U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



Amendment No. 1 to

FORM 10-KSB

(Mark One)



[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the period ended December 31, 2005



[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 for the transition period from ___ to ____.



Commission file number: 333-40954



CCI GROUP, INC.

(Name of Small Business Issuer in its charter)



Utah

87-0648148

(State of Incorporation)

(I.R.S. Employer I.D. Number)



8 Sayres Path, Wainscott, New York 11975

(Address of principal executive offices)         (Zip Code)



405 Park Avenue, 10th Floor, New York, New York     10022

(Former address of principal executive offices)         (Zip Code)



Issuer's telephone number: 212-421-1400



Securities registered under Section 12 (b) of the Act:



Title of each class

Name of exchange on which

to be registered

each class is to be registered



None

None



Securities registered under Section 12(g) of the Act:



None

(Title of Class)



Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes: X    No:

Yes: X    No:



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



State issuer's revenues for the most recent fiscal year. $1,732,355.



As of April 1, 2006, the aggregate market value of the voting and non-voting common equity held by non-affiliates is approximately $5,778,467. This calculation is based upon the average of the bid price of $0.40 and asked price of $1.01 of the common stock on April 1, 2006.



The number of shares issued and outstanding of our common stock, no par value, as of April 1, 2006 was 9,696,407.



DOCUMENTS INCORPORATED BY REFERENCE



None.





#









EXPLANATORY NOTE



Our Form 10-KSB for the period ended December 31, 2005 contained an audit report from our auditors, Hansen, Barnett and Maxwell, which contained an adverse opinion in that certain note payable transactions may have contained derivatives as defined by FAS 133 and EITF 00-19.  The liabilities and expenses associated with these derivatives were excluded from the accompanying consolidated financial statements in the stated Form 10-KSB. We have evaluated these transactions to determine the existence of derivatives in these transactions and have further analyzed the conversion of notes payable to Series B Convertible Preferred Stock.  We are filing this Amendment #1 on Form 10-KSB (this Amendment) to properly record these transactions. As discussed in Note 2 to our consolidated financial statements, our financial statements have been restated for the effects of the issuance of warrants and a beneficial conversion feature in connection with the Series B Convertible Preferred Stock. These changes to our financial statement have necessitated changes to other sections of the original filing which are contained in this Amendment.



Except to the extent expressly set forth herein, this Amendment speaks as of the original filing date of our Report and has not been updated to reflect events occurring subsequent to the original filing date other than those required to reflect the effects of the comments received by the Staff. Accordingly, this Amendment should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the Report, including any amendments to those filings.



PART I



Item 1. Description of Business.



Introduction.



We are CCI Group, Inc., and our wholly owned subsidiary is Caribbean Clubs International, Inc., a Delaware corporation. On August 13, 2003, we formed Beach Properties Barbuda Limited, an Antiguan company, as a wholly owned subsidiary.  Unless the context indicates otherwise, any reference to our or we includes our subsidiaries.



We were incorporated in Utah on February 1, 2000 under the name of Kinship Communications, Inc, and we changed our name to Kinship Systems, Inc. on March 2, 2000.



On May 4, 2000, we entered into a product distribution agreement to distribute a vehicle accident analysis and reconstruction software to municipalities. In April 2001, we completed an initial public offering of our common stock and raised gross proceeds of $102,750 in connection with the sale of 102,750 shares of our common stock.  Due to the events of September 11, we believed that municipalities became more focused on homeland security issues, and became less interested in an accident reconstruction software product. During the first quarter of 2002, existing management decided to terminate our efforts to sell the software product, and, pursued various potential merger, acquisition, or new business opportunities.



Effective November 18, 2002, we entered into a share exchange agreement with Caribbean Clubs International, Inc., a Delaware corporation (CCI-Delaware). Pursuant to the agreement, all of the shareholders of CCI-Delaware exchanged their common shares for our common shares on a 1 for 11.8139 ratio (rounded to whole shares). The transaction was approved by the majority of our shareholders. As part of that transaction, our then officers and directors resigned and were replaced by our current officers and directors. Our subsidiary, Caribbean Clubs International, Inc. was incorporated in the State of Delaware on January 11, 2001.



Our offices are located at 8 Sayers Path, Wainscott, New York 11975 and our telephone number is 646-827-9733.



General.



Our plan of operations entails developing a network of luxury resorts in the Caribbean through an acquisition, management or affiliation program. We suspended our membership sales efforts during 2005. We expect to reintroduce the membership plan along with time share and  fractional interest sales plans in the second quarter of 2006.



On September 18, 2003, we acquired our first resort property located on the island of Barbuda, West Indies. The Beach House-Barbuda features 23 oceanfront junior suites with one villa situated on a pristine, isolated Caribbean beach.  We expect that any other resorts targeted for acquisition will be luxury, boutique style resorts with less than 50 rooms. For the next 6-12 months, we will attempt to acquire other luxury resorts located in the Caribbean. Thereafter, we may attempt to acquire non-Caribbean destinations. Each acquired resort is expected to offer amenities and comforts expected by a sophisticated guest. We will require additional financing to acquire any new resort. We have no financing commitments at this time.



Resort Properties-Generally.



In identifying future resorts for acquisition, we will seek to acquire luxury, boutique style resorts that have an operating history and existing clientele. Boutique style resorts generally have less than 50 rooms. We will avoid properties that require significant property development or that have significant operating losses.  We may consider special situations which do not meet our criteria, such as where the property purchase price is below market, or where we can expect to enhance resort revenues through improved operations or increased occupancy rates resulting from member visits or our resort marketing efforts.



The typical property will recognize almost seventy to eighty percent of its cash flow in the high season which begins in November and extends through May.  The Caribbean has long been a vacation destination providing easy accessibility and tropical climates.  The vacationer typically is from the United States and Europe, and utilizes the tropical weather as an alternative to the winter or humid climates prevailing in their home areas.  Travelers to the Caribbean number in the millions per year with the average stay approximating seven days.



We will target resorts that feature a beachfront location, and that have characteristics and amenities attractive to a higher end clientele. We will evaluate each property at the time of acquisition and estimate the need for property renovations. While every effort will be made to maintain the unique qualities and characteristics of each property, we intend to implement a standardization of amenities to be provided to guests and members.  Our existing resort provides the following amenities, which we expect to replicate at other resorts:



o

Fine Dining. Our restaurant delivers a fine dining experience in a relaxed, elegant atmosphere. Our chef specializes in a fusion of Caribbean and European cuisine utilizing local seafood and specialties.

o

Premium and Unique Libations. Our restaurant and bar features a premiums wine list, along with  a collection of liquors, rums and cigars representative of the Caribbean.

o

Unparalleled Personal Service. We provide a wide array of services aimed at providing the highest level of personal service to our guests. Upon arriving at the local airport, we provide a meet and greet service which collects luggage, provides assistance through customs, and directs guests to resort transportation. At the resort, guests are treated to a free massage and are introduced to their personal Service Ambassador. Our Service Ambassadors are highly trained to provide personalized concierge service.  Each guest can reach their personal ambassador 24 hours/day for guest services, such as arranging for meals and drinks at any location at the resort or beach, or planning island activities.

o

Room Amenities. Our rooms are elegantly appointed with king sized four poster beds and luxurious Italian linens and sheets. An assortment of local fresh fruit and flowers welcomes each arriving guest.



Our existing resort staffs between 1 to 2 full or part-time employees per room. If we acquire other resorts, we expect to re-hire many of the existing staff. The staff of each resort likely will have significant hospitality experience. We will implement our own procedures and standards for guest treatment which will require additional training for some staff members.  We do not expect any material interruption in operations upon our takeover of a resort, except for renovations or refurbishments that we may undertake upon acquisition. Renovation or refurbishment plans will be carried out during periods of low occupancy so as to minimize guest inconvenience. A resort may be closed for a period of time if we expect our plans will be too disruptive to the guest experience.



Existing and Proposed Properties.



The Beach House-Barbuda



On September 18, 2003,  we acquired a leasehold interest to a resort known as the Palmetto Beach Hotel, located in Barbuda, West Indies from an independent third party. After acquiring the leasehold interest, we renovated the resort and renamed it, the The Beach House-Barbuda.   Barbuda is an unspoiled coral island located 24 miles north of its sister island, Antigua.  The entire island is approximately sixty-two square miles in size and has 1,400 inhabitants. Barbuda is one of the least developed islands in the Caribbean populated by only three resorts, including ours.



Our resort features 23 oceanfront junior suites and one villa situated on a pristine Caribbean beach. The property is located on 90 acres of land, and our resort occupies approximately 10 of those acres. Construction of the resort began in 1991 and was completed in 1993.  The renovation was completed in April 2004 at a cost of approximately $1,300,000.  We installed a 66,000 square foot lagoon fronting each suite. Our clubhouse is an open air design displaying 30,000 square feet of exotic wood flooring. We provided new or upgraded air conditioning, telephone, electrical, desalination, reservation, and property management systems. All of our spacious rooms were refurnished and remodeled, with private decks fronting the lagoon. Rooms are elegantly appointed with king sized four poster beds and luxurious linens and sheets. Our renovation project transformed a mid-level property into a luxury resort. Our resort offers tranquility to a discerning, sophisticated traveler. Beaches at our resort are pure white, with a pink hue, miles of which are unblemished by construction or other inhabitants.



The Beach House includes a gourmet restaurant and poolside bar, both offering views of the Caribbean.  Our fine dining restaurant emphasizes fresh caught local seafood in a relaxed setting. The resort, with its fresh renovations, opened for business in April 2004. Our published room rates are seasonal ranging from $600 to $1,200 per night which includes breakfast and dinner.



The resort historically has operated 7 months per year, closing for the months of July through October, with the high tourist season occurring from December through May. While we expect the high occupancy season to remain the same,  we intend to operate The Beach House  10 months a year, closing in mid-September through mid-November. Our staff consists of two full time employees, including our General Manager and Chef, and 32 full and part-time employees scheduled according to occupancy.



The land encompassing the resort (90 acres) is leased from the Government of Antigua and Barbuda for a term of 99 years which commenced in 1989. Under the governmental lease, the lessee is required to pay the government the sum of approximately $7,000 per annum. The rental amount is subject to review in 10 year intervals. The Government of Antigua and Barbuda has approved our lease of the property.



On September 18, 2003, we acquired a sub-lease and option to purchase leasehold rights and assets related to the resort  from Impresa Guffanti Constructioni Edili SRL, an independent third party. Guffanti Constructioni received the leasehold rights to 90 acres of land where the resort is situated from the Government of Antigua and Barbuda in 1989. The term of the lease is term of 99 years. On April 22, 2005, we paid the entirety of our sub-lease payments, and exercised our option to acquire all of the assets to the resort. We received the assignment of the underlying lease agreement with the Government of Antigua and Barbuda. As a result of the assignment, we are now the lessee of the governmental lease. We paid the sum of $4,048,695 to Guffanti Constructioni which represented the remaining lease payments under the sub-lease agreement. We used funds from our credit facility with Laurus Master Fund, Ltd. to make this payment. We drew dawn a total of $4,700,000 from the Laurus facility. Funds remaining from the drawdown were used to pay legal and recording fees, and are to be used for working capital purposes. In connection with our acquisition of the governmental lease, we also paid McGinn Smith, Inc. a registered broker dealer, a fee of $220,000 in connection with our October 19, 2002 agreement with the broker dealer. Of that amount, Mr. Casolo, our Chairman who also is the former officer of the broker dealer, received a fee of $110,000 under an arrangement which pre-dated his role as our Chairman.



Other Targeted Properties.



On June 2, 2005, we entered into a Stock Purchase Agreement with an unaffiliated third party to acquire all the issued and outstanding shares of two companies which, through a subsidiary wholly owned by the two entities, owned and operated a resort located in Antigua, West Indies, known as the St. James Club, Antigua. The purchase price for the transaction was $31,000,000, of which $27,000,000 was payable at closing with the balance payable under a promissory note in favor of the seller. We were unable to effect a closing of the transaction, and effective August 20, 2005, the Stock Purchase Agreement was terminated by the Seller. Due to our inability to close the transaction, we forfeited to the seller $250,000 which was held in escrow under the Stock Purchase Agreement.



We intend to seek other resort properties for acquisition. However, as of the date of this report, we have not identified any resort for acquisition.   We expect that all future properties acquired will require us to procure financing for the entirety of the purchase price, except in instances where seller financing may be available for all or part of the purchase price. If seller financing is unavailable, we will be required to obtain third party financing for such amounts. At this time, we do not have any commitment for these additional funds and we can not predict whether we will successfully obtain these amounts.





Membership Plan, and Timeshare and Fractional Interest Details.



We have established a membership plan which entitles members to special benefits at our resort properties. Participating members will be charged a one-time membership fee and annual dues. Membership fee and annual dues currently are $50,000 and $6,000, respectively. Fees and dues may be changed based on demand. Members are granted ten peak season nights or 20 non-peak season nights per year, or a combination thereof, complimentary at any of our resorts. Additional room nights may be reserved on a space available basis at a discount to published room rates. Member will receive an annual credit of $500 to be applied toward their charges at any of our resorts. The credit may be used only by the member within twelve months of its annual issue date. Members receive complimentary transportation to and from the nearest airport  for each resort visit.



Members do not acquire an equity interest  in our corporate entity, or property interest in our resorts. Instead, members acquire a revocable license to use our resort properties under our membership plan, which we may amend from time to time. We reserve the right to limit memberships, to discontinue operation of any resorts, or to sell, lease or otherwise dispose of our resorts.



We will offer both family and corporate memberships. The term of a family membership is the lifetime of the member and spouse. Family membership will be held in the name of an individual and privileges extend to the immediate family. A members immediate family includes the spouse or partner and unmarried children under the age of twenty-two, living at home or attending school on a full-time basis.



We offer corporate memberships to active corporations, partnerships and other forms of multiple ownership for a term of ten years.  Corporate membership will permit the corporate member to designate up to four individuals for membership privileges.  Designed users may be changed annually by notifying us in writing.  Designated users have family privileges as indicated above.



A membership may be transferred only through the membership plan. Upon the death of a member, the surviving spouse, if any, may elect to continue the membership privileges without having to pay any additional membership fee or other joining fee or elect to transfer the membership through terms of the plan.



At a members request, their guests may use our resorts one time at a discount to our published room rates. Thereafter, guests will be charged the published rate for future visits.



In May 2004, we became an affiliate member of Club Corporation of America. ClubCorp owns or operates more than 200 golf courses, resorts, and country clubs worldwide with a member base exceeding 180,000. Our members are automatically enrolled as a ClubCorp member. This affiliation enables our members to receive complimentary green fees a participating country clubs, enjoy social, tennis and athletic privileges at associated clubs, and receive discounts to selected resorts.



During 2005, we suspended our membership marketing plan, and expect to re-initiate the plan during the second quarter of 2006, subject to available funding.





We also plan to develop a condominium sale strategy that involves the sale of existing resort rooms and the development and sale of free standing cottages and villas.  We have not completed the development of either plan as of the date of this report.



Resort Marketing.



We use third party contractors to market our Barbuda resort.  In May 2004, we retained the services of The Brandman Agency and Grillos Distinctive Properties to promote our Barbuda resort. The Brandman Agency is a public relations firm specializing in promoting luxury resorts principally through print media. The Beach House-Barbuda has received coverage in various resort magazines, newspapers and periodicals, such as Conde Nast Traveler, The New York Post, New York Magazine, House and Garden (UK Edition), Luxury Travel, Robb Report, , Vogue, Travel and Leisure, and the Victoria Secret catalogue among other magazines.  The second consultant specializes in resort promotions to large travel agencies in the United States and tour operators in Europe (principally the UK). We expect to continue these services on a month to month basis for the near future.



Competition.



Competition in the hospitality business is generally  intense. The Beach House faces competition from other luxury resorts located on Barbuda, as well as those throughout the Caribbean, including Antigua which is in close proximity to Barbuda. However, we believe that our superior personal service and amenities, as well as the features of our resort favorably distinguishes it from most other resorts in the Caribbean.



Patents, trademarks, franchises, concessions, royalty agreements or labor contracts.



We have no patents, trademarks, franchises, concessions, royalty agreements or labor contracts.



Employees.



As of December 31, 2005, our President and administrative assistant are full time employees of our parent entity. At our Barbuda subsidiary, we have 2 full time employees, including our General Manager and Chef, and 32 other employees who work a mix of full and part time hours.  We also use consultants and independent contractors from time to time. We have no collective bargaining agreements with our employees and we believe relations with our employees are good.





Transaction with Laurus Master Fund



On July 29, 2004, we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Island company (Laurus), pursuant to which we issued to Laurus a convertible term note in the aggregate principal amount of $10,500,000. The funds received from the note, less a $349,500 fee payable to Laurus, were placed in a restricted bank account under the sole dominion and control of Laurus. We also issued Laurus stock options and stock purchase warrants to acquire our common stock. The stock option agreement enables Laurus to acquire 20% of our issued and outstanding shares of common stock, fully diluted as of the date of the closing (or up to 2,786,941 shares). The option is exercisable during a 10 year term, and the exercise price is $0.0036 per share. The stock purchase warrant grants Laurus the right to acquire 807,692 shares of our common stock during a seven year term. The exercise prices of the warrant are $2.06, $2.40, and $2.74, respectively, each for one third of our common shares covered under the warrant.



We also entered into a registration rights agreement with Laurus under which we filed a registration statement with the Securities and Exchange Commission. The registration statement was declared effective by the Commission, and covered the common stock that may be received by Laurus upon conversion of the term note, as well as the common stock underlying the stock warrants and stock options referenced above.



On April 22, 2005, we paid the entirety of our remaining lease payments under our existing sub-lease for our Barbuda resort using the funds from the Laurus credit facility. We drew down a total of $5,049,500 from the Laurus credit facility. Of the total amount, $4,048,695 was paid to the former sub-lessor, $349,500 in fees were paid to Laurus, $220,000 in fees were paid to McGinn Smith &Co., Inc. The remaining amounts from the drawdown were used to pay legal and recording fees, and for working capital purposes. We granted Laurus a priority lien on our assets at the resort including a priority lien on our ownership rights to the governmental lease. On April 27, 2005, we notified Laurus of our intention to return to Laurus the funds remaining in the restricted account. We are also required to pay Laurus 1% of the amount returned plus any accrued an unpaid interest on such sum.



On December 23, 2005, we, along with our subsidiary Beach Properties Barbuda Limited, an Antiguan company (BPBL),  completed a restructuring of our credit facility with Laurus. Under our prior agreements with Laurus, as of December 2005, a principal balance of $5,049,500 was outstanding, and we owed Laurus $354,210 in past due interest (which includes $203,500 in interest charges while funds were held in a restricted account), $93,508 in past due principal, and $90,599 in other fees which were past due. As a result of the restructuring:

•

Laurus agreed to (i) forbear asserting a default under our existing agreements, (ii) allowed BPBL to assume the liability for our existing indebtedness, (iii) lend an additional $550,000 to BPBL ($433,593 after deducting a closing fee to Laurus of $19,250 and other transactional fees of $97,157), and (iv) deferred principal payments on all indebtedness, including past due amounts, until December 1, 2006,

•

The original term note which we executed in favor of Laurus on July 29, 2004 was terminated, and BPBL executed a new promissory note in favor of Laurus in the principal amount of $6,127,616.00. The principal amount of the new note includes the principal balance of the original term note, together with past due interest and fees described above and the additional advance described above,

•

We granted Laurus an irrevocable right to obtain, at any time and from time to time, 30% of the equity interest in BPBL,

•

We, and our subsidiary, Caribbean Clubs International, Inc., guaranteed the  new promissory note, and we granted Laurus a first lien and mortgage on our Barbuda resort, as well as a security interest in the equity interest held by the parent entity in BPBL under an escrow agreement between the parties,

•

The option which we granted to Laurus in July 29, 2004 to acquire 20% of our outstanding common stock was terminated, and

•

We are required to meet numerous financial commitments under our re-structuring agreement with Laurus which includes limitations on the use of cash flow from our Barbuda operations.



The term of the new note is three years and bears interest at the rate of prime (as published in the Wall Street Journal) plus two percent, subject to adjustments. Interest payments commence monthly on January 1, 2006. We are required to make monthly principal payments in the amount of $51,063.47 commencing on December 1, 2006 and monthly thereafter for the three year term, with a balloon payment at maturity.



The restructuring was effected through the execution of a Loan Agreement, new Promissory Note, Novation and Purchase Right Agreement, among other agreements and instruments, all of which are attached as Exhibits to the Form 8-K which we filed with the Securities and Exchange Commission on December 23, 2005.  Readers should refer to these agreements and documents for a complete description of the terms and condition of the Laurus transaction.





Item 2. Description of Property.



During fiscal 2005, our offices were located at 405 Park Avenue, 10th Floor, New York, New York 10022. The premises consist of approximately 1,200 square feet and are subject to a lease term of five years terminating May 2008. The monthly rental is $5,300. On April 20, 2006, we vacated the lease premises, and our current offices are located at 8 Sayres Path, Wainscott, New York 11975.



On September 18, 2003, we acquired a sub-lease and option to purchase leasehold rights and assets related to the resort  from Impresa Guffanti Constructioni Edili SRL, an independent third party. Guffanti Constructioni received the leasehold rights to 90 acres of land where the resort is situated from the Government of Antigua and Barbuda in 1989. The term of the lease is term of 99 years. On April 22, 2005, we paid the entirety of our sub-lease payments, and exercised our option to acquire all of the assets to the resort. We received the assignment of the underlying lease agreement with the Government of Antigua and Barbuda. As a result of the assignment, we are now the lessee of the governmental lease. The term of the lease is term of 99 years. Under the governmental lease, we are required to pay the government the sum of approximately $7,000 per annum. The rental amount is subject to review in 10 year intervals.



On December 23, 2005, we, along with our subsidiary Beach Properties Barbuda Limited, an Antiguan company (BPBL), completed a restructuring of our credit facility with Laurus Master Fund, Ltd., a Cayman Island company (Laurus). Under our prior agreements with Laurus, as of December 2005, a principal balance of $5,049,500.00 was outstanding, and we owed Laurus $354,210 in past due interest (which includes $203,500 in interest charges while funds were held in a restricted account), $93,508 in past due principal, and $90,599 in other fees which were past due. As a result of the restructuring:

•

Laurus agreed to (i) forbear asserting a default under our existing agreements, (ii) allowed BPBL to assume the liability for our existing indebtedness, (iii) lend an additional $550,000 to BPBL ($433,593 after deducting a closing fee to Laurus of $19,250 and other transactional fees of $97,157), and (iv) deferred principal payments on all indebtedness, including past due amounts, until December 1, 2006,

•

The original term note which we executed in favor of Laurus on July 29, 2004 was terminated, and BPBL executed a new promissory note in favor of Laurus in the principal amount of $6,127,616.00. The principal amount of the new note includes the principal balance of the original term note, together with past due interest and fees described above and the additional advance described above,

•

We granted Laurus an irrevocable right to obtain, at any time and from time to time, a 30% of the equity interest in BPBL,

•

We, and its subsidiary, Caribbean Clubs International, Inc. guaranteed the  new promissory note, and we granted Laurus a first lien and mortgage on our resort located in Barbuda, as well as a security interest in the equity interest held by the parent entity in BPBL under an escrow agreement between the parties,

•

The option which we granted to Laurus in July 29, 2004 to acquire 20% of our outstanding common stock also was terminated.



The term of the new note is three years and bears interest at the rate of prime (as published in the Wall Street Journal) plus two percent, subject to adjustments. Interest payments commence monthly on January 1, 2006. We are required to make monthly principal payments in the amount of $51,063.47 commencing on December 1, 2006 and monthly thereafter for the three year term, with a balloon payment at maturity.



In December 2003, we made significant renovations to the resort. The renovation was completed in April 2004 at a cost approximately $1,300,000.  As a result of the renovations, the property is in good repair, and we do not expect to make additional renovations in the near future. Our resort is considered a luxury resort with room rates ranging from $600 to $1,200 per night. The renovations included a 66,000 square foot lagoon fronting each room. Due to our unique resort design, and other amenities, we believe that our resort compares favorably with other luxury resorts in Barbuda and Antigua. We believe the property is adequately covered by property and casualty insurance. The resort opened for business in April 2004 after the renovations were completed. We do not have any present renovation plans except for normal maintenance items. Our occupancy rate during 2005 ranged from 30% to 90%.  As of December 31, 2005, the depreciable basis of the resort and related assets for federal tax purposes is $4,308,056. This amount is comprised of approximately $3,000,000 in fixed assets such as buildings, $566,374 in furniture and equipment, and $629,950 in improvements. The buildings are depreciated over a 39 year life, on a straight line method at 100%; fixtures are depreciated over a 7 year life using MACRS at 200%; and  improvements are depreciated over a 15 year life using MACRS  at 150%.





Item 3. Legal Proceedings.



On March 3, 2004, we and our subsidiary, Caribbean Clubs International, Inc., filed a complaint in the Supreme Court for the State of New York against the former president of our subsidiary seeking declaratory relief against certain claims made by the defendant against us.  On October 21, 2003, our subsidiary terminated its employment relationship with the defendant under a for cause provision in the employment agreement. The defendant entered into an employment agreement with our subsidiary, and was entitled to receive a total of 300,000 shares of  our common stock during a 3 year term, vesting at the month rate of 8,334. The defendant received a total of 116,666 shares of common stock of the Company under the employment agreement. The defendant asserted certain claims against us, including that he was entitled to participate in the November 2002 stock exchange agreement between us and our subsidiary (despite the fact that at no time was the defendant a shareholder of our subsidiary), and therefore, he was entitled to a total of 3,544,170 shares of our common stock under the terms of the stock exchange agreement. He also alleged that he was terminated without sufficient cause under the employment agreement, and therefore is entitled to additional compensation, in the form of salary and common stock under the agreement, among other claims. Our declaratory action seeks the court to determine that the defendant was not entitled to participate in the stock exchange agreement, is not entitled to additional shares of our common stock, was properly discharged for cause under the agreement, and is not entitled to any additional compensation or other claims. The defendant has filed an answer and a counterclaim now alleging that he is entitled to 3,544,170 shares of our common stock, and was terminated without sufficient cause under the employment agreement and therefore is entitled to additional cash compensation of approximately $48,000 under the agreement. We have responded to the counterclaim denying the claims of the defendant. We filed a motion to dismiss the case which was denied by the Court. Discovery has been completed and a trial on the merits is scheduled from May 8, 2006.



On September 1, 2004, Independent Financial Services, Inc. filed an action against us in the United States District Court, District of Rhode Island. The action relates to the transaction with Laurus Master Fund, Ltd. We entered into an agreement with the plaintiff in which they agreed to assist us in arranging investment capital to acquire additional resort properties. Under the agreement, plaintiff would be entitled to receive private placement commissions equal to four percent of the gross amount financed and two percent of our common stock on the date of closing in connection with such arranged financing. The lawsuit alleges breach of contract, among other claims including fraud, and seeks specific performance of the agreement and the imposition of a constructive trust on the funds resulting from the Laurus transaction. The action also sought to impose a temporary restraining order on the funds held in a restricted account under the Laurus transaction, which was denied by the Court. We have filed an answer in the action denying the plaintiffs claims of relief and asserting various affirmative defenses, including that plaintiff fraudulently induced us to enter into the agreement by failing to disclose that they were not a registered broker-dealer, and that the agreement is voidable due to the fact that they are required to have been a registered broker-dealer in order to receive a commission under the Laurus transaction. The case is in discovery. We filed a motion to dismiss the case which was denied by the Court. Discovery has been completed and a trial on the merits is scheduled from May 22, 2006.



The Company may be involved in other routine legal proceedings from time to time incidental  to its business.



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



None



PART II



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



Our common stock has traded on the NASDAQ OTC Bulletin Board since the third quarter of 2001 until the share exchange agreement under the symbol "KSYS". On November 26, 2002, our stock symbol changed to CCLB and on September 13, 2003, our stock symbol changed to CCIG.



The table below sets forth the high and low bid prices of our common stock as reported by NASDAQ.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions.  There is an absence of an established trading market for our common stock, as the market is limited, sporadic and highly  volatile.  The absence of an active market may have an effect upon the high and low priced as reported.



2003                                  Low Bid    High Bid

1st Quarter                             $2.00     $2.50

2nd Quarter                              2.05      3.75

3rd Quarter                              2.00      3.00

4th Quarter                              1.50      2.23



2004                                  Low Bid    High Bid

1st Quarter                             $1.30     $2.00

2nd Quarter                              1.50      2.00

3rd Quarter                              0.50      1.50

4th Quarter                              0.51      2.00



2005                                  Low Bid    High Bid

1st Quarter                             $0.32     $2.00

2nd Quarter                              0.35      2.00

3rd Quarter                              0.35      1.00

4th Quarter                              0.35      0.90



2006                                  Low Bid    High Bid

1st Quarter                             $0.35     $1.00



As of April 10, 2006, we had 54 shareholders of record of our common stock. Although there are no restrictions on our ability to declare or pay dividends, we have not declared or paid any dividends since our inception and do not anticipate paying dividends in the future.



|Equity Compensation Plan Information                          
|--------------------------------------------------------------
|Plan category                                                 
|Equity compensation plans approved by security holders        
|Equity compensation plans not approved by security holders (1)
|Total                                                         





(1) On September 15, 2003, we appointed Mark C. Casolo as our Chairman, and as results of such appointment, we granted  Mr. Casolo a stock purchase warrant to acquire 1,000,000 shares of the company at an exercise price per share of $0.001 during the term of the stock purchase warrant. The term of the stock purchase warrant is five years.



Recent Sales of Unregistered Securities.



On December 30, 2005, we completed an exchange of $6,676,750 of our outstanding 12% subordinated notes pursuant to which we issued 26,707 shares of our Series B Preferred Stock. Of the total amount converted, $6,304,250 was held by three hedge funds, with the remainder held by individual investors. We entered into respective agreements with the individual investors in each of the three hedge funds and the other remaining investors in respect of this transaction. The features of our Series B Preferred Stock are described in our Form 8-K filed on October 17, 2005, which includes the right to convert each share of our Series B Preferred Stock into 50 shares of our common stock.  During fiscal years 2003, 2004 and 2005, we issued a total of $7,149,250 in 12% subordinated notes, of which $6,346,750 was held by the three hedge funds, with the remainder held by individual investors. The transaction was effective as of August 31, 2005. The Companys Chairman is the fund manager of the two of the hedge funds and is the co-manager of the third fund.



On July 1, 2005, we commenced a private placement offering of  our Series A Preferred Stock. Our Board of Directors authorized the issuance of 600,000 shares of the Series A Preferred Stock. The Series A Preferred Stock has a stated value and liquidation preference of $25.00 per share, and has no voting rights. Each share is convertible into 50 shares of common stock of the Company at the option of the holder, or under certain conditions by the Company. Annual dividends accrue on the preferred stock at the rate of prime during the first two years, prime plus 2% during year three, and prime plus 3% thereafter. The funds raised from the offering will be used for working capital purposes. The Company can redeem the Series A Preferred Stock at a price of 106% of the stated value per share. The funds raised from the offering will be used for working capital purposes. As of December 31, 2005, we received $445,000 in gross offering proceeds.



In 2005, we issued 60,000 shares of our common stock to two individuals in exchange for services rendered by such parties.



We believe that the above stock issuances qualify as an exemption from the registration requirements of the Securities Act pursuant to Section 4(2) of the Act and/or Regulation D promulgated thereunder since, among other things, the transaction did not involve a public offering, as the transaction involved less that 35 unaccredited investors, and each investor had access to information about us and their investment.



Item 6. Management's Discussion and Analysis.



Overview.



We are CCI Group, Inc., and our wholly owned subsidiaries are Caribbean Clubs International, Inc., a Delaware corporation, and  Beach Properties Barbuda Limited, an Antiguan company. Unless the context indicates otherwise, any reference to our or we includes our subsidiaries.



We were incorporated in Utah on February 1, 2000 under the name of Kinship Communications, Inc.  We changed our name to Kinship Systems, Inc. on March 2, 2000. CCI-Delaware was incorporated on January 11, 2001, and on  August 13, 2003, Beach Properties Barbuda Limited was incorporated.



Effective November 18, 2002, we entered into a share exchange agreement with Caribbean Clubs International, Inc., a Delaware corporation. Pursuant to the agreement, all of the shareholders of CCI-Delaware exchanged their common shares for our common shares on a 1 for 11.8139 ratio (rounded to whole shares). The transaction was approved by the majority of our shareholders. As part of that transaction, our then officers and directors resigned and were replaced by our current officers and directors.



On August 29, 2003, we changed our name to CCI Group, Inc.



On September 18, 2003, we acquired a sub-lease to our first resort property located on the island of Barbuda, West Indies. The resort features 23 oceanfront junior suites and one villa situated on a pristine, isolated Caribbean beach. The property is located on 90 acres and is the subject of a 99 year lease agreement with the Government of Antigua and Barbuda which began in 1989.  In December 2003 we commenced a $1,300,000 renovation of the resort. The renovations were completed in April 2004 and which transformed the resort to a five star destination. Our resort is now called The Beach House-Barbuda.  The resort commenced operations in April 2004. On April 22, 2005, using funds from the transaction with Laurus Master Fund, Ltd., we paid the entirety of our lease payments remaining under the original sub-lease agreement. We are now the lessee of the governmental lease. We have delayed the full scale promotion of our membership plan for the foreseeable future, and are concentrating our management efforts on the marketing and operations of our existing resort. We intend to acquire or operate other boutique style resort hotels located in the Caribbean and sell memberships to our acquired properties. We expect to re-initiate our membership marketing efforts when we have acquired at least one more operating resort.



Results of Operations.



Fiscal year end 2005 compared with Fiscal year end 2004.



Revenues for fiscal 2005 were $1,732,355 compared with $293,666 for fiscal 2004. The increase of $1,438,689 or 490% is due to the limited operations which occurred during 2004 period, along with higher occupancy rates experienced during the 2005 period.



Total operating costs, consisting of cost of sales, direct and operating expenses, and general and administrative expenses, were $4,780,127 for the 2005 period compared with $4,142,871 for the comparable 2004 period. Cost of sales which represents principally food and beverage costs for our Barbuda resort was $276,973 for the 2005 period compared with $88,811 for the 2004 period. The increase in the 2005 reflects the higher operating activity for the period compared with the limited operations during the 2004 period.  Direct and operating expenses which represents non-managerial employee related costs, and other direct charges at our resort such as fuel and utilities, was $1,145,966 compared with $1,270,900 for the comparable 2004 period. The increase in the 2005 also reflects the higher operating activity for the period compared with the limited operations during the 2004 period.  General and administrative which represents managerial costs at our Barbuda resort, consulting and employee related charges for our New York operations and depreciation and amortization charges, was $3,357,188 for the 2005 period, reflecting an increase of $574,028 from $2,783,160 for the comparable period in 2004.



Loss from operations for fiscal 2005 was $3,047,772 reflecting a decrease of $801,433 from $3,849,205 for the comparable period in 2004 for the reasons discussed above.



Interest expense for the 2005 period was $8,689,041 reflecting an increase of $6,770,305 from $1,918,736 for the comparable period in 2004. Interest expense, in addition to interest which we paid on our outstanding notes payables, includes the amortization of deferred loan costs related to stock warrants issued in connection with our financings, including warrants issued with our 12% subordinated notes, warrants issued to a broker dealer, and warrants issued to Laurus Master Fund, Ltd. Interest income for 2005 was $126,434 for the 2005 period represents an increase of $105,639 from $20,795 for the comparable period in 2004. Interest income generally is interest on proceeds of the sale of our 12% subordinated notes, held in interest bearing accounts. The increase in interest reflects the additional funds received from the sale of the 12% subordinated notes during the 2005 period. Foreign currency exchange gain for the 2005 period was $4,887 reflecting an increase of $2,672 from $2,215 for the comparable period in 2004. We receive revenues in currencies other than Eastern Caribbean (EC) and United States dollars. Foreign currency exchange gain reflects the impact of converting such other amounts to EC or US dollars.



Net loss for the fiscal 2005 period was $11,605,492 (or $1.20 per common share) compared with a net loss of $5,744,931 (or $0.60 per common share) for the same period in 2004. The increase in net loss of $5,860,561 for the 2005 period is due to the factors discussed above.



Liquidity and Capital Resources



As of December 31, 2005, we had working capital deficit of $2,514,777. Working capital deficit as of December 31, 2004 was $2,120,786. The increase in working capital deficit for the 2005 period compared with the 2004 period is due principally to the loss from operations during 2005 period.



Property, plant and equipment, net of accumulated depreciation, as of December 31, 2005 totaled $3,663,605, which consists of our resort property located in Barbuda. Property, plant and equipment of the Company, net of accumulated depreciation, as of December 31, 2004 totaled $3,910,659. The reduction is due to amortization that occurred during the period.



As of December 31, 2005, our long term notes payable were $6,269,849, of which $6,127,616 is a note payable to Laurus Master Fund, Ltd.



We continue to experience significant losses from operations. We are uncertain as to when we will achieve profitable operations. We require an immediate infusion of capital for us to conduct our business. Due to our cash requirements, our independent auditors in their audit report for fiscal year end December 31, 2005, contained an explanatory paragraph concerning  our ability to continue as a going concern. We will require additional funds to meet our working capital needs at our New York office, which includes the payment of our outstanding debt instruments including ongoing amounts under our loan agreement with Laurus Master Fund, Ltd., and from time to time our Barbuda resort. We also will require additional funds for any resort acquisition. Finally, if acquired resorts have a negative cash flow from operations, we may be required to raise additional funds to satisfy these working capital needs. We intend to raise the required funds through the private placement of our debt or equity securities or through bank financing. On June 23, 2005, we entered into an agreement with Westrock Advisors, Inc. for broker and financial advisor services to assist us in obtaining financing. The Companys chairman is an employee and officer of Westrock.  During fiscal years 2003 and 2004 and in the first quarter of 2005, a broker dealer formerly affiliated with our Chairman has acted as our placement agent in the sale of our subordinated notes. These funds were used to satisfy our working capital requirements during these periods. At this time, however, we do not have any firm commitments to raise the additional funds described above.  If we are unable to raise sufficient funds to meet our cash requirements as described above, we may be required to curtail, suspend, or discontinue our operations, as well as suspend or discontinue acquisition of additional resorts. Our inability to raise additional funds as described above may forced us to restructure, file for bankruptcy, sell assets or cease operations,  any of which could adversely impact our business and business strategy, and the value of our capital stock.



During fiscal years 2003 and 2004, we raised approximately $5,174,700 in gross proceeds through the private placement offerings of our subordinated notes. In addition, during 2004, we issued $1,054,390 in demand notes to a party related to the broker dealer formerly affiliated with our Chairman. The notes bear interest at 12%, and are due and payable on October 1, 2005. During fiscal 2005, we raised approximately $1,525,590 net of offering costs of $169,510 in connection with the private placement offering of our subordinated notes. The subordinated notes issued during 2003, 2004, and 2005 were offered at 100% of the face or principal amount in minimum denomination is $25,000 with $1,000 increments thereafter. The notes mature between August 31, 2008 and May 1, 2009, and are payable in full at maturity. Interest accrues at the rate of 12% per annum, payable quarterly. Each note contains an immediately detachable stock purchase warrant. The warrant enables the holder to purchase 300 shares of our common stock for each $1,000 in face value of the Notes subscribed. The exercise period of the warrants is five years from the date of issuance.



During 2005, we have received $445,000 in gross offering proceeds from the sale of our Series A Preferred Stock. The Series A Preferred Stock has a stated value and liquidation preference of $25.00 per share, and has no voting rights. Each share is convertible into 50 shares of common stock of the Company at the option of the holder, or under certain conditions at our option. Annual dividends accrue on the preferred stock at the rate of prime during the first two years, prime plus 2% during year three, and prime plus 3% thereafter. We can redeem the Series A Preferred Stock at a price of 106% of the stated value per share.



Effective December 30, 2005, we completed an exchange of $6,676,750 of our outstanding 12% subordinated notes pursuant to which we issued 26,707 shares of our Series B Preferred Stock. Of the total amount converted, $6,304,250 was held by three hedge funds, with the remainder held by individual investors. We entered into respective agreements with the individual investors in each of the three hedge funds and the other remaining investors in respect of this transaction.



We do not expect to incur research and development costs within the next 12 months.



We have no off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.



Off Balance Sheet Arrangements.



We have no off balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.





Disclosure Regarding Forward Looking and Cautionary Statements.



Forward Looking Statements. Certain of the statements contained in this Annual Report on Form 10-KSB includes "forward looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts included in this Form 10-KSB regarding the Company's financial position, business strategy, and plans and objectives of management for future operations and capital expenditures, and other matters, are forward looking statements. These forward-looking statements are based upon management's expectations of future events. Although we believe the expectations reflected in such forward looking statements are reasonable, there can be no assurances that such expectations will prove to be correct. Additional statements concerning important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") are disclosed below in the Cautionary Statements section and elsewhere in this Form 10-KSB. All written and oral forward looking statements attributable to us or persons acting on our behalf subsequent to the date of this Form 10-KSB are expressly qualified in their entirety by the Cautionary Statements.



Cautionary Statements. Certain risks and uncertainties are inherent in the Company's business. In addition to other information contained in this Form 10-KSB, the following Cautionary Statements should be considered when evaluating the forward looking statements contained in this Form 10-KSB:



WE MAY NEVER BECOME PROFITABLE AND CONTINUE AS A GOING CONCERN BECAUSE WE HAVE HAD LOSSES SINCE OUR INCEPTION.

We may never become profitable and continue as a going concern because we have incurred losses and experienced negative operating cash flow since our formation. For our fiscal years ended December 31, 2005 and 2004, we had net losses of $(11,605,492) and $(5,744,931), respectively, and we have a cumulative loss from inception of $(21,433,485). We expect to continue to incur significant expenses. Our operating expenses have been and are expected to continue to outpace revenues and result in significant losses in the near term. We may never be able to reduce these losses. We can not predict  whether will be successful in the future.



WE ARE HIGHLY LEVERAGED AND REQUIRE OPERATING INCOME OR ADDITIONAL CAPITAL TO PAY OUR DEBT SERVICE.

As of December 31, 2005, we have total current liabilities of $1,834,503, and long term notes payable of $6,269,849. Notes payable relate to our outstanding loan from Laurus Master Fund, Ltd.  We expect to service our existing debt arrangements through additional financing, income generated from existing and newly acquired resort properties, and membership and timeshare sales, if any. As of the date of this report, revenues from our resort operation have improved but have been insufficient to cover our overall operating expenditures, and membership and timeshare sales have been non-existent. Although we expect to operations at our Barbuda resort to improve, we can not predict whether we will achieve sufficient revenues from resort operations and from membership or time share sales to service our existing debt obligations.



OUR BUSINESS OPERATIONS WILL BE HARMED IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING.

Our business operations will be harmed if we are unable to obtain an immediate capital infusion. We will require immediate financing to meet the working capital requirements of our New York office. In addition, we may need additional financing to meet our operating shortfalls from time to time at our Barbuda resort. We also will need to raise funds to acquire additional resort properties. As of the date of this report, we do not have a commitment for any such funding. We do not know if additional financing will be available when needed, or if it is available, if it will be available on acceptable terms. Insufficient funds may prevent us from implementing our business strategy or may require us to delay, scale back or eliminate certain opportunities. We also may be forced to scale back our existing operations. If our cash flow from our Barbuda operations are insufficient to meet our operating needs, we may suffer a default under the Laurus note. As stated below, if we default under our agreements with Laurus, we may lose our ownership rights to our Barbuda resort.



EXISTING SHAREHOLDERS MAY SUFFER SIGNIFICANT DILUTION DUE TO OUR CAPITAL NEEDS.

As stated above, we require additional funds to support our current working capital requirements, as well funds to acquire other resorts.  If we are successful in raising these funds, we may be required to issue our

common stock, possibly at a discount to the market price. These actions will result in dilution of the ownership interests of existing shareholders, may further dilute our common stock book value, and the resultant dilution may be material.



A DOWNTURN IN ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR BUSINESS.

The resort industry historically has been subject to substantial cyclical variations, and its business typically relies upon the expenditure of consumer discretionary income. A significant downturn in the US or global economy or any other uncertainties regarding future economic prospects could affect consumer spending habits which would have a material adverse impact on our operations and financial results.



INCLEMENT WEATHER COULD ADVERSELY AFFECT OUR BUSINESS.

Our existing and targeted Caribbean resorts are subject to weather-related risks, such as  hurricanes and tropical storms. Weather related incidents could render a resort inoperable for its prime occupancy period, or could curtail travel to a resort. The prime occupancy period for Caribbean resorts is from November through May. Unfavorable weather or the inoperability of a resort during this period could result in a significant loss of operating income.



TERRORIST ACTS COULD ADVERSELY AFFECT OUR BUSINESS.

Terrorist acts worldwide could adversely affect our business.  The travel and hospitality industry experienced a significant negative impact from terrorist acts in the past. Since our resorts are accessible only by air travel, terrorist acts or perceived threats of these acts in the future could affect the willingness of travelers to visit our resorts.  If travel is significantly reduced particularly during our limited high season, we could experience a significant loss of operating income.



IF AN EVENT OF DEFAULT OCCURS UNDER THE NOTE ISSUED TO LAURUS, IT COULD RESULT IN A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, OPERATING RESULTS, OR FINANCIAL CONDITION.

On December 23, 2005, we, along with our subsidiary Beach Properties Barbuda Limited, an Antiguan company (BPBL), completed a restructuring of our credit facility with Laurus Master Fund, Ltd., a Cayman Island company (Laurus). Events of default under the new note and related agreements include:

o    failure to pay interest and principal payments when due;

o    our breach of any  material  covenant or term or condition of the note or in any related

agreements;

o    our breach of any material representation or warranty made in the note or in any related

agreement;

o    we make an  assignment for the benefit of creditors, or a receiver or trustee is appointed for

us;

o    any form of bankruptcy or insolvency  proceeding is instituted by or against us, which is not

vacated within 90 days;

o    any money judgment or similar final process filed against us for more than $50,000, and shall

remain unvacated, unbonded  or unstayed for a period of thirty (30) days; and

o    our  failure to meet certain financial covenants contained in the note and related agreements

which covenants contain restrictions on the use of revenues from our Barbuda subsidiary.



We also have entered into an escrow agreement with Laurus in which we have escrowed our 70% equity ownership in the Barbuda resort. If we default  on the new note and the related agreements, Laurus can foreclose on our resort.  A default of the Laurus note will have a material  adverse  effect  on our  business,  operating  results,  or  financial condition to such extent that we will be forced to restructure, file for bankruptcy, sell assets or cease operations,  any of which could adversely impact our operations the value of our common stock.



WE MAY EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY AFFECT YOUR INVESTMENT.

The market price of our common stock may  fluctuate  significantly  in response to a number of factors, some of which are beyond our control, including:



o    our inability to receive future funding;

o    changes in market valuations of other similar companies;

o    additions or departures of key personnel;

o    any deviations in net sales or in losses from levels  expected by securities analysts; and

o    future sales of common stock.



In addition,  the stock market has recently  experienced extreme volatility that has often been unrelated to the performance of particular companies.  These market  fluctuations  may  cause  our  stock  price  to fall  regardless  of our performance.



OUR COMMON STOCK IS THINLY TRADED AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES.

Our common stock is thinly traded on the OTC Bulletin Board. This means that the buy and sell volume for our common stock OTC Bulletin Board has been limited. If you purchase our shares in the opern market, you may not be able to resell them in the market.



BECAUSE OUR SHARES ARE DEEMED "PENNY STOCKS," YOU MAY HAVE DIFFICULTY SELLING THEM IN THE SECONDARY TRADING MARKET.

The  Securities  and  Exchange  Commission  has adopted  regulations  which generally  define a "penny  stock" to be any equity  security  that has a market price (as therein  defined) less than $5.00 per share or with an exercise  price of less than $5.00 per share,  subject to certain exceptions.  Additionally,  if the equity  security is not  registered or  authorized on a national  securities exchange or Nasdaq,  the equity security also would  constitute a "penny stock." As  our  common  stock  falls  within  the  definition  of  penny  stock,  these regulations require the delivery,  prior to any transaction involving our common stock, of a risk disclosure  schedule  explaining the penny stock market and the risks  associated  with  it.  Disclosure  is  also  required  to be  made  about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities.  In addition,  monthly statements are required to be sent  disclosing  recent price  information for the penny stocks. The  ability  of  broker/dealers  to sell our  common  stock and the  ability of shareholders to sell our common stock in the secondary  market would be limited. As a result,  the market  liquidity  for our common  stock would be severely and adversely affected. We can provide no assurance that trading in our common stock will not be subject to these or other  regulations  in the  future,  which would negatively affect the market for our common stock.



WE HAVE ADDITIONAL SECURITIES AVAILABLE FOR ISSUANCE, INCLUDING PREFERRED STOCK, WHICH IF ISSUED COULD ADVERSELY AFFECT THE RIGHTS OF THE HOLDERS OF OUR COMMON STOCK.

Our articles of incorporation  authorize the issuance of 50,000,000  shares of common stock and 10,000,000  shares of preferred  stock. Our  board  of  directors, without shareholder approval, can issue common stock and the  preferred  stock, and can establish the terms of the  preferred  stock, including dividend rights, voting rights,  liquidation preference and conversion rights. Any issuance of preferred stock could adversely affect the rights of the  holders of common  stock by,  among  other  things,  establishing preferential  dividends,  liquidation  rights  or  voting  powers.  Accordingly, shareholders,  including those purchasing the securities offered hereby, will be dependent  upon the judgment of our  management  in  connection  with the future issuance  and sale of shares of our common  stock and  preferred  stock,  in the event that buyers can be found therefore. Any future issuances of common stock or preferred  stock would further  dilute the  percentage  ownership of our company held by the public  shareholders.  Furthermore,  the issuance of preferred stock could be used to discourage or prevent efforts to acquire control of our company through acquisition of shares of common stock.





Item 7. Financial Statements.



The Consolidated Financial Statements that constitute Item 7 of this Annual Report on Form 10-KSB follow the signatures below.





Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.



None





Item 8A . Controls and Procedures.



Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including the Companys President and Principal Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operations of its disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of December 31, 2005 for the Form 10-KSB. Based on this evaluation, the Companys  President and Principal Financial Officer concluded that the Companys disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms relating to the Companys reporting obligations, and was made known to them by others within the Company, particularly during the period when this report was being prepared. In addition, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the Companys fourth fiscal quarter of 2005 that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting.



PART III



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



Our directors and executive officers, their ages, and the positions they hold are set forth below. Our directors hold office until the next annual meeting of our stockholders and until their successors in office are elected and qualified. All officers serve at the discretion of the Board of Directors.



Name

Age

Position





Mark C. Casolo

50

Chairman, and Chief

Financial Officer

Fred W. Jackson, Jr.

55

President, Chief

Executive Officer, and

Director



Mark C. Casolo. Mr. Casolo has been our director since November 18, 2002, and on September 15, 2003, he was appointed our Chairman. On June 22, 2005, he became Managing Director of Corporate Finance of Westrock Advisors, Inc, a registered broker dealer. From 1996 to June of 2005 he was Senior Vice President of McGinn, Smith & Co., Inc., a NASD registered broker dealer.



Fred W. Jackson, Jr. Mr. Jackson has been our President and CEO since November 18, 2002, and has been Chairman and CEO of our subsidiary, Caribbean Clubs International, Inc., from its inception in January 2001. Mr. Jackson was our Chairman from November 18, 2002 to September 15, 2003. From 1997 to the commencement of activities of our subsidiary, Mr. Jackson was a consultant providing financial services to private and public companies.  Mr. Jackson has served as CFO and CEO of both private and publicly traded companies, and has extensive management, marketing and sales experience having achieved national recognition at both IBM and ITEL for his marketing ability and performance.



Meetings and Committees of the Board of Directors



During the fiscal year ended December 31, 2005, the Board of Directors held no regular meetings, however, it took two actions by unanimous written consent.   The Board of Directors has not established an Audit Committee and the functions of which are performed by the Board.  Mr. Mark C. Casolo is the financial expert of the Board. Mr. Casolo would not be deemed to be independent as  that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934.





Item 10. Executive Compensation.



The compensation for all of our directors and officers, and officers of our subsidiary, for services rendered to the Company or our subsidiary for the fiscal years ended December 31, 2005, 2004, and 2003, respectively, are set forth in the table below.



SUMMARY COMPENSATION



Long Term

Annual Compensation            Compensation Awards

Name and

Principal

Salary    Bonus

Other          Securities

Company Position

Year   ($)      ($)       ($)        Underlying Options#

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

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

Fred W. Jackson, Jr. 2005 $148,959  -0-    -0-                 -0-

President

2003 $125,000  -0-    -0-                 -0-

2002 $127,412  -0-    -0-                 -0-





Mark C. Casolo(1)

2005 $55,204   -0-    -0-                  -0-

Chairman

2004   -0-     -0-    -0-                  -0-

2003   -0-     -0- $1,999,000          1,000,000



James Bishop

2004   -0-     -0-

-0-                 -0-

Director

2003   -0-     -0-

-0-                 -0-

2002   -0-     -0-

-0-                 -0-

_________________________________________________________

Name and

Principal

Salary  Bonus

Other       Securities

Subsidiary Position  Year   ($)   ($)       ($)       Underlying Options #

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

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



Sumner Baye

2004     -0-   -0-

-0-                 -0-

President

2003  $101,357 -0-

$286,039            -0-

2002   $62,508 -0-

-0-                -0-





Anita Diamond       2004 $ 87,500 -0-

-0-                -0-

Vice President-

2003 $131,489 -0-

-0-                -0-

Marketing         2002  $23,557 -0-

-0-                -0-

(1) The amounts for all years excludes any compensation that Mr. Casolo may have received from McGinn Smith & Co., Inc., his former employer, and Westrock Advisors, Inc., his current employer, resulting from any investment banking services rendered by such firms on our behalf. Mr. Casolo received $180,700, $336,770, and $135,600  as an officer of McGinn Smith and Company, Inc., in connection with the private placement of our 12% subordinated notes during 2003, 2004 and 2005, respectively. McGinn Smith acted as the selling agent of our 12% subordinated notes.During April 2005,when we complete the acquisition of the leasehold interest to the Barbuda property during 2005, we paid McGinn Smith a finders fee of $220,000, of which Mr. Casolo received $115,000. In connection with the private placement of our Series A Preferred Stock we paid Westrock Advisors, Inc., a registered NASD broker/dealer, a fee of $44,500, of which Mr. Casolo received $26,700 as a broker in connection with the sale of such securities. On September 15, 2003, we appointed Mr. Mark C. Casolo as our Chairman of the Board. We also granted to Mr. Casolo a stock purchase warrant to acquire 1,000,000 shares of our stock at an exercise price per share of $0.001. The term of the stock purchase warrant is five years. The amount for 2003 reflects the valued price per share of $2.00 less the exercise price of $0.001.



Mr. Bayes employment was terminated in October 2003 and the salary amount is prorated for such period. Other compensation for Mr. Baye represents the value of 116,666 shares of common stock issued to Mr. Baye during 2003. Ms. Diamonds employment was terminated in November 2004, and the salary amount is prorated for such period. The annual salary for each individual is discussed in Employment Agreements below.



Employment Agreements.

We do not have a written employment agreement with our existing officers, Messrs. Jackson or Casolo. We have, however, agreed with both officers to certain terms regarding the employment arrangement through fiscal 2005. Mr. Jacksons annual salary for 2004 was $125,000, and was increased to $150,000 during 2005. In February 2005, we agreed with Mr. Casolo to pay him salary of $75,000 per annum for the 2005 period. His salary was increased to $125,000 for the 2005 period. We do not have any agreements with either officer for compensation beyond 2005. Mr. Casolo has agreed that he is not entitled to compensation as Chairman of the Company for the 2003 and 2004 periods nor for the month of January 2005. Mr. Casolo devotes a significant amount of his business time to our business affairs. However, he also is an officer of Westrock Advisors, Inc., and is not our exclusive employee.



In November 2005, we entered into purported employment agreements with two individuals. The agreements which we believe were entered into provided for a salary of $126,000 per annum for each of the two parties.  The term of each agreement is three years, terminable by either party upon 365 days notice. Among other terms, the two parties each were granted stock options to acquire 500,000 shares of our common stock upon our acquisition of a company wholly owned by the parties. We have not acquired the company nor do we anticipate acquiring the company. The two parties have provided us with a contract which is materially different from the contract described above. We are investigating the difference between the two sets of agreements. As of the date of this report, we have not concluded our investigation, nor have formulated our legal position regarding this matter, and we can not predict the resolution, if any, of these matters.



Effective August 2002, our subsidiary entered into a three year employment agreement with its then President pursuant to which the officer was paid an annual salary of $125,000. In addition, the officer was entitled to receive 100,000 shares of our common stock on an annual, earn out basis. During 2003, Mr. Baye received 116,666 shares of our common stock under his employment agreement for the 2003 and 2002 periods. Our subsidiary terminated the employment agreement on October 21, 2003. We are involved in litigation concerning this employment agreement which is described in the Item 3-Legal Proceedings of Part I above.



Effective November 2002, our subsidiary entered into a one year employment agreement with its Vice President of Business Development, pursuant to which the officer was paid a monthly salary of $14,583 during an initial period of between three to six months. Thereafter, the monthly salary for the employee was $8,333. Our subsidiary terminated the employment arrangement in November 2004.



Except as described herein, we do not have any other form of compensation payable to our officers or directors, including any stock option plans, stock appreciation rights, or long term incentive plan awards for the periods indicated in the above table. We have no compensatory plan or arrangement that results or will result from the resignation, retirement, or any other termination of an executive officers employment or from a change-in-control or a change in an executive officer's responsibilities following a change-in-control. In the future, however, we expect to establish one or more stock option plans for our employees, officers, directors, and consultants.



Option Grants in Fiscal Year 2003



% of Total

Options to    Exercise or    Market Price

Options   Employees in      Base       On Date of

Name         Granted   Fiscal Year   Price ($/sh)     Grant     Expiration Date



Mark Casolo  1,000,000     100%          $0.001      $2.00(1)     8/15/08

Chairman



(1) On September 15, 2003, we appointed Mr. Mark C. Casolo as our Chairman of the Board. We also granted to Mr. Casolo a stock purchase warrant to acquire 1,000,000 shares of our common stock at an exercise price per share of $0.001 during the term of the stock purchase warrant. The term of the stock purchase warrant is five years.



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



The following table identifies, as of April 1, 2006, the number and percentage of outstanding shares of our common stock owned by (i) each person known by us to own more than five percent of the outstanding common stock, (ii) each officer and director, and (iii) and our officers and directors as a group. The following information is based upon 9,696,407 shares of our common stock which are issued and outstanding as of the above date. Except as otherwise noted, the address for each person below is our address of 8 Sayres Path, Wainscott, New York 11975.  As of April 1, 2006, 9,696,407 shares of our common stock were issued and outstanding.



Percentage of

Common Stock

Common Stock

Beneficially

Beneficially

Name

Owned(1)

Owned

Fred W. Jackson, Jr.

1,500,000

15.46%



Mark C. Casolo(2)

5,081,340

34.4%



(officers and directors

6,072,640

42.7%

as a group  2 persons)

_______________________________________________________________________________________

(1). Beneficially owned" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.

(2). The amount for Mr. Casolo includes (i) a stock warrant to acquire 1,000,000 shares of our common stock held individually by Mr. Casolo, (ii) stock warrants to acquire 693,000, 190,200, and 232,860 shares of our common stock held by Atlantis Investors Income Notes LLC. , Atlantis Strategic Total Return Fund, LLC., and MS Real Estate Capital Partners, LLC, respectively, (iii) stock warrants to acquire 1,965,480 shares of our common stock which represents 80% of the stock warrants (totaling 2,456,580)  issued or to be issued to McGinn Smith under our placement agency agreements with such broker dealer, and (iv) stock warrants to acquire 1,000,000 shares of our common stock held by Westrock Advisors, Inc., of which Mr. Casolo is to receive 50% of such warrants.





Item 12. Certain Relationships and Related Transactions.



In April 2001, we completed an initial pubic offering of our common stock and raised gross proceeds of $102,750 in connection with the sale of 102,750 shares of common stock.



Effective November 18, 2002, we entered into a share exchange agreement with Caribbean Clubs International, Inc., a Delaware corporation. Pursuant to the agreement, all of the shareholders of Caribbean Clubs International, Inc. exchanged their shares for shares of our common stock on a 1 for 11.8139 ratio (rounded to whole shares). CCI-Delaware also purchased 50,000 shares of our common stock from two of our former officers (Kinship) for $130,000, which shares were subsequently cancelled. The majority of our shareholders approved the above transaction.



On October 19, 2003, we entered into an underwriting agreement with McGinn Smith & Company, Inc. and agreed to issue to McGinn Smith a stock purchase warrant to acquire 500,000 shares of our common stock, and agreed to pay them a sales commission of 10% of any funds raised for the Company under the agreement. The subsidiary also agreed to pay McGinn Smith a finders fee of 5% upon the acquisition of our Barbuda resort. The exercise period of the warrant is five years from the date of issuance. The per share exercise price for the shares underlying the warrant is 50% of the closing bid price of the Companys common stock as quoted the OTCBB on the termination of the offering . The Company has issued the stock purchase warrant to McGinn Smith under the October 2002 agreement.



During October 2002 and prior to the above share exchange, our subsidiary, Caribbean Clubs International, Inc. completed a private placement of its common stock pursuant to which it sold 411,000 shares and received $1,133,633 in net offering proceeds after deducting offering costs of $148,937. The 411,000 shares of common stock of Caribbean Clubs International, Inc were converted to 4,855,517 shares of our common stock upon completion of the stock exchange transaction. McGinn, Smith & Co., Inc. acted as the placement agent in the offering and received 10% of the gross proceeds as commissions. In addition, McGinn Smith received a common stock purchase warrant to acquire 1,646,580 shares of common stock of the Company. The term of the warrant is five years, and is exercisable at $0.001 per share. When we complete the acquisition of the leasehold interest to the Barbuda property during 2005, we paid McGinn Smith a finders fee of $220,000, of which Mr. Casolo received $115,000.



On September 15, 2003, Mr. Fred W. Jackson resigned in his capacity as our Chairman, and we appointed Mr. Mark C. Casolo as our Chairman. Mr. Jackson continued to remain a director and President of the Company. Concurrent with his appointment, Mr. Casolo received a stock purchase warrant to acquire 1,000,000 shares of the company at an exercise price per share of $0.001 during the term of the stock purchase warrant. The term of the stock purchase warrant is five years.  In connection with the appointment of the new Chairman and for certain other considerations, Mr. Jackson agreed to surrender and return back to the Company 2,044,170 shares of common stock of the Company.  Prior to his stock surrender, Mr. Jackson owned 3,544,170 shares of common stock of the Company.



In May 2004, we entered into a subsequent underwriting agreement with McGinn Smith & Company, Inc. and agreed to issue to McGinn Smith a stock purchase warrant to acquire 1,000,000 shares of our common stock at an exercise price of $0.01 per share, and agreed to pay them a sales commission of 10% of any funds raised for the Company for the period from May 1, 2004 through November 1, 2004. The Company has not issued the stock purchase warrant to McGinn Smith under the May 2004 agreement. Mr. Casolo is entitled to receive 80% of the warrants issued to McGinn Smith.



From October 2003 through December 2004, we raised approximately $5,174,700 in gross proceeds through the private placement of our subordinated notes. The notes were  offered at 100% of the face or principal amount in minimum denomination is $25,000 with $1,000 increments thereafter. The notes mature between August 31, 2008 and May 1, 2009, and are payable in full at maturity. Interest accrues at the rate of 12% per annum, payable quarterly. Each note contains an immediately detachable stock purchase warrant. The warrant enables the holder to purchase 300 shares of our common  stock for each $1,000 in face value of the Notes subscribed. The exercise period of the warrants is five years from the date of issuance. The per share exercise price for the warrant shares is the lesser of; $1.00 or 50% of the closing bid price of the Companys common stock as quoted the OTCBB on the termination of the offering. Of the total amount subscribed, Atlantis Investors Income Notes LLC, Atlantis Strategic Total Return Fund, LLC, MS Real Estate Capital Partners, LLC purchased $2,166,000, $709,000, and $776,200, respectively.  Mark. Casolo, our Chairman, is the fund manager of the three funds. McGinn Smith, the placement agent of the subordinate notes under the October 2002 and May 2004 agreements, received sales commissions of 10% the total amount of notes sold.  During 2003, 2004, and 2005, Mr. Casolo, as a registered broker of McGinn Smith, received $180,700, $336,770, and $135,600 in commissions from the sales of the investor notes. Mr. Casolo also was an officer of McGinn Smith. Mr. Casolo also is expected to receive 50% of the stock purchase warrants issued or to be issued to McGinn Smith in connection with the October  2002 and May 2004 underwriting agreements with McGinn Smith.



On July 29, 2004, we entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., pursuant to which we issued to Laurus a convertible term note in the aggregate principal amount of $10,500,000. Mandatory and optional conversion rights to our common stock exist in respect to the obligations under  the  term note, subject to certain conditions. These conversion rights enable Laurus to acquire up to approximately 10,000,000 of our common stock. We also issued Laurus stock options and stock purchase warrants to acquire our common stock. The stock option agreement enabled Laurus to acquire 20% of our issued and outstanding shares of common stock, fully diluted as of the date of the closing (or up to 2,786,941 shares) during a 10 year term at an  exercise price is $0.0036 per share. The stock purchase warrant grants Laurus the right to acquire 807,692 shares of our common stock during a seven year term. The exercise prices of the warrant are $2.06, $2.40, and $2.74, respectively, each for one third of our common shares covered under the warrant. In connection with the Laurus transaction, we agreed to issue McGinn Smith & Company, Inc. a stock purchase warrant to acquire 1,000,000 shares of our common stock at an exercise price of $0.01 per share. The warrant expires July 29, 2014. We also agreed to pay McGinn Smith a fee of 4% of the amount of the term note. The amount has not been paid to McGinn Smith.



On December 23, 2005, we, along with our subsidiary Beach Properties Barbuda Limited, an Antiguan company (BPBL), restructured our credit facility with Laurus. Under our prior agreements with Laurus, as of December 2005, a principal balance of $5,049,500.00 was outstanding, and we owed Laurus $354,210 in past due interest (which includes $203,500 in interest charges while funds were held in a restricted account), $93,508 in past due principal, and $90,599 in other fees which were past due. As a result of the restructuring:

•

Laurus agreed to (i) forbear asserting a default under our existing agreements, (ii) allowed BPBL to assume the liability for our existing indebtedness, (iii) lend an additional $550,000 to BPBL ($433,593 after deducting a closing fee to Laurus of $19,250 and other transactional fees of $97,157), and (iv) deferred principal payments on all indebtedness, including past due amounts, until December 1, 2006,

•

The original term note which we executed in favor of Laurus on July 29, 2004 was terminated, and BPBL executed a new promissory note in favor of Laurus in the principal amount of $6,127,616.00. The principal amount of the new note includes the principal balance of the original term note, together with past due interest and fees described above and the additional advance described above,

•

We granted Laurus an irrevocable right to obtain, at any time and from time to time, a 30% of the equity interest in BPBL,

•

We, and its subsidiary, Caribbean Clubs International, Inc. guaranteed the  new promissory note, and we granted Laurus a first lien and mortgage on our resort located in Barbuda, as well as a security interest in the equity interest held by the parent entity in BPBL under an escrow agreement between the parties,

•

The option which we granted to Laurus in July 29, 2004 to acquire 20% of our outstanding common stock also was terminated.



On January 6, 2005, we entered into a consulting agreement with a third party to provide investor relations services.  The Agreement is effective for six months with an automatic six month renewal option if not canceled in writing 30 days prior to the expiration of the first term.  As compensation for this agreement, we agreed to pay the consultant $6,000 per month and issue 60,000 shares of common stock each three-month period the agreement is in place.  We also agreed to register the shares issued under this agreement in connection with our next registration statement filed with the Securities and Exchange Commission.



On June 23, 2005, we entered into an agreement with Westrock Advisors, Inc., a NASD broker/dealer, to assist us in obtaining financing. Westrock Advisors, Inc. assisted in the private placement of our Series A Preferred Stock described below. As compensation for these services, we agreed to pay the broker/dealer 11% of the capital raised and agreed to issue 1,000,000 warrants to purchase common stock.  The agreement expired December 23, 2005. We have been advised that Mr. Casolo is expected to receive 60% of the compensation received by the broker/dealer under the described agreement.During 2005,Mr. Casolo received a total of $26,700 as a broker in connection with the sale of our securities under the described agreement.



On July 1, 2005, we commenced a private placement offering of  our Series A Preferred Stock. Our Board of Directors authorized the issuance of 600,000 shares of the Series A Preferred Stock. The Series A Preferred Stock has a stated value and liquidation preference of $25.00 per share, and has no voting rights. Each share is convertible into 50 shares of common stock of the Company at the option of the holder, or under certain conditions by the Company. Annual dividends accrue on the preferred stock at the rate of prime during the first two years, prime plus 2% during year three, and prime plus 3% thereafter. The funds raised from the offering will be used for working capital purposes. The Company can redeem the Series A Preferred Stock at a price of 106% of the stated value per share. The funds raised from the offering will be used for working capital purposes. As of December 31, 2005, we received $445,000 in gross offering proceeds.



On December 30, 2005, we completed an exchange of $6,676,750 of our outstanding 12% subordinated notes pursuant to which we issued 26,707 shares of our Series B Preferred Stock. Our Board of Directors authorized the issuance of 1,000,000 shares of the Series B Preferred Stock. The Series B Preferred Stock has a stated value and liquidation preference of $25.00 per share, and has no voting rights. Each share is convertible into 50 shares of common stock of the Company at the option of the holder, or under certain conditions by the Company. Annual ordinary dividends accrue on the preferred stock at the rate of 5% of the stated value per annum. Payment of ordinary dividends on the Series B Preferred Stock are junior to the payment of dividends on the Series A Preferred Stock. A special, one-time dividend was paid to each holder of the 12% Subordinated Notes that exchanges such notes for the Series B Preferred Stock. The dividend amount is equal to 1.25% of the principal amount of the 12% Subordinated Note(s) then converted. In addition, each holder of the 12% Subordinated Notes that participated in the exchange received a stock purchase warrant to purchase shares of our common stock at a purchase price of $0.50 per share. The term of the warrant is five years. The number of shares of our common stock covered by the stock purchase warrant equals the outstanding principal amount of each 12% Subordinated Note then exchanged. We also granted piggy back registration rights to the holders of the Series B Preferred Stock for the common stock receivable upon conversion and the common stock underlying the warrants. Of the total amount converted, $6,304,250 was held by three hedge funds, with the remainder held by individual investors. We entered into respective agreements with the individual investors in each of the three hedge funds and the other remaining investors in respect of this transaction.





Item 13. Exhibits

(a) Exhibits



EXHIBIT INDEX

3.1   Articles of Incorporation of Registrant. (Filed as an exhibit to our SB-1 Registration Statement).

3 1 (ii) Articles of Share Exchange and Name Change dated November 14, 2002. (Filed as part of exhibit to our Form 8-K dated December 4, 2002).

3.2  By-Laws of Registrant. (Filed as an exhibit to our SB-1 Registration Statement).

10.1  Product Distribution Agreement. (Filed as an exhibit to our SB-1 Registration Statement).

10.2 Promotional Shares Lock-In Agreement. (Filed as an exhibit to our SB-1 Registration Statement).

10.3 Stock Exchange Agreement dated November 1, 2002 by and between Kinship Systems, Inc., and Caribbean Clubs International, Inc. and certain shareholders of Kinship Systems, Inc, and all of the shareholders of Caribbean Clubs International, Inc. (Filed as Exhibit 10.2 to our Form 8-K dated December 4, 2002).

Exhibit 10.4 Stock Purchase Warrant dated September 15, 2003 in favor of Mark C. Casolo. (Filed as an exhibit to our Form 8-K dated September 29, 2003).

Exhibit 10.5 Sublease Agreement dated September 5, 2003 by and between Barbuda Beach Properties Limited and Impresa Guffanti Constructioni Edili Srl. (Filed as an exhibit to our Form 8-K dated October 2, 2003).

Exhibit 10.5 Securities Purchase Agreement dated July 29, 2004 by and between CCI Group, Inc. and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.6 Secured Convertible Term Note of CCI Group, Inc. dated July 29, 2004 in favor of Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.7 Master Security Agreement dated July 29, 2004 by and between CCI Group, Inc., Caribbean Clubs International, Inc., and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.8 Common Stock Purchase Warrant of CCI Group, Inc. dated July 29, 2004 in favor of Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.9 Common Stock Option of CCI Group, Inc. dated July 29, 2004 in favor of Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.10 Registration Rights Agreement dated July 29, 2004 by and between CCI Group, Inc. and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.11 Restricted Account Agreement dated July 29, 2004 by and between CCI Group, Inc., North Fork Bank, and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.12 Restricted Account Side Letter Agreement dated July 29, 2004 by and between CCI Group, Inc., and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.13 Stock Pledge Agreement dated July 29, 2004 by and between CCI Group, Inc., Caribbean Clubs International, Inc., and Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.14 Subsidiary Guaranty dated July 29, 2004 by Caribbean Clubs International, Inc. in favor of Laurus Master Fund, Ltd. (Filed as an exhibit to our Form 8-K dated August 4, 2004).

Exhibit 10.15 Sale of Assets Agreement between East Winds Beach Hotel Limited and East winds Holding Limited and Winner Holdings Limited and CCI Group, Inc. effective  December 30, 2004. (Filed as an exhibit to our Form 8-K dated January 4, 2005).

Exhibit 10.16 Agreement dated May 4, 2004 by and between the Company and McGinn Smith & Company, Inc. (Filed as an exhibit to our Form 10-KSB dated April 8, 2005 for the period ended December 31, 2004).

Exhibit 10.17 Form of 12% Subordinated Note for the Companys 12% Subordinated Note Offering. . (Filed as an exhibit to our Form 10-KSB dated April 8, 2005 for the period ended December 31, 2004).

Exhibit 10.18 Form of Stock Warrant for Companys 12% Subordinated Note Offering. (Filed as an exhibit to our Form 10-KSB dated April 8, 2005 for the period ended December 31, 2004).



31.1  Certification Under Section 308 of the Sarbanes-Oxley Act of 2002.

32.1  Certification Under Section 906 of the Sarbanes-Oxley Act of 2002.



Item 14. Principal Accountant Fees and Services.



Hansen, Barnett & Maxwell served as our independent accountants for the years ended December 31 2004 and 2005, and is expected to serve in that capacity for the current year.  Principal accounting fees for professional services rendered for us by Hansen, Barnett & Maxwell for the years ended December 31, 2003 and 2004 are summarized as follows:



2004

2005

Audit

$65,935

$51,492

Audit Related

-

-

Tax

625



4,255

All Other

226



3,743

Total

$66,786

$59,490



Audit Fees.  Audit fees were for professional services rendered in connection with the companys annual financial statement audits and quarterly reviews of financial statements and review of and preparation of consents for registration statements for filing with the Securities and Exchange Commission.



Audit Committee Pre-Approval Policies and Procedures. At its regularly scheduled and special meetings, the Audit Committee of the Board of Directors, which is comprised of independent directors knowledgeable of financial reporting, considers and pre-approves any audit and non-audit services to be performed by the Companys independent accountants.  The Audit Committee has the authority to grant pre-approvals of non-audit services.



#















SIGNATURES



In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized.



CCI Group, Inc.



/s/  Fred W. Jackson, Jr.                May 11, 2006

Fred W. Jackson, Jr.                           Date

Chief Executive Officer and





/s/  Mark C. Casolo                May 11, 2006

Mark C. Casolo    .                           Date

Chief Financial Officer



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





/s/  Fred W. Jackson, Jr.                 May 11, 2006

Fred W. Jackson, Jr.                            Date

Director



/s/  Mark C. Casolo                       May 11, 2006

Mark C. Casolo                                   Date

Director

#





CCI GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

TABLE OF CONTENTS



Report of Independent Registered Public Accounting Firm

F-1



Consolidated Balance Sheets as of December 31, 2005 and 2004

F-2



Consolidated Statements of Operations for

the Years Ended December 31, 2005 and 2004,

And for the Period from January 11, 2001

(Date of Inception) through December 31, 2005

F-3



Consolidated Statements of Stockholders Equity for the Period

from January 11, 2001(Date of Inception) through December 31, 2005 and for

the Years Ended December 31, 2004 and 2005

F-4



Consolidated Statements of Cash Flows for the Years Ended

December 31, 2005 and 2004, And for the Period from January 11, 2001

(Date of Inception) through December 31, 2005

F-5



Notes to Consolidated Financial Statements

F-6





















HANSEN, BARNETT & MAXWELL

A Professional Corporation

CERTIFIED PUBLIC ACCOUNTANTS

5 Triad Center, Suite 750

Salt Lake City, UT 84180-1128

Phone: (801) 532-2200

Fax: (801) 532-7944

www.hbmcpas.com



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM



To the Board of Directors and the Shareholders

CCI Group, Inc.



We have audited the accompanying consolidated balance sheets of CCI Group, Inc. and subsidiaries (a development stage company) as of December 31, 2005 and 2004 and the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended and for the period January 11, 2001 (Date of Inception) through December 31, 2005.   These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CCI Group, Inc. and subsidiaries as of December 31, 2005 and 2004 and the results of their operations and their cash flows for the years then ended and for the period January 11, 2001 (Date of Inception) through December 31, 2005, 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 discussed in Note 1 to the financial statements, the Company is a development stage company with no significant revenues, and has incurred losses since inception. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



As discussed in Note 2, the accompanying financial statements have been restated for the effects of the issuance of warrants and a beneficial conversion feature in connection with the Series B Convertible Preferred Stock.



HANSEN, BARNETT & MAXWELL

Salt Lake City, Utah

April 27, 2006 except for

Note 2-restatement, as to which the date is

May 10, 2006

F-1





CCI GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Balance Sheets

|ASSETS                                                                                
|--------------------------------------------------------------------------------------
|                                                                                      
|                                                                                      
|CURRENT ASSETS                                                                        
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|OTHER ASSETS                                                                          
|                                                                                      
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|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                 
|                                                                                      
|CURRENT LIABILITIES                                                                   
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|NONCURRENT LIABILITIES                                                                
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|                                                                                      
|STOCKHOLDERS' EQUITY                                                                  
|                                                                                      
|                                                                                      
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|                                                                                      
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|                                                                                      
|The accompanying notes are an integral part of these consolidated financial statements
|F-2                                                                                   







CCI GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Operations

|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|-------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------- | ------------------- | -------------------- | ------------------------------ | ----------------------------- | -----------------
|                                                                                       |                                            |                               |                     |                      |                                |                               | For the period   
|                                                                                       |                                            |                               |                     |                      | January 11, 2001              
|                                                                                       |                                            |                               | For the Years Ended |                      | (Date of Inception)           
|                                                                                       |                                            |                               | December 31,        |                      | through                       
|                                                                                       |                                            |                               | 2005                |                      | 2004                           |                               | December 31, 2005
|REVENUE                                                                                | $     1,732,355                            |                               | $        293,666    |                      | $                    2,026,021
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|OPERATING COSTS AND EXPENSES                                                           |                                            |                               |                     |                      |                               
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       | Cost of sales                              | 276,973                       |                     | 88,811               |                                | 365,784                      
|                                                                                       | Direct and operating expenses              | 1,145,966                     |                     | 1,270,900            |                                | 2,416,866                    
|                                                                                       | General and administrative expenses        | 3,357,188                     |                     | 2,783,160            |                                | 10,042,342                   
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       |                                            | Total Operating Costs         | 4,780,127           |                      | 4,142,871                      |                               | 12,824,992       
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|LOSS FROM OPERATIONS                                                                   | (3,047,772)                                |                               | (3,849,205)         |                      | (10,798,971)                  
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|OTHER INCOME (EXPENSES)                                                                |                                            |                               |                     |                      |                               
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       | Interest expense                           | (8,689,041)                   |                     | (1,918,736)          |                                | (10,803,695)                 
|                                                                                       | Interest income                            | 126,434                       |                     | 20,795               |                                | 162,079                      
|                                                                                       | Foreign currency exchange gain             | 4,887                         |                     | 2,215                |                                | 7,102                        
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       |                                            | Total Other Income (Expenses) | (8,557,720)         |                      | (1,895,726)                    |                               | (10,634,514)     
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|NET LOSS                                                                               | (11,605,492)                               |                               | (5,744,931)         |                      | (21,433,485)                  
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       | Preferred stock dividend from              |                               |                     |                      |                                |                              
|                                                                                       |                                            | beneficial conversion feature | (1,407,434)         |                      | -                              |                               | (1,407,434)      
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|                                                                                       | Series B preferred stock dividend declared | (83,459)                      |                     | -                    |                                | (83,459)                     
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|NET LOSS APPLICABLE TO                                                                 |                                            |                               |                     |                      |                               
|                                                                                       | COMMON SHAREHOLDERS                        | $  (13,096,385)               |                     | $    (5,744,931)     |                                | $                (22,924,378)
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|BASIC AND DILUTED LOSS PER                                                             |                                            |                               |                     |                      |                               
|                                                                                       | COMMON SHARE                               | $             (1.20)          |                     | $             (0.60) |                                |                              
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|WEIGHTED AVERAGE NUMBER OF                                                             |                                            |                               |                     |                      |                               
|                                                                                       | SHARES OUTSTANDING                         | 9,708,559                     |                     | 9,570,650            |                                |                              
|                                                                                       |                                            |                               |                     |                      |                                |                               |                  
|The accompanying notes are an integral part of these consolidated financial statements
|F-3                                                                                   







CCI GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Stockholders Equity

|                                                                                       |                                               |        |                     |               |                     |                       |                |                                   |                         | Deficit                      |          
|-------------------------------------------------------------------------------------- | --------------------------------------------- | ------ | ------------------- | ------------- | ------------------- | --------------------- | -------------- | --------------------------------- | ----------------------- | ---------------------------- | ---------
|                                                                                       |                                               |        |                     |               |                     |                       |                | Additional                        |                         | Accumulated                  |          
|                                                                                       |                                               |        | Series A Series B   |               |                     | Paid-In               |                | During the                        | Total                  
|                                                                                       |                                               |        | Preferred Stock     | Common Stock  | Capital             | Development           | Stockholders' 
|                                                                                       |                                               |        | Shares              |               | Amount              | Shares                | Amount         |                                   |                         | Stage                        | Equity   
|                                                                                       |                                               |        |                     |               |                     |                       |                |                                   |                         |                              |          
|Balance, January 11, 2001 (Date of Inception)                                          | -                                             |        | $                 - | -             | $                 - | $                   - |                | $                               - | -                      
|Capital contribution                                                                   |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | January 2001 - no shares issued               |        | -                   |               | -                   | -                     | 2,200          |                                   |                         | -                            | 2,200    
|Stock issued for cash and services                                                     |                                               |        |                     |               |                     |                       |                |                                   |                         | -                           
|                                                                                       | June 2002 - $0.02 per share                   |        | -                   |               | -                   | 3,544,170             | 66,020         |                                   |                         | -                            | 66,020   
|                                                                                       | July 2002 - $0.02 per share                   |        | -                   |               | -                   | 295,348               | 5,500          |                                   |                         | -                            | 5,500    
|                                                                                       | October 2002 - $0.26 per share                |        | -                   |               | -                   | 531,626               | 140,400        |                                   |                         | -                            | 140,400  
|                                                                                       | July through October 2002 - $0.26 per share   |        |                     |               |                     |                       |                |                                   |                         |                              |          
|                                                                                       | net of deferred offering costs of $148,937    |        | -                   |               | -                   | 4,855,517             | 1,133,633      |                                   |                         | -                            | 1,133,633
|November 2002 - Acquisition of Kinship                                                 |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | Systems, Inc. $(0.09) per share               |        | -                   |               | -                   | 1,492,750             | (127,692)      |                                   |                         | -                            | (127,692)
|Net loss for the period from January 11, 2001                                          |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | through December 31, 2002                     |        |                     |               |                     | -                     | -              | -                                 |                         | (600,942)                    | (600,942)
|Balance, December 31, 2002                                                             |                                               | -      |                     | -             | 10,719,411          | 1,220,061             | -              |                                   | (600,942)               | 619,119                     
|Stock issued for services - January through                                            |                                               |        |                     |               |                     |                       |                |                                   |                         | -                           
|                                                                                       | October 2002 - $1.50 to $2.50 per share       |        |                     |               |                     | 116,666               | 298,426        |                                   |                         | -                            | 298,426  
|Exercise of warrants - June 2003 - $0.001 per share                                    |                                               |        |                     |               | 690,000             | 690                   |                |                                   | -                       | 690                         
|Issuance of warrants in connection with debentures -                                   |                                               |        |                     |               |                     |                       |                |                                   | -                      
|                                                                                       | September through December 2003               |        |                     |               |                     | -                     | 1,173,556      |                                   |                         | -                            | 1,173,556
|Issue of warrants for services - September 2003                                        |                                               |        |                     |               | -                   | 1,999,000             |                |                                   | -                       | 1,999,000                   
|Redemption of shares                                                                   |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | September 2003 - no consideration given       |        |                     |               |                     | (2,044,170)           | -              |                                   |                         | -                            | -        
|                                                                                       | October 2003 - no consideration given         |        |                     |               |                     | (20,000)              | -              |                                   |                         | -                            | -        
|Net loss                                                                               |                                               |        |                     |               | -                   | -                     | -              |                                   | (3,482,120)             | (3,482,120)                 
|Balance, December 31, 2003                                                             |                                               | -      |                     | -             | 9,461,907           | 4,691,733             | -              |                                   | (4,083,062)             | 608,671                     
|Issuance of warrants in connection with subordinated                                   |                                               |        |                     |               |                     |                       |                |                                   |                        
|notes payable                                                                          |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | January through March 2004                    |        |                     |               |                     | -                     | 319,435        |                                   |                         | -                            | 319,435  
|                                                                                       | April through June 2004                       |        |                     |               |                     | -                     | 255,413        |                                   |                         | -                            | 255,413  
|                                                                                       | July through September 2004                   |        |                     |               |                     | -                     | 15,220         |                                   |                         | -                            | 15,220   
|                                                                                       | October through December 2004                 |        |                     |               |                     | -                     | 99,698         |                                   |                         | -                            | 99,698   
|Issuance of warrants in connection with funding
arrangement                            |                                               |        |                     |               |                     |                       |                |                                  
|                                                                                       | July through September 2004                   |        |                     |               |                     | -                     | 5,348,469      |                                   |                         | -                            | 5,348,469
|Shares issued to former shareholders for release of claims                             |                                               |        | 200,000             | 300,000       |                     |                       | -              | 300,000                          
|Net Loss                                                                               |                                               |        |                     |               | -                   | -                     | -              |                                   | (5,744,931)             | (5,744,931)                 
|Balance, December 31, 2004                                                             |                                               | -      |                     | -             | 9,661,907           | 11,029,968            | -              |                                   | (9,827,993)             | 1,201,975                   
|Shares issued for services                                                             |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | April 2005 - $0.35 per share                  |        | -                   |               | -                   | 60,000                | 21,000         | -                                 |                         | -                            | 21,000   
|                                                                                       | September 2005 - $0.35 per share              |        | -                   |               | -                   | 11,000                | 3,850          | -                                 |                         | -                            | 3,850    
|Issuance of warrants in connection with subordinated                                   |                                               |        |                     |               |                     |                       |                |                                   |                        
|notes payable                                                                          |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | January through March 2005                    |        | -                   |               | -                   | -                     | 108,733        | -                                 |                         | -                            | 108,733  
|                                                                                       | April through June 2005                       |        | -                   |               | -                   | -                     | 61,068         | -                                 |                         | -                            | 61,068   
|                                                                                       | July through September 2005                   |        | -                   |               | -                   | -                     | 15,366         | -                                 |                         | -                            | 15,366   
|                                                                                       | Westrock Advisors for financing arrangement   |        | -                   |               | -                   | -                     | 170,448        | -                                 |                         | -                            | 170,448  
|Issuance of Series A Preferred Stock                                                   |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | August 2005 - $25.00 per share                |        | 17,800              |               | 445,000             | -                     | -              | -                                 |                         | -                            | 445,000  
|Issuance of Series B Preferred Stock                                                   |                                               |        |                     |               |                     |                       |                |                                   |                         |                             
|                                                                                       | in connection with conversion of subordinated |        |                     |               |                     |                       |                |                                   |                         |                              |          
|                                                                                       | notes payable                                 |        | 26,707              |               | 5,269,316           | -                     | -              | 2,814,868                         |                         | (1,407,434)                  | 6,676,750
|Preferred Stock B Dividend                                                             |                                               |        |                     |               |                     |                       |                |                                   | (83,459)                | (83,459)                    
|Net Loss                                                                               |                                               | -      |                     | -             | -                   | -                     | -              |                                   | (11,605,492)            | (11,605,492)                
|Balance, December 31, 2005                                                             |                                               | 44,507 |                     | $   5,714,316 | 9,732,907           | $  11,410,433         | $    2,814,868 |                                   | $          (22,924,378) | $                (2,984,761)
|                                                                                       |                                               |        |                     |               |                     |                       |                |                                   |                         |                              |          
|The accompanying notes are an integral part of these consolidated financial statements
|F-4                                                                                   







CCI GROUP, INC. AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Cash Flow

|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   | For the period   
|-------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------- | ------------------- | ------------------ | ------------------------------- | --------------------------------- | -----------------
|                                                                                       |                                                            |                                           |                     |                    | January 11, 2001               
|                                                                                       |                                                            |                                           | For the Years Ended |                    | (Date of Inception)            
|                                                                                       |                                                            |                                           | December 31,        |                    | through                        
|                                                                                       |                                                            |                                           | 2005                |                    | 2004                            |                                   | December 31, 2005
|CASH FLOWS FROM OPERATING ACTIVITIES                                                   |                                                            |                                           |                     |                    |                                
|Net Loss                                                                               | $  (11,605,492)                                            |                                           | $ (5,744,931)       |                    | $                  (21,433,485)
|Adjustments to reconcile net loss to net cash from operating activities:               |                                                            |                                           |                     |                    |                                
|                                                                                       | Depreciation                                               | 377,713                                   |                     | 266,737            |                                 | 644,450                          
|                                                                                       | Issuance of common stock and warrants for services         | 24,850                                    |                     | 300,000            |                                 | 2,768,176                        
|                                                                                       | Amortization of deferred offering costs, discount          |                                           |                     |                    |                                 |                                  
|                                                                                       |                                                            | on notes payable and land lease rights    | 7,449,399           |                    | 1,282,957                       |                                   | 8,818,222        
|                                                                                       | Gain on foreign currency exchange                          | 4,887                                     |                     | (2,215)            |                                 | 2,672                            
|Changes in operating assets and liabilities                                            |                                                            |                                           |                     |                    |                                
|                                                                                       | Receivables                                                | (172,878)                                 |                     | (29,596)           |                                 | (202,474)                        
|                                                                                       | Employee advance                                           | -                                         |                     | 6,199              |                                 | -                                
|                                                                                       | Prepaid expenses and other current assets                  | 16,093                                    |                     | (16,093)           |                                 | -                                
|                                                                                       | Deposits                                                   | (150,000)                                 |                     | (100,000)          |                                 | (265,900)                        
|                                                                                       | Accounts payable                                           | 298,358                                   |                     | 322,477            |                                 | 709,149                          
|                                                                                       | Reservation deposits                                       | 67,647                                    |                     | 284,060            |                                 | 351,707                          
|                                                                                       | Accrued expenses                                           | 1,592,773                                 |                     | 197,103            |                                 | 1,749,995                        
|                                                                                       |                                                            | Net Cash Used by Operating Activities     | (2,096,650)         |                    | (3,233,302)                     |                                   | (6,857,488)      
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                   |                                                            |                                           |                     |                    |                                
|                                                                                       | Cash paid for property and equipment                       | (130,658)                                 |                     | (634,994)          |                                 | (1,808,055)                      
|                                                                                       | Issuance of note receivable                                | -                                         |                     | -                  |                                 | (400,000)                        
|                                                                                       | Payments received on note receivable                       | -                                         |                     | -                  |                                 | 400,000                          
|                                                                                       |                                                            | Net Cash Used by Investing Activities     | (130,658)           |                    | (634,994)                       |                                   | (1,808,055)      
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                   |                                                            |                                           |                     |                    |                                
|                                                                                       | Proceeds from issuance of notes payable and warrants       | 2,193,817                                 |                     | 4,400,700          |                                 | 8,401,517                        
|                                                                                       | Proceeds from issuance of preferred stock                  | 445,000                                   |                     | -                  |                                 | 445,000                          
|                                                                                       | Cash paid for offering and financing costs                 | (193,854)                                 |                     | (347,622)          |                                 | (858,393)                        
|                                                                                       | Principle payments on capital lease                        | (141,403)                                 |                     | (309,902)          |                                 | (451,305)                        
|                                                                                       | Issuance of common stock for exercise of warrants          | -                                         |                     | -                  |                                 | 690                              
|                                                                                       | Proceeds from issuance of common stock                     | -                                         |                     | -                  |                                 | 1,348,626                        
|                                                                                       | Contribution of capital with no issuance of shares         | -                                         |                     | -                  |                                 | 2,200                            
|                                                                                       | Cash received in purchase of Kinship                       | -                                         |                     | -                  |                                 | 32,308                           
|                                                                                       | Preferred stock dividend                                   | (66,507)                                  |                     | -                  |                                 | (66,507)                         
|                                                                                       |                                                            | Net Cash Provided by Financing Activities | 2,237,053           |                    | 3,743,176                       |                                   | 8,854,136        
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|                                                                                       | NET INCREASE (DECREASE) IN CASH                            | 9,745                                     |                     | (125,120)          |                                 | 188,593                          
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|                                                                                       | CASH AT BEGINNING OF PERIOD                                | 178,848                                   |                     | 303,968            |                                 | -                                
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|                                                                                       | CASH AT END OF PERIOD                                      | $         188,593                         |                     | $      178,848     |                                 | $                         188,593
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|NON-CASH INVESTING AND FINANCING ACTIVITIES                                            |                                                            |                                           |                     |                    |                                
|                                                                                       | Conversion of notes payable to preferred stock             | $      6,676,750                          |                     | $                - |                                 |                                  
|                                                                                       | Deferred financing costs settled with options/warrants     | $                   -                     |                     | $   5,348,469      |                                 |                                  
|                                                                                       | Deferred loan fees resulting from issuance of note payable | $                   -                     |                     | $      394,500     |                                 |                                  
|                                                                                       | Accrued interest converted to notes payable                | $         354,210                         |                     | $        21,390    |                                 |                                  
|                                                                                       |                                                            |                                           |                     |                    |                                 |                                   |                  
|The accompanying notes are an integral part of these consolidated financial statements
|F-5                                                                                   



CCI GROUP, INC. AND SUBSIDIARIES
(A Development Stage Company) 
Notes to Consolidated Financial Statements

December 31, 2005 and 2004







NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES



Organization and Nature of Business  The Company was incorporated in Utah on February 1, 2000 under the name of Kinship Communications, Inc (Kinship). On November 18, 2002, the Company entered into a share exchange agreement with Caribbean Clubs International, Inc., a corporation incorporated in the State of Delaware on January 11, 2001.



The Company is considered to be a development stage company with its activities to date consisting of developing a network of members only resorts by acquiring or controlling boutique style resorts located in the Caribbean. The Company acquired its first resort, a 24 room property located in Barbuda West Indies, in September 2003. The Barbuda property commenced operations in April 2004. The Company plans to sell memberships which entitle the member to use the resorts under a membership plan.



Consolidation  The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.



Use of Estimates  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Basic and Diluted Loss Per Share At December 31, 2005, there were 9,112,153 options/warrants outstanding that were not included in the computation of diluted net loss per share as their effects would be anti-dilutive, thereby decreasing the net loss per common share.



Stock Based Compensation The Company accounts for stock options/warrants issued to directors, officers and employees under Accounting Principles Board Opinion No. 25 and related interpretations (APB 25).  Under APB 25, compensation expense is recognized if an options exercise price on the measurement date is below the fair value of the Companys common stock.  The Company accounts for options and warrants issued to non-employees at their fair value in accordance with SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123).



Business Condition The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements for the period from January 11, 2001 (date of inception) through December 31, 2005, the Company earned nominal revenue and incurred a net loss of $21,433,485.  The lack of significant revenues and the loss from operations raise substantial doubt about the Companys ability to continue as a going concern for a reasonable period of time.



The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amount and classification of liabilities which might be necessary should the Company be unable to continue as a going concern. The Companys continuation as a going concern is dependent upon its ability to generate sufficient cash flows to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain successful operations. The Companys management has raised capital and acquired operating resort properties in the Caribbean in anticipation of ultimately attaining successful operations; however, there is no assurance that this will occur.



Cash and Cash Equivalents  Cash and cash equivalents include highly liquid debt investments with original maturities of three months or less, readily convertible to known amounts of cash. At December 31, 2005 the Company had cash in excess of federally insured limits.



Property and Equipment  Equipment, and furniture and fixtures are stated at cost. As of December 31, 2005, and 2004 property and equipment had been placed into service and accordingly depreciation expense was $377,714 and $266,737, respectively.  Property and equipment depreciation is computed using the straight-line method over the estimated useful lives of the assets.  Expenditures for maintenance, repairs, and renewals are charged to expense as incurred.  Expenditures for major renewals and betterments that extend the useful lives of existing equipment are capitalized and depreciated. On retirement or disposition of property and equipment, the cost and accumulated depreciation is removed and any resulting gain or loss is recognized in the statement of operations.



Useful lives for property and equipment are as follows:



|                       | Years  
|---------------------- | -------
|Buildings              | 10 - 30
|Leasehold improvements | 3 - 10 
|Furniture and fixtures | 3 - 10 
|Equipment              | 3 - 5  



Long-lived assets are reviewed for impairment when circumstances arise that could impair the assets.  Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.



Deferred Offering Costs  The Company capitalizes direct costs associated with the acquisition of debt and equity financing which are netted against the actual proceeds.  These offering costs are amortized to interest expense over the life of the financing.



Income Taxes The Company recognizes the amount of income taxes payable or refundable for the current year and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement amounts of certain assets and liabilities and their respective tax bases. Deferred tax assets and deferred liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance to the extent that uncertainty exists as to whether the deferred tax assets will ultimately be realized.



Recent Accounting Pronouncements In May 2003 the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", which requires that certain financial instruments be presented as liabilities that were previously presented as equity or as temporary equity. Such instruments include mandatory redeemable preferred and common stock, and certain options and warrants.  The Company adopted the requirements of SFAS 150 which had no effect on reported net loss.



In December 2004, the FASB issued Statement No. 123 (Revised 2004), Share-Based Payment (Statement 123(R)).  Statement 123(R) revises Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting  for Stock Issued to Employees.  Statement 123(R) requires the recognition of the cost of employee services received in exchange for stock options and awards of equity instruments based on the grant-date fair value of such options and awards, over the period they vest.  Under the options for adoption available under Statement 123(R), the Company has determined to adopt Statement 123(R) on the modified-prospective basis beginning on July 1, 2005, which will result in the recognition of the remaining unamortized grant-date fair value compensation over the remaining vesting period.  The effect of adopting Statement 123(R) on options outstanding at December 31, 2004 did not result in additional compensation during the year ended December 31, 2005.



Fair Values of Financial Instruments The carrying amounts reported in the balance sheet for notes receivable and payable approximate their fair values because the interest rates approximate current interest rates to be received and charged on similar receivables and borrowings.



NOTE 2  RESTATEMENT OF FINANCIAL STATEMENTS



The financial statements have been restated to record the issuance of 6,676,750 warrants and a beneficial conversion feature relating to the issuance of Series B redeemable convertible preferred stock and to allocate the proceeds between the fair value of the preferred stock and the detachable warrants as discussed in Note 5 & 6.  The effects of the restatement were as follows:



|                                                 |  | As Previously      |  | Effect of            |  | As                
|------------------------------------------------ |  | ------------------ |  | -------------------- |  | ------------------
|                                                 |  | Reported           |  | Restatement          |  | Restated          
|                                                 |  |                    |  |                      |  |                   
|For the Year Ended December 31, 2005             |  |                    |  |                      |  |                   
|                                                 |  |                    |  |                      |  |                   
|Interest expense                                 |  | $        8,755,548 |  | $             66,507 |  | $        8,689,041
|Net loss                                         |  | (11,671,999)       |  | 66,507               |  | (11,605,492)      
|Basic and diluted loss per share                 |  | (1.20)             |  | -                    |  | (1.20)            
|                                                 |  |                    |  |                      |  |                   
|From Inception of the Development Stage on       |  |                    |  |                      |  |                   
|January 11, 2001 through December 31, 2005       |  |                    |  |                      |  |                   
|                                                 |  |                    |  |                      |  |                   
|Interest expense                                 |  | $      10,870,202  |  | $             66,507 |  | $      10,803,695 
|Net loss                                         |  | (21,499,992)       |  | 66,507               |  | (21,433,485)      
|                                                 |  |                    |  |                      |  |                   
|December 31, 2005                                |  |                    |  |                      |  |                   
|                                                 |  |                    |  |                      |  |                   
|Series B Preferred Stock                         |  | $        6,676,750 |  | $      (1,407,434)   |  | $        5,269,316
|Additional Paid-In Capital                       |  | -                  |  | 2,814,868            |  | 2,814,868         
|Deficit accumulated during the development stage |  | (21,499,992)       |  | (1,424,386)          |  | (22,924,378)      
|                                                 |  |                    |  |                      |  |                   





NOTE 3  TRADE ACCOUNTS RECEIVABLE



The Company believes accounts receivable for are fully collectable within one year, and no allowance for doubtful accounts was deemed necessary at December 31, 2005 and 2004.



NOTE 4  PROPERTY AND EQUIPMENT



Property and equipment consists of the following:



|                            | 2005           |  | 2004            
|--------------------------- | -------------- |  | ----------------
|                            |                |  |                 
|Buildings                   | $    3,000,000 |  | $      3,000,000
|Deposits for construction   | 111,732        |  | 47,006          
|Leasehold improvements      | 629,950        |  | 629,950         
|Furniture and fixtures      | 461,311        |  | 451,743         
|Equipment                   | 105,063        |  | 48,697          
|                            | 4,308,056      |  | 4,177,396       
|Accumulated depreciation    | (644,451)      |  | (266,737)       
|Property and equipment, net | $    3,663,605 |  | $    3,910,659  





NOTE 5  NOTES PAYABLE



Subordinated Notes Payable

On September 1, 2003, the Company commenced a private placement of subordinated notes payable, with a minimum offering of $450,000 and a maximum offering of $10,000,000. The notes are offered at 100% of the face or principal amount in the minimum denomination of $25,000, with $1,000 increments thereafter. The notes mature on August 31, 2008 and will be payable in full at maturity. Interest on the notes accrues at the rate of 12% per annum, payable quarterly. Each note is redeemable at the election of the Company at any time at a price of 106% of the principal amount of each note.



During the year ended December 31, 2005, the Company issued notes totaling $1,695,100.  The Company received $1,525,590 net of offering costs of $169,510. From the commencement of the offering through December 31, 2005, the Company has issued notes totaling $6,869,800. Interest payable relating to the notes was $648,461 at December 31, 2005.



The notes contain an immediately detachable stock purchase warrant which enables the holder to acquire common stock of the Company. The warrants enable the holder to purchase 300 shares of the Companys common stock for each $1,000 in face value of the notes subscribed. The warrants expire five years from the date of issuance. The per share exercise price for the warrant shares will be the lesser of: $1 or 50% of the closing bid price of the Companys

common stock on the termination date of the offering.  The Company issued 508,530 warrants relating to the notes payable issued during the year ended December 31, 2005 at exercise prices ranging from $0.55 to $0.75.



The proceeds from the offering for the year ended December 31, 2005 were allocated to the financial instruments issued, based upon their relative fair values and resulted in an allocation of $1,489,260 to the notes before deferred financing costs of $148,936 and $185,166 (which includes $20,574 of offering costs) to the warrants. While the allocated value of the warrants was less than their fair value of $241,607, the fair value of the warrants was measured using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 3.80%, expected dividend yield of 0%, volatility of 52.45%, and expected lives of 5 years.



On December 30, 2005, the Company exchanged $6,676,750 of outstanding subordinated notes for 26,707 shares of the Companys Series B preferred stock.  Of the total amount converted, $6,304,250 was held by three hedge funds, with the remainder held by individual investors.   The features of the Series B preferred stock are described in Note 6.



Laurus Transactions

On July 29, 2004, the Company entered into a Securities Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Island company (Laurus). Under the agreement, the Company issued to Laurus a convertible term note in the aggregate principal amount of $10,500,000. The term of the note is three years and bears interest at the rate of prime plus two percent, subject to a minimum rate and adjustments. The funds received from the note, less a $349,500 fee payable to Laurus, were placed in a restricted bank account under the sole dominion and control of Laurus. The ability to use the funds was subject to limitations and restrictions.  The Company had the right to prepay all amounts drawn down by paying 101% of such amount in cash. The note was convertible into common stock at a fixed price of $1.37 per share subject to certain conditions.



On April 21, 2005, the Company paid the entirety of their lease payments remaining under their existing sub-lease for the Barbuda resort. The Company also exercised their option to acquire all of the assets to the resort and to receive the assignment of the underlying lease agreement with the Government of Antigua and Barbuda. The Company entered into the sublease agreement in September 2003 with Impresa Guffanti Constructioni Edili SRL, an Italian company. Guffanti Constructioni received the leasehold rights to 90 acres of land where the resort is situated from the Government of Antigua and Barbuda in 1989. The term of the lease is 99 years. As a result of the assignment, the Company is now the lessee of the governmental lease. The Government of Antigua and Barbuda has approved the

assignment of the lease to the Company. The lease requires the Company to pay the government the sum of approximately $7,000 as an annual lease payment. The rental amount is subject to review in 10 year intervals.



The Company paid the sum of $4,048,695 to the former sub-lessor representing the remainder of the Companys lease payments under the sub-lease agreement. The Company used funds from their exiting credit facility with Laurus Master Fund, Ltd. to make this payment. The Company drew down a total of $4,700,000 from the Laurus facility. Funds remaining from the drawdown were used to pay legal and recording fees and are to be used for working capital purposes. The Company paid McGinn Smith, Inc. a registered broker dealer, a fee of $220,000 in connection with their October 19, 2002 agreement with the broker dealer. Of that amount, Mr. Casolo, the Companys Chairman who also is the former officer of the broker dealer, is expected to receive a fee of $110,000 under an arrangement which pre-dated his role as Chairman.





On December 23, 2005, the Company completed a restructuring of their agreement with Laurus Master Fund, Ltd.  As of that date the Company owed a principal balance of $5,049,500, as well as $354,210 in past due interest, $93,508 in past due principal, and $90,599 in other fees which were past due.  As a result of the restructuring Laurus agreed to forbear asserting a default under existing agreements, lent an additional $550,000 to the Company, less a closing fee of $19,250 and other transactional fees of $97,157, and deferred principal payments on all indebtedness, including past due amounts, until December 1, 2006.



The original term note payable, which was executed on July 29, 2004, was terminated, and a new promissory note in the principal amount of $6,127,616 was executed.  The amount of the new note includes the principal balance of the original term note, together with past due interest and fees described above.  The Company granted Laurus an irrevocable right to obtain, at any time and from time to time, a 30% equity interest in the Company.  The option,

which granted Laurus on July 29, 2004 to acquire 20% of the Companys outstanding common stock was also terminated.



The term of the new note is three years and bears interest at prime plus two percent, subject to adjustments.  Interest payments commence monthly on January 1, 2006.  The Company will be required to begin making monthly principal payments in the amount of $51,063 commencing on December 31, 2006 and monthly thereafter for the three-year term, with a balloon payment at maturity.





NOTE 6  STOCKHOLDERS EQUITY AND STOCK WARRANTS



Warrants-As discussed in Note 5, the Company has entered into an agreement relating to the private placement offering of subordinated notes payable which began in September 2003.  During the year ended December 31, 2005, the company issued warrants to purchase 508,350 shares of common stock.  Also discussed in Note 5, the Company entered into a financing agreement in which the Company issued options and warrants to purchase 3,594,633 shares of common stock.



On June 23, 2005, the Company entered into an agreement with Westrock Advisors, Inc. for broker and financial advisor services to assist the Company in obtaining financing.  As compensation for these services, Westrock is to receive 11% of the capital raised and receive 1,000,000 warrants to purchase common stock.  The agreement expired December 23, 2005.  The warrants have a fair value of $170,448 as calculated using the Black-Scholes option pricing model with the following weighted average assumptions: risk free interest rate of 3.74%, expected dividend yield of 0%, volatility of 51.64%, and expected lives of 5 years.  The fair value of the warrants have been recorded as an increase to common stock.  The Company Chairman is also an employee and officer of Westrock Advisors, Inc. We have been advised that Mr. Casolo is expected to receive 60% of the compensation received by Westrock under the described agreement.





At December 31, 2005, the Company had 9,112,153 options/warrants outstanding. A summary of warrants outstanding is as follows:



|                                                                                                        | Warrants   |  | Range         |  | Exercise Price
|------------------------------------------------------------------------------------------------------- | ---------- |  | ------------- |  | --------------
|Outstanding at December 31, 2003                                                                        | 2,998,680  |  | *             |  | *             
|Warrants granted in connection with debentures                                                          | 1,010,310  |  | *             |  | *             
|Warrants granted in connection with financing arrangements                                              | 4,594,633  |  | .0036 to 2.74 |  | 0.44          
|Outstanding at December 31, 2004                                                                        | 8,603,623  |  | *             |  | *             
|Warrants granted during 2005                                                                            | 7,185,280  |  | *             |  | *             
|Outstanding at December 31, 2005                                                                        | 15,788,903 |  | *             |  | *             
|                                                                                                        |            |  |               |  |               
|*Exercise price for warrants granted in connection with debentures are to be the lessor of $1.00 or 50%
|of the closing stock price on the date the debenture funding terminates.                                |            |  |               | 





Series A Preferred Stock On July 1, 2005, the Company commenced a private placement offering of a class of its preferred stock designated as its Series A Preferred Stock. The Companys Board of Directors authorized the issuance of 600,000 shares of the Series A Preferred Stock. The Series A Preferred Stock has a stated value and liquidation preference of $25.00 per share, and has no voting rights. Each share is convertible into 50 shares of common stock of the Company at the option of the holder, or under certain conditions by the Company. Annual dividends accrue on the



preferred stock at the rate of prime during the first two years, prime plus 2% during year three, and prime plus 3% thereafter. The funds raised from the offering will be used for working capital purposes. The Company can redeem the Series A Preferred Stock at a price of 106% of the stated value per share. The funds raised from the offering will be

used for working capital purposes. As of December 31, 2005, the Company has received $445,000 in gross offering proceeds.



Series B Preferred Stock As discussed in Note 4, On October 11, 2005 the Company changed their articles of Incorporation and designated a Series B preferred stock.  The Company authorized 400,000 shares of $25 par value preferred stock with dividends payable semi-annually on the stated value at the rate of 5% per annum.  The Series B Preferred stock shall rank senior to all classes of common stock but junior to the Series A Preferred Stock, shall be convertible into common stock at a conversion price of $0.50 per share and is non-voting.



On December 30, 2005, the Company completed an exchange of $6,676,750 of their 12% subordinated notes by issuing 26,707 shares of Series B Non-Voting, Convertible Preferred Stock. Of the total amount converted, $6,304,250 was held by three hedge funds, with the remainder held by individual investors. The Company entered into respective agreements with the individual investors in each of the three hedge funds and the other remaining investors in respect of this transaction.



In connection with the conversion of debt to preferred stock, the Company paid a one time special dividend of 1.25% of the principal amount converted.  To further entice the conversion, the Company also issued 6,676,750 warrants to purchase common stock.  The warrants are exercisable at $0.50 per share and expire on August 31, 2010.



NOTE 7  INCOME TAXES



The Company has paid no federal or state income taxes since its incorporation.  As of December 31, 2005, and 2004, the Company had net operating loss carry forwards for federal income tax reporting purposes of $13,618,471 and $2,947,408, respectively which, if unused, will begin to expire in 2022.  The net deferred tax asset consists of the following at December 31, 2005 and 2004:



|                                                                               | 2005                      |  | 2004                     
|------------------------------------------------------------------------------ | ------------------------- |  | -------------------------
|Operating loss carryforwards                                                   | $          5,079,690      |  | $          1,099,383     
|Stock compensation granted                                                     | 745,627                   |  | -                        
|Valuation allowance                                                            | (5,825,317)               |  | (1,099,383)              
|Net deferred tax asset                                                         | $                       - |  | $                       -
|                                                                               |                           |  |                          
|The following is a reconciliation of the income tax computed using the federal
|statutory rate to the provision for income taxes:                              |                           | 
|                                                                               |                           |  |                          
|                                                                               | 2005                      |  | 2004                     
|Tax at Federal statutory rate (34%)                                            | $        (3,945,867)      |  | $        (1,168,696)     
|State benefit, net of federal tax                                              | (382,981)                 |  | (113,432)                
|Non-deductible expenses                                                        | 348,542                   |  | 928,505                  
|Change in valuation allowance                                                  | 3,980,306                 |  | 353,623                  
|Income tax provision                                                           | $                       - |  | $                       -



NOTE 8  COMMITMENTS AND CONTINGENCIES



Operating Lease  In November 2002, the Company entered into a five-year operating lease for office space. The lease was effective December 1, 2002. Under terms of the lease, the Company will pay $5,300 per month through May 2008. The future minimum payments under this lease as of December 31, 2005 are as follows:



|Year Ending December 31, |                         
|------------------------ | ------------------------
|2006                     | $                 63,600
|2007                     | 63,600                  
|2008                     | 21,200                  
|                         | $               148,400 







St. James Club Acquisition

On June 2, 2005, the Company entered into a Stock Purchase Agreement to acquire all the issued and outstanding shares of two companies which, through a subsidiary wholly owned by the two entities, own and operate a resort located in Antigua, West Indies, known as the St. James Club, Antigua. The purchase price for the transaction is $31,000,000, of which $27,000,000 is payable at closing and the balance is payable under a promissory note in favor of the seller. The five year note will bear interest at the rate of 7% per annum, and principal and interest will be payable monthly throughout the term based on a five year amortization. The note will be secured by a second mortgage on the resort. The Company placed $250,000 in escrow which will be applied towards the total purchase price at closing.  The Company also agreed to purchase outstanding timeshare receivables of the seller at a rate of 90% of the amount due at closing, which is believed to be approximately $3,000,000.  Due to unforeseen delays the Company was unable to effect a closing of the transaction, and effective August 20, 2005, the Stock Purchase Agreement was terminated by the seller.





Lawsuit with Independent Financial Services

On June 15, 2004, the Company entered into an agreement with Independent Financial Services, Inc. (IFS) in which IFS agreed to act as an agent for CCI to obtain financing for the Company.  As compensation for these services, the Company agreed to pay a commission consisting of a) common shares equal to 2% of the common stock on the date of closing and if the lender/investor does not require equity participation, then 4% and b) 4% of the gross loan amount payable in cash, which includes any mezzanine, equity funds or sale/leaseback proceeds.  This agreement expired on August 17, 2004.  If the Company obtains funding from a source introduced by IFS during the original term of the agreement, within five years of the expiration of the agreement, the Company is required to pay the above fees to IFS.



On July 29, 2004, the Company entered into a Securities Purchase Agreement with Laurus. Under the agreement, the Company issued to Laurus a convertible term note in the aggregate principal amount of $10,500,000 plus options and warrants to purchase the Companys common stock. On September 1, 2004, IFS filed a lawsuit against CCI claiming breach of contract and seeking the payment of fees under the agreement.  IFS is also seeking an award of compensatory damages, punitive damages, interest, costs and such other relief as provided by law and deemed just by the Court. The Company filed an answer to the lawsuit stating in part that IFS fraudulently induced the Company to enter into the agreement knowing they (IFS) were not a registered broker-dealer.  The Company also believes that the nature of the underlying transaction with Laurus would require IFS to be a registered broker-dealer in order to receive such fees or commissions.



Currently, the outcome of the litigation is uncertain. If the Company were to lose the lawsuit the Company may be required to pay $420,000 representing the 4% commission and the issuance of 2% of CCIs common stock on July 29, 2004.



In March 2004, the Company and its subsidiary filed a complaint in the Supreme Court for the State of New York against the former president of the Companys subsidiary seeking declaratory relief against certain claims made by the former president.  The former president filed an answer and counter claim alleging he was entitled to participate in the November 2002 stock exchange agreement between the Company and its Subsidiary and is entitled to 3,544,170 shares of the Companys common stock.  Additionally, the former president alleges he was terminated without sufficient cause under his employment agreement and is entitled to additional compensation of approximately $48,000.  Currently, the outcome of the litigation is uncertain.  If the Company were to lose the lawsuit the Company may be required to issue the common stock and make the cash payment sought in the counter claim.



Other Litigation

In February 2005, a third party filed suit in The Superior Court of the Virgin Islands Division of St. Croix for breach of contract.   The plaintiff is seeking consulting fees of $25,000, plus interest at a rate of 9% and associated legal fees.



Consulting Agreement

The Company has a consulting agreement in place which provides for a finders fee equal to 5% of the purchase price of any properties the Company purchases that were introduced by the consultant.  Under this agreement, the Company will pay $250,000 to the consultant for the purchase of the Palmetto Beach Hotel.



On January 6, 2005, the Company entered into a consulting agreement to provide investor relations services to the Company.  The Agreement is effective for six months with an automatic six month renewal option if not canceled in writing 30 days prior to the expiration of the first term.  As compensation for this agreement, the Company is to pay $6,000 per month and issue 60,000 shares of common stock each three-month period the agreement is in place.  The Company also agreed to register the shares issued under this agreement in connection with the Companys next registration of shares.





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