $0.36
            Cash5/12/06
            Bruce
                Berger
            55,556
            $0.18
            Cash5/15/06
            ROI
                Associates
            Warrants(1)
            (1)
            Consulting
                fees5/15/06
            ROI
                Associates
            Warrants(2)
            (2)
            Consulting
                fees5/15/06
            ROI
                Associates
            Warrants(3)
            (3)
            Consulting
                fees5/15/06
            ROI
                Associates
            Warrants(4)
            (4)
            Consulting
                fees5/15/06
            Steve
                Rothman
            Warrants(5)
            (5)
            Consulting
                fees5/15/06
            Steve
                Rothman
            Warrants(6)
            (6)
            Consulting
                fees5/15/06
            Steve
                Rothman
            Warrants(7)
            (7)
            Consulting
                fees5/15/06
            Steve
                Rothman
            Warrants(8)
            (8)
            Consulting
                fees5/17/06
            Keith
                Wilson
            23,809
            $0.21
            Cash6/8/06
            Robert
                Machen
            200,000
            $0.21
            Cash6/8/06
            Robert
                Machen
            85,427
            $0.625
            Note
                conversion7/5/06
            Robert
                Machen
            178,571
            $0.28
            Cash7/5/06
            Donald
                S. Robbins
            200,000
            $0.28
            Cash7/5/06
            K.
                Bruce Jones
            200,000
            $0.28
            Cash7/10/06
            Steve
                Rothman
            68,182
            $0.22
            Consulting
                fees8/11/06
            Cornell
                Capital Partners LP
            232,559
            $0.43
            SEDA
                note conversion8/15/06
            Sterling
                Trust FBO Barbara Berger IRA
            12,946
            $0.625
            Note
                conversion8/15/06
            Sterling
                Trust FBO John Nolen IRA
            54,270
            $0.625
            Note
                conversion8/15/06
            Sterling
                Trust FBO Sean S. Nolen IRA
            8,527
            $0.625
            Note
                conversion8/15/06
            Dr.
                Abimael Perez
            106,504
            $0.625
            Note
                conversion8/22/06
            Conrad
                Derdeyn
            59,423
            $0.625
            Note
                conversion8/25/06
            Children’s
                surgical Services DBPP
            545,310
            $0.625
            Note
                conversion8/25/06
            Bruce
                Henderson Family Trust
            91,273
            $0.625
            Note
                conversion8/25/06
            Kevin
                Pojezny
            33,172
            $0.625
            Note
                conversion8/25/06
            Jill
                Pojezny
            33,172
            $0.625
            Note
                conversion8/25/06
            Carl
                Pojezny
            43,044
            $0.625
            Note
                conversion




12




8/25/06
            Bob
                J. Harris
            61,305
            $0.625
            Note
                conversion8/25/06
            Steve
                Raible
            35,420
            $0.625
            Note
                conversion8/25/06
            Sterling
                Trust Co. FBO
              Samuel
                Carpenter IRA
            157,289
            $0.625
            Note
                conversion8/28/06
            Steve
                Isenhaur
            72,443
            $0.625
            Note
                conversion8/28/06
            Robert
                J. Machen
            26,048
            $0.625
            Note
                conversion8/30/06
            Conrad
                Derdeyn
            583
            $0.625
            Note
                conversion8/30/06
            Robert
                Hauser
            25,745
            $0.625
            Note
                conversion8/30/06
            Dr.
                William Elfarr
            85,118
            $0.625
            Note
                conversion8/30/06
            Charles
                Smith
            34,179
            $0.625
            Note
                conversion8/30/06
            John
                Harris
            44,446
            $0.625
            Note
                conversion8/30/06
            Bob
                Deskins
            51,803
            $0.625
            Note
                conversion9/9/06
            Mack
                Taylor
            83,808
            $0.625
            Note
                conversion9/9/06
            Sterling
                Trust Con. FBO Thomas Guidry IRA
            48,719
            $0.625
            Note
                conversion9/13/06
            Herman
                Hohauser
            60,000
            $0.625
            Cash9/18/06
            Scott
                Cornelius
            60,321
            $0.625
            Note
                conversion9/18/06
            James
                Workman
            52,555
            $0.625
            Note
                conversion9/21/06
            Sterling
                Trust Co. FBO
              Gerald
                Frucht, IRA
            62,591
            $0.625
            Note
                conversion9/21/06
            ROI
                Associates
            135,000
            $0.64
            Consulting
                fees9/21/06
            Steve
                Rothman
            15,000
            $0.64
            Consulting
                fees11/2/06
            John
                Crooch
            34,467
            $0.625
            Note
                conversion11/2/06
            Hawk
                Associates
            60,000
            $0.625
            Issued
                in lieu of payment of fees for public relations
                services11/2/06
            James
                Brown
            50,000
            $0.625
            Issued
                in lieu of payment of interest due on outstanding note11/2/06
            David
                G. Eastman
            50,000
            $0.625
            Issued
                in lieu of payment of interest due on outstanding note11/2/06
            Jack
                Massey
            32,000
            $0.625
            Note
                conversion1/3/07
            Robert
                Machen
            150,000
            $0.40
            Fees1/3/07
            Donald
                S. Robbins
            150,000
            $0.40
            Fees1/3/07
            Esmeralda
                Robbins
            150,000
            $0.40
            Fees1/3/07
            Conrad
                Derdeyn
            150,000
            $0.40
            Fees1/3/07
            Bruce
                Jones
            100,000
            $0.40
            Fees




(1)
            
            Represents
                warrants to purchase an aggregate of up to 360,000 shares of common
                stock
                at an exercise price of $0.40 per share, expiring on December 31,
                2012.(2)
            
            Represents
                warrants to purchase an aggregate of up to 90,000 shares of common
                stock
                at an exercise price of $0.50 per share, expiring on December 31,
                2012.(3)
            
            Represents
                warrants to purchase an aggregate of up to 90,000 shares of common
                stock
                at an exercise price of $0.60 per share, expiring on December 31,
                2012.(4)
            
            Represents
                warrants to purchase an aggregate of up to 90,000 shares of common
                stock
                at an exercise price of $0.75 per share, expiring on December 31,
                2012.(5)
            
            Represents
                warrants to purchase an aggregate of up to 40,000 shares of common
                stock
                at an exercise price of $0.40 per share, expiring on December 31,
                2012.(6)
            
            Represents
                warrants to purchase an aggregate of up to 10,000 shares of common
                stock
                at an exercise price of $0.50 per share, expiring on December 31,
                2012.(7)
            
            Represents
                warrants to purchase an aggregate of up to 10,000 shares of common
                stock
                at an exercise price of $0.60 per share, expiring on December 31,
                2012.(8)
            
            Represents
                warrants to purchase an aggregate of up to 10,000 shares of common
                stock
                at an exercise price of $0.75 per share, expiring on December 31,
                2012.




All
      of
      the purchasers were known to management, they were all accredited investors
      and
      had access to all material information concerning the company.




13




**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 no
      revenues in FY 2006 compared with $414 revenues of in FY 2005. We reported
      a
      loss of $3,017,734 in FY 2006 and a loss of $3,261,409 in FY 2005, of which
      losses $64,811 and $91,471, 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
      decreased our general and administrative expenses from $3,037,307 during FY
      2005
      to $2,606,143 during FY 2006. 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
      decreased our fiscal year 2005 net loss of $3,261,409, or $0.17 per share,
      to a
      net loss of $3,017,734 , or $.10 per share, in FY 2006. This decrease was
      primarliy attributable to an extraordinary gain in FY 2006 in the amount of
      $200,805 resulting from forgiveness of certain accrued indebtedness, compared
      to
      $-0- in FY 2005, and interest income of $10,903 in FY 2006, compared to $60
      in
      FY 2005 as a result of the bridge loan received from Empire Financial Group,
      Inc. discussed below *.*





**Liquidity
      and Capital Resources**





We
      were
      able to meet our cash requirements during this quarter as a result of the bridge
      loan in the aggregate amount of $2,750,000 placed by Empire Financial Group
      from
      July to November 2006. In addition, we converted an aggregate of $1,409,066
      in
      notes held by certain shareholders into an aggregate of 2,254,505 shares of
      Rule
      144 common stock and paid $111,000 of consultant fees in Rule 144 common stock.
      Additionally, we converted of $100,000 of the note held by Cornell Capital
      Partners, L.P. into Rule 144 common stock and received proceeds of $461,800
      from
      the sale of Rule 144 common stock.





We
      have
      signed a firm commitment letter agreement for a minimum $5 million dollar
      Initial Public Offering “IPO” with Empire Financial Group for our subsidiary
      Live Tissue Connect, Inc.




14




**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 Financing :





On
      March
      29, 2004, we entered into an Equity Line of Credit Agreement with Cornell
      Capital Partners, L.P. (“Cornell Capital”). The registration statement for
      issuing new shares to Cornell Capital under the Equity Line of Credit expired
      in
      June 2006. As of September 30, 2006, we had sold an aggregate of 15,457,734
      shares of common stock to Cornell Capital for total proceeds of $2,083,638
      pursuant to the Equity Line of Credit.  We have escrowed 488,854 shares
      with Cornell’s escrow agent to use as repayment of our current credit line
      balance and future credit line use.  We are currently working with Cornell
      to repay the remaining current credit line balance, which as of March 1, 2007
      amounted to $242,000, plus interest in cash or restricted Rule 144
      stock.





The
      Empire Financial Group Transaction :





On
      June
      30, 2006, we engaged Empire Financial Group for a firm commitment public
      offering of approximately $5 million in shares of common stock of Live
      Tissue Connect ,
      Inc.
      and to immediately raise up to $3 million in a privately placed bridge financing
      for us, of which $2,750,000 has been received to date. Neither the offering
      price of the shares nor the amount of shares to be registered has been
      determined in connection with the proposed Live Tissue Connect public offering.
      As of December 31, 2006, we have received $2,750,000 from the bridge financing
      and paid $379,500 in fees, along with an initial $10,000 fee, to Empire
      Financial Group.





We
      have
      signed a firm commitment letter agreement for a minimum $5 million dollar
      Initial Public Offering “IPO” with Empire Financial Group for our subsidiary
      Live Tissue Connect, Inc.





***Off-Balance
      Sheet Arrangements***





The
      lease
      on our office space is in the name of Donald Robbins, our President and Chief
      Executive Officer, although we an arrangement with Mr. Robbins to pay the rent
      on this lease until it expires in 11 months. Our rent is $1,113 a month that
      will increase to $1,146 per month commencing June 1, 2007. The monthly rent
      is
      paid by us directly to the landlord, the Bank of America.





Other
      than the office lease, our company has not entered into any transaction,
      agreement or other contractual arrangement with an entity unconsolidated with
      us
      under which we have


·
            an
                obligation under a guarantee contract, ·
            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, ·
            any
                obligation, including a contingent obligation, under a contract that
                would
                be accounted for as a derivative instrument,
                or ·
            any
                obligation, including a contingent obligation, arising out of a variable
                interest in an unconsolidated entity that is held by us 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.





15




**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**
              **Obligations**
            **Total**
            **Less
                Than**
              **1
                Year**
            **1-3
                Years**
            **3-5
                Years**
            **More
                Than**
              **5
                Years**Long-Term
                Debt ObligationsCapital
                Lease ObligationsOperating
                Lease Obligations
            
            
            $19,322Other
                Long-Term Liabilities Reflected on Our Balance Sheet under
                GAAP
            
            $7,040,491Total





**ITEM
      7.**  **FINANCIAL
      STATEMENTS.**





The
      information that appears following Item 14 of this report and is incorporated
      herein by reference.





**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, 2006. 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.




16




**Changes
      in internal control over financial reporting.** During
      the last fiscal quarter, there was no change in the company’s internal control
      over financial reporting that has materially affected, or is reasonably likely
      to materially affect, the company’s internal control over financial
      reporting.








**ITEM
      8B.**  **OTHER
      INFORMATION.**





Not
      applicable.





**PART
      III**





**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; 
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.





**Name**
            
            **Age**
            
            **Position**
            
            **Director
                Since**Donald
                S. Robbins
            
            62
            
            Chairman
                of the Board of Directors, President and Chief Executive
                Officer
            
            1992Esmeralda
                G. Robbins
            
            62
            
            Director
            
            1992Conrad
                Derdeyn
            
            72
            
            Director
            
            2003K.
                Bruce Jones
            
            65
            
            Chief
                Financial Officer and Director
            
            2005Robert
                Jay Machen
            
            74
            
            Director
            
            2003Herman
                Hohauser
            
            65
            
            Executive
                Vice President and Secretary
            
            -





*Donald
      S. Robbins, Chairman of the Board of Directors, President and Chief Executive
      Officer* .
      Mr.
      Robbins is a founder of our company and currently serves as President, Chief
      Executive Officer and Chairman of the Board of Directors. 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.




17




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




*Conrad
      Derdeyn, director* .
      Mr.
      Derdeyn has degrees in civil engineering from the University of Texas at Austin.
      In addition to being employed from 1963 to 2002 by Caterpillar, Inc., and its
      affiliated companies, which are leading manufacturers of heavy earthmoving,
      mining, pipeline and construction equipment, he served from 1956 to 1994 in
      the
      Transportation Corps of the 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).




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




*Robert
      Jay Machen, director* .
      Mr.
      Machen, a graduate of Auburn University, is a civil engineer. After several
      years early experience in building dams and bridges, he was employed from 1964
      to August 1997 by McDermott International, Inc., a New Orleans-based energy
      services company serving the energy and power industry. He held positions as
      vice president and general manager for fabrication of off-shore installations
      in
      the Gulf of Mexico, the British North Sea and the Western Hemisphere outside
      the
      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.




18




*Herman
      Hohauser, Esq., Executive Vice President and Secretary* .
      Mr.
      Hohauser received his BEE degree from the University of Florida in 1962 and
      his
      JD degree from Washington College of Law in 1971. He is a practicing lawyer
      and
      business consultant to small businesses. Mr. Hohauser served as corporate
      counsel to the company and consultant prior to becoming executive vice president
      in February 2005. He assists Mr. Robbins with day-to-day operations and
      expanding the company’s business opportunities. From 1978 to 2005, he engaged in
      the practice of law specializing in intellectual property matters including
      patent prosecution, licensing, structuring of business arrangements, and
      technology transfer. He was employed by the 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.




**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,
      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:





No.
                of Late Reports
            
            No.
                of Transactions
              Not
                Timely Reported
            
            No.
                of Failures
              to
                File a
              Required
                ReportDonald
                S. Robbins
            
            
            1
            
            
            1
            
            
            0Esmeralda
                G. Robbins
            
            
            0
            
            
            0
            
            
            0Conrad
                Derdeyn
            
            
            1
            
            
            1
            
            
            0K.
                Bruce Jones
            
            
            3
            
            
            3
            
            
            0Robert
                Jay Machen
            
            
            4
            
            
            5
            
            
            0Herman
                Hohauser
            
            
            1
            
            
            1
            
            
            0Gordon
                W. Allison
            
            
            2
            
            
            2
            
            
            0James
                Workman
            
            
            0
            
            
            0
            
            
            0




19




**Corporate
      Governance**





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





**Code
      of Ethics**





We
      have
      adopted a Code of Ethics that applies to our executive officers, including
      our
      chief executive officer. A copy of the Code of Ethics is filed as an exhibit
      to
      this Form 10-KSB annual report.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION.**





The
      following table sets forth the cash and non-cash compensation we paid for
      services rendered during the fiscal years ended December 31, 2004, December
      31,
      2005 and December 31, 2006, to Donald S. Robbins, our current President and
      Chief Executive Officer. No other executive officer’s compensation exceeded
      $100,000 in the fiscal year ended December 31, 2006.




**SUMMARY
      COMPENSATION TABLE**


**Name
                    and Principal Position**
                
                **Year**
                
                **Salary ($)**
                
                **Bonus ($)**
                
                **Stock**
                  **Awards**
                  **($)**
                
                **Option**
                  **Awards**
                  **($)**
                
                **Non-Equity**
                  **Incentive
                    Plan**
                  **Compensation**
                  **($)**
                
                **Nonqualified**
                  **Deferred**
                  **Compensation**
                  **Earnings**
                  **($)**
                
                **All
                    Other**
                  **Compensation**
                  **($)**
                
                **Total**
                  **($)**Donald
                    S. Robbins
                
                
                2006
                
                $
                183,139
                
                
                -
                
                $
                12,000
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                195,139President
                    and Chief
                
                
                2005
                
                $
                10,606
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                10,606Executive
                    Officer (PEO) (1)
                
                
                2004
                
                $
                138,170
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                $
                138,170
  (1)  In
        addition, stock options held by Mr. Robbins that were to expire were extended
        for five years during 2004.




**Employment
      Contracts** **.**





We
      have
      no employment contracts.





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




20




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





The
      following table sets forth, as of the March 1, 2007, certain information
      concerning the beneficial ownership of common stock by (i) each person known
      by
      the company to be the owner of more than 5% of the outstanding common stock,
      (ii) each director, (iii) our Chief Executive Officer, and (iv) all directors
      and executive officers as a group. In general, “beneficial ownership” includes
      those shares a director or executive officer has the power to vote or the power
      to transfer, and stock options and other rights to acquire common stock that
      are
      exercisable currently or become exercisable within 60 days. Except as indicated
      otherwise, the persons named in the table below have sole voting and investment
      power with respect to all shares shown as beneficially owned by them. The
      calculation of the percentage owned is based on 34,386,640 shares outstanding
      on
      March 1, 2007.




**Name
                and Address**
            
            **Amount
                and Nature**
              **of
                Beneficial Ownership**
            
            **Percentage
                of**
              **Outstanding**
              **Shares
                Owned**Donald
                  S. Robbins
                701
                  CCNB North Tower
                500
                  North Shoreline
                Corpus
                    Christi, TX 78471
            
            
            2,351,904
            (1),
              (2)
            
            7.0
            %Esmeralda
                  G. Robbins
                701
                  CCNB North Tower
                500
                  North Shoreline
                Corpus
                  Christi, TX 78471
            
            
            450,000
            (1)
            
            1.3
            %Conrad
                Derdeyn
              11534
                Spicewood Parkway
              Austin,
                TX 78750-2602
            
            
            642,506
            
            
            1.9
            %K.
                  Bruce Jones
                Building
                  22, Suite 300
                610
                  Village Trace
                Marietta,
                  GA 30067
            
            
            1,019,333
            (2)
            
            3.0
            %Robert
                Jay Machen
              5327
                Westerdale Drive
              Fulshear,
                TX 77441
            
            
            1,627,195
            
            
            4.8
            %Herman
                  Hohauser
                6212
                  Berlee Drive
                Alexandria,
                  VA 22312
            
            
            260,000
            (2)
            
            *All
                directors and executive
              officers
                as a group (7 persons)
            
            
            6,350,938
            
            
            18.4
            %


——————


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




21




(1)
            Esmeralda
                G. Robbins and Donald S. Robbins are wife and husband, and each is
                deemed
                the beneficial owner of the shares beneficially owned by the other.
                The
                shares indicated as beneficially owned by each excludes the shares
                beneficially owned by the other.




(2)
            Includes
                options that are presently exercisable to purchase the following
                number
                shares of common stock:




Mr.
                Robbins
            525,000
            
            Mr.
                Hohauser
            100,000Mr.
                Jones
            200,000






**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, AND DIRECTOR
      INDEPENDENCE.**





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





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





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





**ITEM
      13.**  **EXHIBITS.**





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





Exhibit No.
            
            
            Description3(i)
            -
            
            Amended
                and Restated Articles of Incorporation of CSMG Technologies, Inc.,
                as
                amended3(ii)
            -
            
            Bylaws
                of CSMG Technologies, Inc., as
                amended




22




10.1
            -
            
            Second
                amendment to Lease Agreement between Bank of American and Donald
                S.
                Robbins, dated as of June 24, 200510.2
            -
            
            Agreement
                of July 9, 1996 between Consortium Service Management Group, Inc. and
                International Welding concerning tissue bonding technology [Incorporated
                by reference to Exhibit 10.3 to the registrant’s Form 10-SB, filed on
                September 16, 1999.]10.3
            -
            
            Agreement
                of December 1998 between International Welding Association of Kiev,
                Ukraine and Consortium Service Management Group, Inc. concerning
                the
                carbon dioxide separator technology [Incorporated by reference to
                Exhibit
                10.9 to the registrant’s Form 10-SB, filed on September 16,
                1999.]10.4
            -
            
            Operating
                Agreement of June 14, 2001 between Consortium Service Management
                Group,
                Inc. and Resource Technology Corporation [Incorporated by reference
                to
                Exhibit 10.10 to Amendment No. 2 to the registrant’s Form 10-SB, filed on
                December 3, 2001.]10.5
            -
            
            Agency
                Agreement between Joint Stock Company “Sumy Frunze Machine-Building
                Science and Production Association” of Ukraine and Consortium Service
                Management Group, Inc. [Incorporated by reference to Exhibit 10.20
                to the
                registrant’s Form 10-KSB for the year ended December 31, 2002, filed on
                April 15, 2003.]10.6
            -
            
            2003
                Stock Option Plan adopted by the board of directors of Consortium
                Service
                Management Group, Inc. [Incorporated by reference to Exhibit 10.21
                to the
                registrant’s Form 10-QSB for the quarter ended March 31, 2003, filed on
                May 20, 2003.]10.7
            -
            
            Standby
                Equity Distribution Agreement of March 29, 2004 between Cornell Capital
                Partners, LP and Consortium Service Management Group, Inc. [Incorporated
                by reference to Exhibit 10.23 to the registrant’s Form 10-KSB for the year
                ended December 31, 2004, filed on April 15, 2005.]10.8
            -
            
            Landfill
                Gas Sales Agreement between CSMG Technologies, Inc. and E.I. DuPont
                de
                Nemours and Co. Inc. and Shoreline Gas, Inc. [Incorporated by reference
                to
                Exhibit 10.1 to the registrant’s Form 8-K, filed on February 21,
                2006.]




23




14
            -
            
            Code of Ethics for the Chief Executive
              Officer and Senior Financial Officers[Incorporated
              by reference to Exhibit 14 to the registrant’s Form 10-KSB for the year
              ended December 31, 2004, filed on April 15, 2005.]31.1
            -
            
            Certification
                of the Chief Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a)31.2
            -
            
            Certification
                of the Chief Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a)32
            -
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 135099.1
            -
            
            Ukraine
                Ministry of Health, State Department, Certificate of State Registration
                No. 1105-193 [Incorporated by reference to Exhibit 99 to Amendment
                No. 2
                to the registrant’s Form 10-SB, filed on December 3,
                2001.]99.2
            -
            
            Extract of U.S. Patent No. 6,562,037
              May 13,
              2003 [Incorporated by reference to Exhibit 99.1 to the registrant’s Form
              10-QSB for the quarter ended June 30, 2004, filed on August 19,
              2004.]99.3
            -
            
            Extract
                of U.S. Patent No. 6,733,498 May 11, 2004 [Incorporated by reference
                to
                Exhibit 99.2 to the registrant’s Form 10-QSB for the quarter ended June
                30, 2004, filed on August 19,
                2004.]





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





Fiscal
      Year ended December 31, 2006   $
      16,000


Fiscal
      Year ended December 31, 2005   $
      25,629





**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, 2006   $
      7,800


Fiscal
      Year ended December 31, 2005   $
      6,900




24




**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, 2006   $-0-


Fiscal
      Year ended December 31, 2005   $-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, 2006   $-0-


Fiscal
      Year ended December 31, 2005   $-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.





25


**Index
            To Consolidated Financial Statements**
  PageReport
                      of Independent Registered Public Accounting Firm
                  F-1Consolidated
                      Balance Sheet as of December 31, 2006
                  F-2Consolidated
                      Statements of Operations for the Years Ended December 31, 2006
                      and
                      2005
                  F-4Statements
                      of Cash Flows for the Years Ended December 31, 2006 and
                      2005
                  F-5Statements
                      of Changes in Stockholders’ Deficit for the Years Ended December 31, 2006
                      and 2005
                  F-6Notes
                      to Consolidated Financial Statements
                  F-7
   
  **Report
            of Independent Registered Public Accounting Firm**
 
 
 To
            the
            Shareholders and Board of Directors
 CSMG
            Technologies, Inc. and Subsidiaries
 (formerly
            Consortium Service Management Group, Inc. and Subsidiaries)
 
 I
            have
            audited the accompanying consolidated balance sheets of CSMG Technologies,
            Inc
            and Subsidiaries as of December 31, 2006 and December 31, 2005, 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 CSMG Technologies,
            Inc. and
            Subsidiaries as of December 31, 2006 and December 31, 2005, 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.
 
  
 Gary
            Skibicki, CPA, PC
 Oklahoma
            City, OK
 March
            30,
            2007
 F-1
  **CSMG
                              TECHNOLOGIES, INC.****(FORMERLY,
                              CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****AND
                              SUBSIDIARIES**
  CONSOLIDATED
                              BALANCE SHEETS
 ASSETS
 
 Dec
                            31, 2006
                        
                        Dec
                            31, 2005Current
                            AssetsCash
                        
                        $
                        868,217
                        
                        $
                        -Total
                            Current Assets
                        
                        
                        868,217
                        
                        
                        -Fixed
                            AssetsFurniture
                            and Equipment
                        
                        
                        65,284
                        
                        
                        61,409Less
                            Accumulated Depreciation
                        
                        
                        (61,793
                        )
                        
                        (61,409
                        )Total
                            Fixed Assets
                        
                        
                        3,491
                        
                        
                        -Other
                            AssetsInvestment
                            - United Engineering Company
                        
                        
                        53,383
                        
                        
                        136,236CO2Equipment Patent
                        
                        
                        -
                        
                        
                        8,000Tissue
                            Bonding Patent
                        
                        
                        -
                        
                        
                        530,170Less
                            Accumulated Amortization
                        
                        
                        -
                        
                        
                        (61,866
                        )Total
                            Other Assets
                        
                        $
                        53,383
                        
                        $
                        612,540Total
                            Assets
                        
                        $
                        925,091
                        
                        $
                        612,540
  The
                              accompanying notes are an integral part of these financial
                              statements.
 F-2
 **CSMG
                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                  SUBSIDIARIES**
 CONSOLIDATED
                              BALANCE SHEETS (CONTINUED)
  LIABILITIES
  Dec
                              31, 2006
                          
                          Dec
                              31, 2005Current
                              LiabilitiesBank
                              Overdraft
                          
                          $
                          -
                          
                          $
                          1,534Accounts
                              Payable
                          
                          
                          89,474
                          
                          
                          820,788Interest
                              Payable
                          
                          
                          1,531,513
                          
                          
                          1,394,017Payroll
                              Taxes Payable
                          
                          
                          12,762
                          
                          
                          90,968Notes
                              Payable to Stockholders
                          
                          
                          2,758,978
                          
                          
                          3,903,828Notes
                              Payable - Others
                          
                          
                          2,749,999CO2Equipment Payable
                          
                          
                          206,749
                          
                          
                          206,749Accrued
                              CO2 expenses
                          
                          
                          134,833
                          
                          
                          -Total
                              Current Liabilities
                          
                          
                          7,484,308
                          
                          
                          6,417,884Long
                              Term LiabilitiesLong
                              Term Contract IAW
                          
                          
                          200,000
                          
                          
                          300,000Fee
                              Debenture Payable
                          
                          
                          -
                          
                          
                          -Total
                              Long-Term Liabilities
                          
                          
                          200,000
                          
                          
                          300,000Total
                              Liabilities
                          
                          
                          7,684,308
                          
                          
                          6,717,884Minority
                              Interest in Consolidated Subsidiary
                          
                          
                          206,000
                          
                          
                          206,000STOCKHOLDERS'
                              EQUITYCommon
                              stock $.001 par value, 40,000,000 sharesauthorized;
                              33,464,418 shares issued, 33,383,710shares
                              outstanding, 488,854 shares subscribedat
                              December 31, 2006; and 26,056,072 shares issued,25,036,546
                              shares outstanding, atDecember
                              31, 2005.
                          
                          
                          33,464
                          
                          
                          26,057Additional
                              Paid in Capital
                          
                          
                          9,922,095
                          
                          
                          7,548,050Less
                              - Common Stock Subscriptions Receivable
                          
                          
                          (488
                          )
                          
                          (939
                          )Accumulated
                              Other Comprehensive (Loss)
                          
                          
                          (337,190
                          )
                          
                          (339,454
                          )Accumulated
                              (Deficit)
                          
                          
                          (16,550,813
                          )
                          
                          (13,512,773
                          )Treasury
                              Stock
                          
                          
                          (32,285
                          )
                          
                          (32,285
                          )Total
                              Stockholders' Equity
                          
                          
                          (6,965,217
                          )
                          
                          (6,311,344
                          )Total
                              Liabilities and Stockholders' Equity
                          
                          $
                          925,091
                          
                          $
                          612,540
 The
                                  accompanying notes are an integral part of these
                                  financial
                                  statements.
  F-3
 **CSMG
                    TECHNOLOGIES, INC.**
 **(FORMERLY,
                              CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****AND
                              SUBSIDIARIES**CONSOLIDATED
                              STATEMENT OF OPERATIONS
  Jan
                              1, 2006-
                          
                          Jan
                              1, 2005-Dec
                              31, 2006
                          
                          Dec
                              31, 2005Revenues
                          
                          $
                          -
                          
                          $
                          414General
                              and Administrative Expenses
                          
                          
                          2,606,143
                          
                          
                          3,037,307Funded
                              R & D
                          
                          
                          
                          
                          
                          -Cost
                              of Funded R & D
                          
                          
                          558,488
                          
                          
                          133,105Net
                              R & D Cost
                          
                          
                          558,488
                          
                          
                          133,105Operating
                              (Loss)
                          
                          
                          (3,164,631
                          )
                          
                          (3,169,998
                          )Extraordinary
                              Gain
                          
                          
                          200,805Interest
                              Income
                          
                          
                          10,903
                          
                          
                          60Interest
                              in Income (Loss) of Unconsolidated Companies
                          
                          
                          (85,118
                          )
                          
                          (91,471
                          )(Loss)
                              from Continuing Operations
                          
                          
                          (3,038,041
                          )
                          
                          (3,261,409
                          )Income
                              Taxes
                          
                          
                          -
                          
                          
                          -Net
                              (Loss)
                          
                          $
                          (3,038,041
                          )
                          $
                          (3,261,409
                          )Net
                              (Loss) Per Share Common Stockbefore
                              Extraordinary Gain
                          
                          
                          (0.11
                          )
                          
                          (0.17
                          )Net
                              (Loss) Per Share Common Stock
                          
                          
                          (0.10
                          )
                          
                          (0.17
                          )Weighted
                              Average Common Shares Outstanding
                          
                          
                          30,786,442
                          
                          
                          19,545,500
   Basic
                              and diluted earnings (loss) 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.
  F-4
 **CSMG
                              TECHNOLOGIES, INC.****(FORMERLY,
                              CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****AND
                              SUBSIDIARIES**CONSOLIDATED
                              STATEMENT OF CASH FLOWS
  Jan
                              1, 2006-
                          
                          Jan
                              1, 2005-Dec
                              31, 2006
                          
                          Dec
                              31, 2005Cash
                              Flows from Operating ActivitiesNet
                              (Loss)
                          
                          $
                          (3,038,041
                          )
                          $
                          (3,261,408
                          )Equity
                              Loss from Investee
                          
                          
                          85,118
                          
                          
                          91,471Depreciation
                              and Amortization
                          
                          
                          384
                          
                          
                          136,416Impairment
                              Loss CO2 Equipment
                          
                          
                          -
                          
                          
                          1,417,647Services
                              for Common Stock
                          
                          
                          201,107
                          
                          
                          6,500Increase
                              (Decrease) Current Liabilities
                          
                          
                          (732,847
                          )
                          
                          503,105Increase
                              Fee Debenture Payable
                          
                          
                          -
                          
                          
                          (275,000
                          )Increase
                              Accrued CO2 Expense
                          
                          
                          134,833
                          
                          
                          -Write
                              off FAS 144 Assets
                          
                          
                          476,304
                          
                          
                          -Interest
                              for Stock
                          
                          
                          556,775
                          
                          
                          -Increase
                              (Decrease) in Federal Payroll Taxes Payable
                          
                          
                          (78,207
                          )
                          
                          11,578Increase
                              Accrued Interest
                          
                          
                          137,496
                          
                          
                          695,415Net
                              Cash provided by (used in) Operating Activities
                          
                          
                          (2,257,078
                          )
                          
                          (674,276
                          )Cash
                              Flows from Investing ActivitiesDeposits
                          
                          
                          -
                          
                          
                          -Purchase
                              Equipment and Patent
                          
                          
                          (3,875
                          )
                          
                          (299,695
                          )Net
                              Cash (used in) Investing Activities
                          
                          
                          (3,875
                          )
                          
                          (299,695
                          )Cash
                              Flows from Financing ActivitiesBank
                              Overdraft
                          
                          
                          -
                          
                          
                          0Increase
                              Notes Payable
                          
                          
                          2,555,831
                          
                          
                          51,264Increase
                              Stock Issue
                          
                          
                          673,339
                          
                          
                          832,265Payable
                              to IAW
                          
                          
                          (100,000
                          )Net
                              Cash provided by Financing Activities
                          
                          
                          3,129,170
                          
                          
                          883,529Net
                              Increase (Decrease) in Cash and Cash Equivalents
                          
                          
                          868,217
                          
                          
                          (90,442
                          )Cash
                              and Cash Equivalents at Beginning of Period
                          
                          
                          -
                          
                          
                          88,908Cash
                              and Cash Equivalents at End of Period
                          
                          $
                          868,217
                          
                          $
                          (1,534
                          )
 The
                                  accompanying notes are an integral part of these
                                  financial
                                  statements.
 F-5
 **CSMG
                              TECHNOLOGIES, INC.****(FORMERLY,
                              CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****AND
                              SUBSIDIARIES**CONSOLIDATED
                              STATEMENT OF STOCKHOLDERS' EQUITYJANUARY
                              1, 2006 - DECEMBER 31, 2006
  Description
                          
                          No.
                                CommonShares
                              (Ea.)
                          
                          
                          
                          ParValue
                          
                          AdditionalPaid
                                InCapital
                          
                          StockSubscribed
                          
                          AccumulatedOtherComprehensiveIncome(Loss)
                          
                          AccumulatedDeficit
                          
                          TreasuryStock
                          
                          TotalBalance
                              January 1, 2006
                          
                          
                          26,056,072
                          
                          
                          9,175
                          
                          $
                          26,056
                          
                          $
                          7,548,049
                          
                          $
                          (939
                          )
                          $
                          (339,454
                          )
                          $
                          (13,512,773
                          )
                          $
                          (32,285
                          )
                          $
                          (6,311,346
                          )Common
                              Stock Sold
                          
                          
                          4,549,122
                          
                          
                          
                          
                          
                          4,549
                          
                          
                          668,340
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          672,889Common
                              Stock Issued for Services
                          
                          
                          366,115
                          
                          
                          
                          
                          
                          366
                          
                          
                          200,741
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          201,107Common
                              Stock Issued for Interest
                          
                          
                          888,991
                          
                          
                          
                          
                          
                          889
                          
                          
                          555,886
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          556,775Common
                              Stock Issued for Notes
                          
                          
                          1,604,118
                          
                          
                          
                          
                          
                          1,604
                          
                          
                          949,079
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          950,683Common
                              Stock Escrowed/Subscribed
                          
                          
                          -
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          451
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          451Net
                              (Loss)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          (3,038,041
                          )
                          
                          -
                          
                          
                          (3,038,041
                          )Other
                              Comprehensive Income (Loss)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          2,264
                          
                          
                          -
                          
                          
                          -
                          
                          
                          2,264Foreign
                              Exchange Gain (Loss)
                          
                          
                          -
                          
                          
                          
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -Balance
                              December 31, 2006
                          
                          
                          33,464,418
                          
                          
                          
                          
                          $
                          33,464
                          
                          $
                          9,922,095
                          
                          $
                          (488
                          )
                          $
                          (337,190
                          )
                          $
                          (16,550,814
                          )
                          $
                          (32,285
                          )
                          $
                          (6,965,218
                          )Treasury
                              Shares
                          
                          
                          (80,713
                          )Shares
                              Outstanding
                          
                          
                          33,383,705
  The
                                  accompanying notes are an integral part of these
                                  financial
                                  statements.
   F-6
 
 
 **CSMG
                                TECHNOLOGIES, INC.**
 **(FORMERLY,
                                CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                SUBSIDIARIES**
 **NOTES
                                TO FINANCIAL STATEMENTS**
 **DECEMBER
                                31, 2006, DECEMBER 31, 2005**
 **NOTE
                                1**
 **SIGNIFICANT
                                ACCOUNTING POLICIES**
 
 **Nature
                                of Operations**
 
 CSMG
                                Technologies, Inc., formerly, Consortium Service
                                Management Group, Inc. (the
“Company”), a Texas corporation, was incorporated on November
                                17, 1992 under the
                                name “Consortium Service Management Group, Inc.” On January 18, 2007, the
                                Company changed its name to “CSMG Technologies, Inc.” and increased its total
                                number of authorized shares to 90,000,000 and the
                                number of shares of common
                                stock to 80,000,000.
 
 We
                                are a
                                technology management company. The technologies involve
                                live tissue bonding and
                                CO2 (carbon dioxide) separation of landfill gas.
                                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 worldwide
                                rights on licensing,
                                patenting, manufacturing, development and distribution
                                of this technology. To
                                date, four United States patents, one European Union
                                patent and one Australian
                                patent have been issued and approximately 22 pending
                                patent applications in the
                                United States and overseas in connection with this
                                live tissue bonding
                                equipment. In addition, the Ukraine Ministry of Health
                                has approved the
                                technology for commercial development in Ukraine.
 
 A
                                U.S.
                                patent has been issued on the carbon dioxide separator
                                technology, also
                                developed in Ukraine, that promotes the economical
                                separation of methane from
                                carbon dioxide gas emanating from landfills. Landfills
                                generate a commingled
                                mixture of methane and carbon dioxide gas which prevents
                                it from being
                                commercially sold as fuel. The Ukraine technology
                                has developed an economical
                                carbon dioxide separator that removes the carbon
                                dioxide to allow the methane
                                gas to be sold to utility companies as well as other
                                industrial and commercial
                                customers. The first installation began in 2002 in
                                Mobile, Alabama with
                                completion originally estimated to be in the second
                                quarter of 2003.
 
 The
                                carbon dioxide separator equipment 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. RTC contracted with
                                the Company to extract the
                                methane gas. Accordingly, the Company installed the
                                carbon dioxide separator at
                                the landfill during 2002 and 2003. Waste Management
                                Inc. asserted that the
                                carbon dioxide equipment produced methane gas that
                                failed to meet Mobile Gas
                                quality specifications and accordingly contended
                                the above agreement with RTC
                                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: RTC had
                                to release its right to
                                collect, extract and remove landfill gas from the
                                property in return for CSMG
                                paying RTC $75,000 and withdrawing its $6 million
                                administrative claim.
 
 On
                                December 16, 2004 the Company entered into a contract
                                with Waste Management Inc.
                                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. An appeal of
                                that approval was unsuccessfully appealed by RTC
                                insider creditors.
 
 The
                                Company 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.
 
 F-7
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  There
                                is
                                a dispute between WMI and the company with regard
                                to the Chastang Waste Site in
                                Chastang, Alabama. WMI was to maintain the site so
                                as to produce marketable
                                levels of waste site gas. The site has failed to
                                produce such volume and WMI has
                                countered by demanding the company remove its equipment
                                from the site.
                                Discussions to resolve the issues are on-going. If
                                the actions being taken at
                                the site by WMI are deemed to be insufficient for
                                supporting commercial sales of
                                treated waste gas, the company expects to seek an
                                alternate site.
 
 At
                                the
                                end of December 2006 the Company has invested $1,619,446
                                in the 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 to be written
                                down to a zero value with
                                an impairment loss of $1,417,647 included in 2005
                                operating expenses. 
While this adversely 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.
                                For the same reason the tissue
                                bonding and CO2 patents had to be written down during
                                the 3rd quarter 2006 for a
                                total $476,304 and are included in the 3rd quarter
                                operating loss. While this
                                affects the financial statements of the Company it does
                                not affect the actual value of the equipment, patents
                                or the ability of the Company to
                                perform on its contracts.
 
 Anaerobic
                                animal waste process has been discontinued as non
                                marketable.
 
 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 2006 and 2005, management considers
                                it impractical to further
                                segment financial information.
 
 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. The 2006
                                and 2005 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.
 
 F-8
 **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 2006
                                the average exchange rate used to record income was
                                .20610 functional currency
                                to U.S. dollars and the year end exchange rate used
                                to value the UEC investment
                                account was .2070 functional currency to U.S. dollars.
                                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.
 
 The
                                summarized 2006 and 2005 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
 
 Through
                                          September 30,2006
                                      
                                      2005Current
                                          Assets
                                      
                                      $
                                      17,761
                                      
                                      $
                                      126,500Non
                                          Current Assets
                                      
                                      
                                      287,212
                                      
                                      
                                      408,800Total
                                          Assets
                                      
                                      
                                      304,973
                                      
                                      
                                      535,300Current
                                          Liabilities
                                      
                                      
                                      144,962
                                      
                                      
                                      127,000Non
                                          Current Liabilities
                                      
                                      
                                      -
                                      
                                      
                                      -Total
                                          Liabilities
                                      
                                      
                                      144,962
                                      
                                      
                                      127,000Equity
                                      
                                      
                                      160,011
                                      
                                      
                                      408,300Total
                                          Liabilities and Equity
                                      
                                      $
                                      304,973
                                      
                                      $
                                      535,300Sales
                                      
                                      $
                                      351,668
                                      
                                      $
                                      846,600Gross
                                          Profit (Loss)
                                      
                                      
                                      34,089
                                      
                                      
                                      (56,000
                                      )Operating
                                          Expense
                                      
                                      
                                      289,469
                                      
                                      
                                      225,600Net
                                          (Loss)
                                      
                                      $
                                      (255,380
                                      )
                                      $
                                      (281,600
                                      )
 
 UEC’s
                                equity decreased by $248,289 from 2005 to 2006 of
                                which 1/3, or $82,853, is
                                reflected in the decrease of the UEC investment account
                                from $136,236 to
                                $53,383. The change comprises an operating loss of
                                $85,118 (which was partially
                                set off by a foreign exchange gain of $2,265 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 $(3,038,041) in
                                2006 and $(3,261,409) in 2005 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.
 
 F-9
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  In
                                2006,
                                366,115 shares of common stock were issued in exchange
                                for $ 201,107 in
                                management and marketing services. The cost of the
                                services has been charged to
                                operations and additional paid in capital has been
                                increased by $200,741
                                representing the excess of the cost of the services
                                over the par value of the
                                common stock issued
 
 In
                                2005
                                10,000 shares of common stock 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. Also in 2005 the Company issued no shares
                                of common stock for interest
                                on notes payable to shareholders with the cost charged
                                to operations, and
                                additional paid in capital increased by $ -0- 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
                                  2006 the Financial Accounting Standards Board issued
                                  for following statements on
                                  financial accounting standards (SFAS).
 
 (1)
                                      SFAS
                                          155 - Accounting for certain hybrid financial
                                          instruments (2)
                                      SFAS
                                          156 - Accounting for servicing of financial
                                          assets (3)
                                      SFAS
                                          157 - Fair value measurements (4)
                                      SFAS
                                          158 - Employers’ accounting for deferred benefit pension
                                          and other post
                                          retirement plans 
 SFAS
                                  155
                                  and SFAS 156 are effective for financial statements
                                  with fiscal years that begin
                                  after September 15, 2006. SFAS 157 has an effective
                                  date for fiscal years
                                  beginning after November 15, 2007. SFAS 158 has
                                  an effective date for public
                                  companies having fiscal years ending after December
                                  15, 2006. The Company does
                                  not currently have a retirement plan.
 
 During
                                  2005 the Financial Accounting Standards Board issued
                                  the following statements on
                                  financial accounting standards (SFAS).
 
 (1)
                                      SFAS
                                          152 - Accounting for real estate time
                                          shares (2)
                                      SFAS
                                          153 - Exchanges of non monetary assets (3)
                                      SFAS
                                          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.
 F-10
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 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 $(3,038,041) for the year ended December
                                31, 2006 and $(3,261,409) for
                                the year ended December 31, 2005, 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 accordance with
                                the above
                                arrangement.
 
 As
                                of
                                December 31, 2006 we have sold 15,457,734 shares
                                of common stock to Cornell
                                Capital for $2,083,638 advanced pursuant to the Equity
                                Line of Credit. As of
                                December 31, 2006 we have escrowed 488,854 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 15,457,734
                                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. As
                                of 3-1-07 we currently owe
                                Cornell $242,,000 plus interest which is planned
                                to be repaid by cash or from
                                issuance of rule 144 stock. Remaining shares from
                                the Cornell registration have
                                been returned to treasury stock.
 
 F-11
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  The
                                Empire Financial Group Transaction :
 
 On
                                June
                                30, 2006, we engaged Empire Financial Group for a
                                firm commitment public
                                offering of approximately $5 million in shares of
                                common stock of Live
                                Tissue Connect ,
                                Inc.
                                and to immediately raise up to $3 million in a privately
                                placed bridge financing
                                for us, of which $2,750,000 has been received to
                                date. Neither the offering
                                price of the shares nor the amount of shares to be
                                registered has been
                                determined in connection with the proposed Live Tissue
                                Connect public offering.
                                As of December 31, 2006, we have received $2,750,000
                                from the bridge financing
                                and paid $379,500 in fees, along with an initial
                                $10,000 fee, to Empire
                                Financial Group.
 
 We
                                have
                                signed a firm commitment letter agreement for a minimum
                                $5 million dollar
                                Initial Public Offering “IPO” with Empire Financial Group for our subsidiary
                                Live Tissue Connect, Inc.
 
 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.
 
 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.
 
 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, 2006 net
                                operating loss carryforwards
                                will exceed $16,500,000 making it reasonably uncertain
                                if any of these loss
                                carryforwards will result in tax benefits.
 
 During
                                the second quarter 2006 a tax lien for 2004 undeposited
                                payroll tax was paid in
                                full and the lien was released. The company is not
                                behind on any taxes as of
                                12-31-06.
 
 **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 nine 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 period ending December 31,
                                2006 UEC in U.S. dollars had
                                revenues of $351,668, assets of $304,973, liabilities
                                of $144,962 and a net
                                worth of $160,011. For the year ended December 31,
                                2005 revenues were $864,600,
                                assets were $535,300, liabilities were $ 127,000
                                with a net worth of $
                                408,300.
 
 F-12
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  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.
 
 **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 an 89.7% interest. The
                                consolidated financial statements show $206,000 in
                                Membership Capital
                                representing the investment of eight 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. has been discontinued as non marketable.
 
 Live
                                Tissue Connect, Inc. is a Delaware corporation formed
                                May 22, 2002. Its
                                objective is to develop, market and sale live tissue-bonding
                                technologies
                                throughout the world. Live Tissue Connect, Inc. is
                                86% Company
                                owned.
 In
                                November 2006, we engaged a regulatory and equipment
                                consultant to assist in
                                obtaining FDA approval. We plan to file with the
                                FDA and for the European CE
                                (Conformité Européne) Mark in early 2007. We are working with qualified
                                US
                                medical device and instrument manufacturers to manufacture
                                the commercial
                                equipment. Additionally, we have retained a qualified
                                firm to complete FDA
                                Filings.
 
 **NOTE
                                6**
 **NOTES
                                PAYABLE TO STOCKHOLDERS**
 
 Notes
                                to
                                shareholders as of December 31, 2006 consists of
                                38 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, 2006 notes
                                payable to shareholders totaled $2,758,978 with interest
                                expense of $756,843 as
                                follows:
 
 a.
                                            Cash paid
                                        
                                        $
                                        62,572b.
                                            Common stock issued for interest
                                        
                                        $
                                        556,775c.
                                            Accrued interest
                                        
                                        $
                                        137,496$
                                        756,843
 December
                                31, 2005 notes payable to shareholders totaled $3,903,828
                                with interest expense
                                of $695,415 as follows:
 
 a.
                                            Cash paid
                                        
                                        $
                                        61,720b.
                                            Common stock issued for interest
                                        
                                        
                                        -c.
                                            Accrued interest
                                        
                                        $
                                        633,695$
                                        695,415
  F-13
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  **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 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
                                was
                                granted.
 
 On
                                June
                                30, 2006, CSMG was served by Nature Coast Collections,
                                Inc. in the Federal
                                District Court for the Southern District of Texas,
                                Nature Coast Collections,
                                Inc. v. Consortium Service Management Group, Inc.,
                                Donald S. Robbins and Gordon
                                W. Allison. 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.
                                CSMG has answered the complaint and filed a counterclaim
                                alleging, among other
                                matters, that Nature Coast Collections, Inc. is an
                                affiliate of the debtor in
                                the bankruptcy proceeding in the Northern District
                                of Illinois referred to
                                above, Resource Technology Corporation, and that
                                CSMG should be authorized to
                                offset its losses caused by its contractual relationship
                                with Resource
                                Technology Corporation against the claims of Nature
                                Coast Collections, Inc. CSMG
                                has moved the Federal District Court for the Southern
                                District of Texas to
                                transfer the proceeding to the Federal District Court
                                for the Northern District
                                of Illinois so that the litigation can be referred
                                to the United States
                                Bankruptcy Court for the Northern District of Illinois.
                                No discovery has
                                commenced.
 
 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 the 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 8-K 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.
 
 F-14
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  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 SMG
                                owed Banco Panamericano
                                $514,920 as of February 9, 2005.
 
 CSMG
                                alleges as follows with regard to the allegations
                                of Banco
                                Panamericano:
  ·
                                    Banco
                                        Panamericano is not a bank but a Nebraska
                                        corporation that is affiliated
                                        with Resource Technologies Corporation (“RTC”), a company that is a debtor
                                        in a federal chapter 11 reorganization
                                        case.  ·
                                    CSMG
                                        and RTC had entered into a contract (“the Contract”) whereby CSMG would
                                        provide equipment (“The Equipment”), at CSMG’s cost, to filter landfill
                                        gas from a landfill operated by RTC located
                                        in Alabama so as to provide
                                        marketable methane gas. Among RTC’s obligations under the Contract was a
                                        commitment to provide a pipeline hookup to
                                        the purchaser of the gas. CSMG
                                        and RTC would share in the proceeds from
                                        the sale of the methane
                                        gas.  ·
                                    CSMG
                                        lacked the funds to perform its obligations
                                        under the Contract. RTC 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.  ·
                                    CSMG
                                        installed the Equipment but RTC never performed
                                        its obligations under the
                                        Contract and Banco Panamericano never loaned
                                        any funds to CSMG. Rather,
                                        Banco Panamericano advised CSMG, from time
                                        to time, that CSMG had incurred
                                        several indistinctly-described financial
                                        obligations to RTC and that Banco
                                        Panamericano had advanced the funds subject
                                        to the Note to its affiliate,
                                        RTC, to cover such obligations. Such allegations
                                        of CSMG indebtedness to
                                        RTC were not true.  ·
                                    The
                                        intention of 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.   F-15
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2006, DECEMBER 31, 2005**
  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 judgment was entered against the
                                Company in the amount of
                                $32,091 in favor of Bagby and Russell Electric Company.
                                The judgment 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.
 
 **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
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        MarketFrom
                                        No
                                            of
                                        
                                        
                                        Options
                                        
                                        
                                        Options
                                        
                                        
                                        Option
                                        
                                        
                                        Price
                                            atPlan
                                            Date
                                        Grant
                                            Date
                                        Options
                                        
                                        
                                        Issued
                                        
                                        
                                        Exercised
                                        
                                        
                                        Price
                                        
                                        
                                        Grant
                                            Date12/31/98
                                        10
                                              years; 5 years if
                                        1,500,000
                                        
                                        
                                        850,000
                                            on 1/31/98
                                        
                                        
                                        
                                        
                                        
                                        .165/
                                            Sh
                                        
                                        
                                        .15/
                                            Shoptionee
                                          owns more
                                        
                                        
                                        
                                        215,000
                                            on 1/28/05
                                        
                                        
                                        
                                        
                                        
                                        /
                                            Sh.280
                                        
                                        
                                        .17/
                                            Shthan
                                          10% of voting
                                        
                                        
                                        
                                        435,000
                                            on 9/28/05
                                        
                                        
                                        
                                        
                                        
                                        /
                                            Sh.330
                                        
                                        
                                        .17/
                                            Shstock
                                            at time of grant
                                        
                                        
                                        
                                        
                                        
                                        
                                        850,000
                                            on 12/30/03
                                        
                                        
                                        .165/
                                            Sh
                                        
                                        
                                        .40/
                                            Sh5/8/03
                                        10
                                              years; 5 years if
                                        1,000,000
                                        
                                        
                                        865,000
                                            on 5/8/03
                                        
                                        
                                        
                                        
                                        
                                        .605/
                                            Sh
                                        
                                        
                                        .55/
                                            Shoptionee
                                          owns
                                          morethan
                                          10% of
                                          votingstock at time of
                                            grant
  Total
                                            options outstanding at December 31, 2006:12/31/1998
                                            plan
                                        600,0005/8/2003
                                            plan
                                        
                                        850,000Total
                                        1,450,000
 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.
 
 F-16
 **CSMG
                                  TECHNOLOGIES, INC.**
 **(FORMERLY,
                                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **AND
                                  SUBSIDIARIES**
 **NOTES
                                  TO FINANCIAL STATEMENTS**
  **NOTE
                                8**
 **COMMITMENTS
                                AND CONTINGENCIES**
 
 The
                                Company conducts operations in Corpus Christi, Texas
                                and Kiev, Ukraine and has
                                the following lease obligations for each location:
 
 Location
                                      
                                      Lease
                                          Term
                                      
                                      Monthly
                                          Payment
                                      
                                      Total
                                          ObligationCorpus
                                          Christi
                                      
                                      
                                      Expires
                                          May 1, 2008
                                      
                                      $
                                      1113,
                                          Increase to
                                      
                                      $
                                      18,204$
                                      1145
                                            June 1, 2007Kiev
                                      
                                      
                                      Monthly
                                      
                                      $
                                      1,200
                                      
                                      
                                      -0-
 
 The
                                Company has idle carbon dioxide separator equipment
                                currently located at the
                                Chastang Waste Site in Chastang, Alabama and the
                                operator of the site, Waste
                                Management Company, Inc., has demanded that the equipment
                                be removed from the
                                site. It is estimated that it will cost the company
                                approximately $1,050,000 to
                                disassemble and relocate the equipment to another
                                landfill
                                location.
   F-17
    **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.




**CSMG TECHNOLOGIES,
              INC.**Date:
              March 30, 2007
            By:
            /s/ Donald
              S.
              RobbinsDonald
              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:
                March 30, 2007
              
              /s/ Donald
                S.
                RobbinsDonald
                  S. Robbins, President, ChiefExecutive
                  Officer and Director
  Date:
                March 30, 2007
              
              /s/ Esmeralda
                G. RobbinsEsmeralda
                  G. Robbins, Chairman of theBoard
                  and Director
  Date:
                March 30, 2007
              
              /s/ Robert
                Jay MachenRobert
                Jay Machen, Director
  Date:
                March 30, 2007
              
              /s/ Conrad
                DerdeynConrad
                Derdeyn, Director
  Date:
                March 30, 2007
              
              /s/ K.
                Bruce
                JonesK.
                Bruce Jones, Chief Financial
                Officer










**Consortium
        Service Management Group, Inc.**
 **Commission
        File No. 0-27359**
 
 **EXHIBIT
        INDEX**
 
 **FORM
        10-KSB**
 **For
        the fiscal year ended December 31, 2006**


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





Exhibit No.
              
              Description3(i)
              
              Amended
                  and Restated Articles of Incorporation of CSMG Technologies, Inc.,
                  as
                  amended **3(ii)
              
              Bylaws
                  of CSMG Technologies, Inc., as amended **
 10.1
              
              Second
                  amendment to Lease Agreement between Bank of American and Donald
                  S.
                  Robbins, dated as of June 24, 2005 **10.2
              
              Agreement
                  of July 9, 1996 between Consortium Service Management Group, Inc. and
                  International Welding concerning tissue bonding technology
                  *10.3
              
              Agreement
                  of December 1998 between International Welding Association of Kiev,
                  Ukraine and Consortium Service Management Group, Inc. concerning
                  the
                  carbon dioxide separator technology *10.4
              
              Operating
                  Agreement of June 14, 2001 between Consortium Service Management
                  Group,
                  Inc. and Resource Technology Corporation *10.5
              
              Agency
                  Agreement between Joint Stock Company “Sumy Frunze Machine-Building
                  Science and Production Association” of Ukraine and Consortium Service
                  Management Group, Inc. *10.6
              
              2003
                  Stock Option Plan adopted by the board of directors of Consortium
                  Service
                  Management Group, Inc. *10.7
              
              Standby
                  Equity Distribution Agreement of March 29, 2004 between Cornell
                  Capital
                  Partners, LP and Consortium Service Management Group, Inc.
                  *10.8
              
              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*31.1
                
                Certification
                    of the Chief Executive Officer required by Rule 13a-14(a) or
                    Rule
                    15d-14(a) **31.2
                
                Certification
                    of the Chief Financial Officer required by Rule 13a-14(a) or
                    Rule
                    15d-14(a) **32
                
                Certification
                    of the Chief Executive Officer and Chief Financial Officer required
                    by
                    Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350 **99.1
                
                Ukraine
                    Ministry of Health, State Department, Certificate of State Registration
                    No. 1105-193 *99.2
                
                Extract of U.S. Patent No. 6,562,037
                  May 13,
                  2003 *99.3
                
                Extract
                    of U.S. Patent No. 6,733,498 May 11, 2004
                    *
 _____________________





* Previously
      filed


** Filed
      herewith