U.S.
      SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-QSB**





[X]
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF
      THE SECURITIES EXCHANGE ACT OF 1934


For
      the quarterly period ended June 30, 2007


OR


[
      ] TRANSITION REPORT PURSUANT TO SECTION 13


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


For
      the transition period from ____________ to ____________








**CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.**


(Exact
      name of registrant as specified in its charter)




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





501
      North Shoreline Drive, Suite 701 North


Corpus
      Christi, TX 78471


(301)
      887-7546


____________________________________________________


(Address
      and telephone number of registrant's principal


executive
      offices and principal place of business)





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





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


Common
      Stock, $0.001 par value


(Title
      of Class)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter
      period that the registrant was required to file such reports), and (2) has
      been
      subject to such filing requirements for the past 90 days. Yes [X] No [
      ]





As
      of August 15, 2007, the Company had 36,670,777 shares of its $.001 par value
      common stock issued and outstanding.





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





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




1




**TABLE
                    OF CONTENTS**PagePART
                    I - FINANCIAL INFORMATIONItem
                    1. Financial Statements
                
                3Item
                    2. Management’s Discussion and Analysis or Plan of
                    Operation
                
                22Item
                    3. Controls and Procedures
                
                28PART
                    II - OTHER INFORMATIONItem
                    1. Legal Proceedings
                
                29Item
                    2. Unregistered Sales of Equity Securities and Use of
                    Proceeds
                
                30Item
                    6. Exhibits
                
                31SIGNATURES
                
                32









1




**PART
      I - FINANCIAL INFORMATION**





**Item
                    1. Financial Statements**PageConsolidated
                    Balance Sheets June 30, 2007 (Unaudited) and December 31,
                    2006
                
                3Consolidated
                    Statement of Operations (Unaudited) June 30, 2007 and 2006
                
                4Consolidated
                    Statement of Cash Flows (Unaudited) June 30, 2007 and 2006
                
                5Notes
                    to the Financial Statements
                
                6




2


**CSMG
                  TECHNOLOGIES. INC. AND SUBSIDIARIES****(FORMERLY
                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****CONDENSED
                  CONSOLIDATED BALANCE SHEET (UNAUDITED)****JUNE
                  30, 2007****ASSETS****CURRENT
                  ASSETS**Cash
              
              $
              -Prepaid
                  expenses and other current assets
              
              
              -**Total
                  current assets**
              
              
              -Fixed
                  assets, net of depreciation
              
              
              3,169**TOTAL
                  ASSETS**
              
              $
              3,169**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                  LIABILITIES**Bank
                  overdraft
              
              $
              16,030Accounts
                  payable and accrued expenses
              
              
              563,173Accrued
                  interest payable
              
              
              1,463,684Liability
                  for stock to be issued
              
              
              49,845Convertible
                  notes payable
              
              
              3,025,000Notes
                   payable
              
              
              1,801,101Other
                  current liabilities
              
              
              341,582**Total
                  current liabilities**
              
              
              7,260,415**Long-term
                  Liabilities**Long-term
                  contract - IAW
              
              
              122,000**TOTAL
                  LIABILITIES**
              
              
              7,382,415**Minority
                  interest**
              
              
              206,000**STOCKHOLDERS'
                  EQUITY (DEFICIT)**Preferred
                    stock, par value $0.001 per share, 10,000,000 shares authorized
                    andno
                    shares issued and outstanding
              
              
              -Common
                  stock, par value $0.001 per share, 80,000,000 shares authorized
                  and36,404,484
                  issued, 35,915,630 shares outstanding and 488,854 shares
                  subscribed
              
              
              36,404Additional
                  paid-in capital
              
              
              12,580,600Stock
                  subscriptions receivable
              
              
              (488
              )Accumulated
                  deficit
              
              
              (19,832,288
              )Accumulated
                  other comprehensive income (loss)
              
              
              (337,189
              )Treasury
                  stock
              
              
              (32,285
              )**Total
                  stockholders' equity (deficit)**
              
              
              (7,585,246
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
              
              $
              3,169The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
  3
  **CSMG
                  TECHNOLOGIES, INC. AND SUBSIDIARIES****(FORMERLY
                  CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)****FOR
                  THE SIX AND THREE MONTHS ENDED JUNE 30, 2007 AND
                  2006****SIX
                  MONTHS ENDED**
              
              **THREE
                  MONTHS ENDED****JUNE
                  30,**
              
              **JUNE
                  30,****2007**
              
              **2006**
              
              **2007**
              
              **2006****REVENUE**
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -**COST
                  OF REVENUES**Research
                  and development costs
              
              
              1,205,284
              
              
              34,997
              
              
              1,030,908
              
              
              1,095**Total
                  costs of revenues**
              
              
              1,205,284
              
              
              34,997
              
              
              1,030,908
              
              
              1,095**GROSS
                  PROFIT (LOSS)**
              
              
              (1,205,284
              )
              
              (34,997
              )
              
              (1,030,908
              )
              
              (1,095
              )**OPERATING
                  EXPENSES**General
                  and administrative
              
              
              1,028,385
              
              
              469,258
              
              
              309,870
              
              
              200,583Depreciation
                  and impairment
              
              
              322
              
              
              16,192
              
              
              226
              
              
              8,096**Total
                  operating expenses**
              
              
              1,028,707
              
              
              485,450
              
              
              310,096
              
              
              208,679**NET
                  LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION
                  FOR INCOME TAXES AND MINORITY INTEREST**
              
              
              (2,233,991
              )
              
              (520,447
              )
              
              (1,341,004
              )
              
              (209,774
              )**OTHER
                  EXPENSE**Equity
                  in net income (losses) of unconsolidated companies
              
              
              -
              
              
              (53,813
              )
              
              -
              
              
              (26,177
              )Gain
                  on sale of United Engineering
              
              
              225,117
              
              
              -
              
              
              -
              
              
              -Interest
                  expense, net of interest income
              
              
              (1,272,601
              )
              
              (138,164
              )
              
              (899,719
              )
              
              (68,709
              )**NET
                    LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES AND MINORITY
                    INTEREST**
              
              
              (3,281,475
              )
              
              (712,424
              )
              
              (2,240,723
              )
              
              (304,660
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
                  TAXES**
              
              
              (3,281,475
              )
              
              (712,424
              )
              
              (2,240,723
              )
              
              (304,660
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -**NET
                  (LOSS) APPLICABLE TO SHARES**
              
              $
              (3,281,475
              )
              $
              (712,424
              )
              $
              (2,240,723
              )
              $
              (304,660
              )**NET
                  (LOSS) PER BASIC AND DILUTED SHARES**
              
              $
              (0.09
              )
              $
              (0.02
              )
              $
              (0.06
              )
              $
              (0.01
              )**WEIGHTED
                  AVERAGE NUMBER OF****SHARES
                  OUTSTANDING**
              
              
              35,198,376
              
              
              28,568,400
              
              
              35,982,956
              
              
              29,468,581The
                  accompanying notes are an integral part of these condensed consolidated
                  financial statements.
 
 4
  **CSMG
                    TECHNOLOGIES, INC. AND SUBSIDIARIES****(FORMERLY
                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)****CONDENSED
                    CONSOLIDATED STATEMENTS OF CASH FLOW
                    (UNAUDITED)****FOR
                    THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006****2007**
                
                **2006****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    (loss)
                
                $
                (3,281,475
                )
                $
                (712,424
                )**Adjustments
                    to reconcile net (loss)****to
                    net cash (used in) operating activities:**Stock
                    issued for services
                
                
                282,813
                
                
                -Discount
                    on notes payable
                
                
                761,421
                
                
                -Warrants
                    issued for commissions
                
                
                186,092Options
                    issued to consultant
                
                
                28,247
                
                
                -Equity
                    loss from investee
                
                
                -
                
                
                48,831Depreciation
                
                
                322
                
                
                16,192**Change
                    in assets and liabilities**Decrease
                    in other assets
                
                
                53,383
                
                
                -Increase
                    in accounts payable and accrued expenses
                
                
                808,960
                
                
                91,018Increase
                    in liability for stock to be issued
                
                
                49,845
                
                
                -**Total
                    adjustments**
                
                
                2,171,083
                
                
                156,041**Net
                    cash (used in) operating activities**
                
                
                (1,110,392
                )
                
                (556,383
                )**CASH
                    FLOWS FROM INVESTING ACTIVITIES:**Capital
                    expenditures
                
                
                -
                
                
                (14,966
                )**Net
                    cash (used in) investing activities**
                
                
                -
                
                
                (14,966
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Increase
                    (decrease) in cash overdraft
                
                
                16,030
                
                
                -Issuance
                    of stock for cash
                
                
                29,145
                
                
                473,528Repayment
                    of long-term contract
                
                
                (78,000
                )
                
                -Borrowings
                    of convertible notes payable
                
                
                275,000
                
                
                97,821**Net
                    cash provided by financing activities**
                
                
                242,175
                
                
                571,349**NET
                    INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
                
                
                (868,217
                )
                
                -**CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                
                
                868,217
                
                
                -**CASH
                    AND CASH EQUIVALENTS - END OF PERIOD**
                
                $
                -
                
                $
                -**SUPPLEMENTAL
                    INFORMATION OF CASH FLOW ACTIVITY**Cash
                    paid during the year for interest
                
                $
                -
                
                $
                -**SUPPLEMENTAL
                    INFORMATION ON NONCASH ACTIVITY**Conversion
                    of notes payable to common stock
                
                $
                957,877
                
                $
                -Conversion
                    of accrued interest to common stock
                
                $
                494,974
                
                $
                -The
                    accompanying notes are an integral part of these condensed consolidated
                    financial statements.
  5
  **CSMG
            TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
            CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 NOTE
                  1-
              **ORGANIZATION
                  AND BASIS OF
                  PRESENTATION**
  The
        unaudited condensed financial statements included herein have been prepared,
        without audit, pursuant to the rules and regulations of the Securities and
        Exchange Commission (“SEC”). The condensed financial statements and notes are
        presented as permitted on Form 10-QSB and do not contain information included
        in
        the Company’s annual statements and notes. Certain information and footnote
        disclosures normally included in financial statements prepared in accordance
        with accounting principles generally accepted in the United States of America
        have been condensed or omitted pursuant to such rules and regulations, although
        the Company believes that the disclosures are adequate to make the information
        presented not misleading. It is suggested that these condensed consolidated
        financial statements be read in conjunction with the December 31, 2006 audited
        financial statements and the accompanying notes thereto. While management
        believes the procedures followed in preparing these condensed consolidated
        financial statements are reasonable, the accuracy of the amounts are in some
        respects dependent upon the facts that will exist, and procedures that will
        be
        accomplished by the Company later in the year.
 
 These
        condensed unaudited condensed consolidated financial statements reflect all
        adjustments, including normal recurring adjustments which, in the opinion
        of
        management, are necessary to present fairly the consolidated operations and
        cash
        flows for the periods presented.
 
 CSMG
        Technologies Inc., formerly, Consortium Service Management Group, Inc. (the
        “Company”), a Texas corporation, was incorporated on November 17, 1992. On
        January 18, 2007, the Company changed its name to CSMG Technologies, Inc.
        and
        increased its total number of authorized shares to 90,000,000 and the number
        of
        common shares to 80,000,000.
  The
        Company is a technology management company. The technologies involve live
        tissue
        bonding and CO2 (carbon dioxide) separation of landfill gas.
  The
        live
        tissue bonding technology focuses on bonding living soft biological tissue
        used
        in surgical procedures which eliminates the need for sutures, staples, sealants
        or glues. The Company has an agreement with the E.O. Paton Institute of
        Electrical Welding of the Ukraine National Academy of Sciences and International
        Association of Welding and owns the technology including the worldwide rights
        of
        licensing, patenting, manufacturing, development and distribution of this
        technology. To date, we have 37 issued or pending patents in the United States
        and overseas in connection with the live tissue bonding equipment. In addition,
        in June 2007, the Company filed a 510(K) submission with the U.S. Food and
        Drug
        Administration for the duct and vessel sealer and two instruments, as well
        as
        having their technology approved for commercial development in Ukraine by
        the
        Ukraine Ministry of Health.
  6
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
 
 **NOTE
                  1-**
                **ORGANIZATION
                    AND BASIS OF PRESENTATION****(CONTINUED)**
 The
        Company also has 1 patent issued in both the United States and Canada on
        the
        carbon dioxide separator technology. This was also developed in Ukraine,
        and
        promotes the economical separation of methane from carbon dioxide gas emanating
        from landfills. Landfills generate a commingled mixture of methane and carbon
        dioxide gas which prevents it from being commercially sold as fuel. The Ukraine
        technology has developed an economical carbon dioxide separator that removes
        the
        carbon dioxide to allow the methane gas to be sold to utility companies as
        well
        as other industrial and commercial customers. The first installation began
        in
        2002 in Mobile, Alabama with completion originally estimated to be in the
        second
        quarter of 2003.
 
 The
        Company made the first installation of the carbon dioxide separator at the
        Chastang landfill in Mobile, Alabama which was owned by the city of Mobile
        but
        operated by Waste Management Inc. and Transamerican Waste Industries Inc.
        An
        agreement existed between Transamerican Waste Industries Inc. and Resource
        Technology Corporation (RTC) which gave RTC the sole and exclusive right
        to
        collect, extract and remove landfill gas from the property. At this time
        RTC
        contracted with the Company to extract the methane gas. Accordingly, the
        Company
        installed the carbon dioxide separator at the landfill in 2002 and 2003.
        On
        February 14, 2006, the Company signed a contract with DuPont to provide up
        to
        500,000 MMbtu commercial quality gas to DuPont’s plant outside Mobile, Alabama.
        Waste Management Inc., however, asserted that the carbon dioxide equipment
        produced methane gas that failed to meet Mobile Gas quality specifications
        and
        also that it has failed to meet marketable levels of methane gas. As a result
        and as noted in Note 9, Litigation, a legal dispute ensued as well as RTC
        filing
        for bankruptcy protection. The site has failed to produce marketable volumes
        of
        methane gas, and the Company received a written demand for removal of its
        equipment on August 9, 2007. The Company has commenced the disassembly of
        the
        equipment in preparation for removal of the equipment from the site.
 
 In
        1994,
        the Company formed United Engineering Company, a Ukraine and U.S. joint stock
        company registered under the laws of Ukraine with 14 of Ukraine’s largest
        defense contractors and Ukraine State Property fund. The purpose was to perform
        dismantlement of weapons of mass destruction under the START Treaty. The
        company
        initially had a 50% ownership that was reduced to 33.3% in 2000. The Company
        recorded this investment under the equity method, and maintained its investment
        until March 2007, when their interest was sold for net proceeds of
        $278,500.
 
 The
        Company recently has been focusing on their live tissue bonding technology,
        and
        has hired an internationally recognized medical device expert, a surgical
        device
        design company to design and manufacture the live tissue connect generator,
        as
        well as bringing on a major U.S. University to complete laboratory work and
        adding advisors that are surgeons, engineers and scientists to work on this
        project in the Ukraine.
  7
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                  1-**
                **ORGANIZATION
                    AND BASIS OF PRESENTATION****(CONTINUED)**
 **Going
        Concern**
 
 As
        shown
        in the accompanying condensed consolidated financial statements the Company
        has
        incurred a loss of $3,281,475 and $712,424 for the six months ended June
        30,
        2007 and 2006, respectively, and have current liabilities of $7,260,415 as
        of
        June 30, 2007.
  The
        Company’s management has raised funds through equity and debt offerings. In June
        2006, Empire Financial Group and the Company entered into a best efforts
        bridge
        financing transaction for $3,000,000. Empire Financial Group was successful
        in
        raising the full $3,025,000 which is currently classified as notes payable
        -
        others on the condensed consolidated balance sheet at June 30, 2007, which
        will
        likely be converted to equity. The Company and Empire Financial Group has
        extended this offering for up to an additional $3,000,000, as well as entering
        into a letter of intent relating to the raising of an additional $5,000,000
        for
        a potential initial public offering of Live Tissue Connect, Inc., the tissue
        welding technology subsidiary of the Company.
  The
        principal reasons for the Company’s ability to continue as a going concern
        involves the carbon dioxide separator business. The equipment manufactured
        removes CO2 from landfill gas, raw landfill gas that has high air content
        requires additional landfill gathering system tuning to reduce air content
        or
        additional oxygen and nitrogen removal equipment. Our system fits well is
        within
        specifications on the Company’s agreement with DuPont. The Chastang project
        however, generated no production, and cost the Company approximately $2,000,000.
        The Company is in process of either moving their equipment from the Chastang
        site to another location or to storage or salvage. Despite, the new gas purchase
        contract the Company entered into, the Company did impair the value of their
        equipment. In addition to this impairment, the Company impaired the value
        of
        obtaining their patents for both the CO2 separator equipment as well as the
        patents related to the live tissue bonding. The total of the patent impairment
        was approximately $650,000.
  Management’s
        plans to address these conditions include raising additional funds, through
        Empire Financial Group, as well as the manufacturing of their live tissue
        bonding equipment in the last two quarters of 2007. The Company has signed
        a
        contracts with leading instrument and electro surgery generator design and
        manufacturing companies and has completed manufacturing of the prototype
        equipment that will be licensed or sold to perform surgeries.
  The
        Company’s long-term success is dependent upon obtaining FDA approval, and
        worldwide acceptance of their products.
 
 8
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                1-**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION****(CONTINUED)**
  **Going
        Concern** **(Continued)**
 
 The
        Company is subject to certain risks common to technology-based companies.
        Principal risks to the Company include uncertainty of growth in market
        acceptance for its products; history of losses in recent years; ability to
        remain competitive in response to new technologies; costs to defend, as well
        as
        risks of losing patent and intellectual property rights; reliance on limited
        number of suppliers; reliance on outsourced manufacture of its products for
        quality control and product availability; uncertainty of demand for its products
        in certain markets; ability to manage growth effectively; dependence on key
        members of its management; and its ability to obtain adequate capital to
        fund
        future operations.
  The
        condensed consolidated financial statements do not include any adjustments
        relating to the carrying amounts of recorded assets or the carrying amounts
        and
        classification of recorded liabilities that may be required should the Company
        be unable to continue as a going concern.
  **NOTE
                2-**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
  **Principles
        of Consolidation**
  The
        condensed consolidated financial statements include those of the Company
        and its
        wholly-owned subsidiary. All intercompany accounts and transactions have
        been
        eliminated in consolidation.
 
 **Use
        of Estimates**
  The
        preparation of condensed consolidated financial statements in conformity
        with
        accounting principles generally accepted in the United States of America
        requires management to make estimates and assumptions that affect the reported
        amounts of assets and liabilities and disclosures of contingent assets and
        liabilities at the date of the financial statements and the reported amounts
        of
        revenue and expenses during the reporting period. Actual results could differ
        from those estimates.
 
 **Cash
        and Cash Equivalents**
  The
        Company considers all highly liquid debt instruments and other short-term
        investments with a maturity of three months or less, when purchased, to be
        cash
        equivalents.
  The
        Company maintains cash and cash equivalent balances at one financial institution
        that is insured by the Federal Deposit Insurance Corporation up to $100,000.
  9
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                    2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
 **Fixed
        Assets**
  Fixed
        assets are stated at cost, less accumulated depreciation. Depreciation is
        provided using the straight-line method over the estimated useful lives of
        the
        related assets (primarily three to five years). Costs of maintenance and
        repairs
        are charged to expense as incurred.
  **Recoverability
        of Long-Lived Assets**
  The
        Company reviews the recoverability of its long-lived assets on a periodic
        basis
        whenever events and changes in circumstances have occurred which may indicate
        a
        possible impairment. The assessment for potential impairment is based primarily
        on the Company’s ability to recover the carrying value of its long-lived assets
        from expected future cash flows from its operations on an undiscounted basis.
        If
        such assets are determined to be impaired, the impairment recognized is the
        amount by which the carrying value of the assets exceeds the fair value of
        the
        assets. Fixed assets to be disposed of by sale are carried at the lower of
        the
        then current carrying value or fair value less estimated costs to
        sell.
  **Research
        and Development**
  The
        Company annually incurs costs on activities that relate to research and
        development of new technology and products. Research and development costs
        are
        expensed as incurred.
 
 **Revenue
        Recognition**
  The
        Company has not generated revenue in many years. The Company anticipates
        that
        they will record revenue in accordance with Staff Accounting Bulletin 104.
        The
        criteria for recognition is as follows:
  1)
              Persuasive
                  evidence of an arrangement exists;
 
 2)
              Delivery
                  has occurred or services have been
                  rendered;
  3)
              The
                  seller’s price to the buyer is fixed or determinable, and
 
 4)
              Collectibility
                  is reasonably assured.
 
 **Stock-Based
        Compensation**
  On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
        Payment* ”
(“SFAS
        123R”). SFAS 123R requires that compensation cost related to share-based payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans. The provisions of SFAS 123R, as amended, are effective
        for
        small business issuers beginning as of the next interim period after December
        15, 2005. The Company has adopted these provisions as of January 1, 2006
        and
        this adoption did not have a material effect on the Company’s
        operations.
  10
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                    2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
 **Stock-Based
        Compensation** **(Continued)**
 
 On
        January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
        Payment” (“FAS 123R”) which requires recognition of stock-based compensation
        expense for all share-based payments based on fair value. Prior to January
        1,
        2006, the Company measured compensation expense for all of its share-based
        compensation using the intrinsic value method prescribed by Accounting
        Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
        Employees” (“APB 25”) and related interpretations. The Company has provided pro
        forma disclosure amounts in accordance with FAS No. 148, “Accounting for
        Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
        Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
        123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
        its stock-based compensation.
 
 The
        Company has elected to use the modified-prospective approach method. Under
        that
        transition method, the calculated expense in 2006 is equivalent to compensation
        expense for all awards granted prior to, but not yet vested as of January
        1,
        2006, based on the grant-date fair values estimated in accordance with the
        original provisions of FAS 123. Stock-based compensation expense for all
        awards
        granted after January 1, 2006 is based on the grant-date fair values estimated
        in accordance with the provisions of FAS 123R. The Company recognizes these
        compensation costs, net of an estimated forfeiture rate, on a pro rata basis
        over the requisite service period of each vesting tranche of each award.
        The
        Company considers voluntary termination behavior as well as trends of actual
        option forfeitures when estimating the forfeiture rate.
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
        The
        fair value of the option issued is used to measure the transaction, as this
        is
        more reliable than the fair value of the services received. The fair value
        is
        measured at the value of the Company’s common stock on the date that the
        commitment for performance by the counterparty has been reached or the
        counterparty’s performance is complete. The fair value of the equity instrument
        is charged directly to compensation expense and additional paid-in
        capital.
 
 The
        Company’s warrants issued in May 2007, were not stock based compensation and
        were recorded in accordance with EITF 96-18. The Company recognized $186,092
        in
        expense for the six months ended June 30, 2007.
  11
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                  2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Segment
        Reporting**
  The
        Company follows the provisions of SFAS 131, “Disclosures about Segments of an
        Enterprise and Related Information.” This standard requires that companies
        disclose operating segments based on the manner in which management
        disaggregates the Company in making internal operating decisions. The Company
        believes that there is only one operating segment at this time as their CO2
        separator business is inactive.
 
 **Fair
        Value of Financial Instruments**
 
 The
        carrying amounts reported in the condensed consolidated balance sheet for
        cash
        and cash equivalents, and accounts payable approximate fair value because
        of the
        immediate or short-term maturity of these financial instruments. For the
        notes
        payable, the carrying amount reported is based upon the incremental borrowing
        rates otherwise available to the Company for similar borrowings.
 
 **Income
        Taxes**
  Under
        Financial Accounting Standards Board Statement No. 109, “Accounting for Income
        Taxes,” the liability method is used in accounting for income taxes. Under this
        method, deferred tax assets and liabilities are determined based on differences
        between financial reporting and tax bases of assets and liabilities, and
        are
        measured using the enacted tax rates and laws that will be in effect when
        the
        differences are expected to reverse.
 
 **(Loss)
        Per Share of Common Stock**
  Basic
        net
        (loss) per common share (“EPS”) is computed using the weighted average number of
        common shares outstanding for the period. Diluted earnings per share includes
        additional dilution from common stock equivalents, such as stock issuable
        pursuant to the exercise of stock options and warrants. Common stock equivalents
        are not included in the computation of diluted earnings per share when the
        Company reports a loss because to do so would be anti-dilutive for the periods
        presented.
  All
        options and warrants to purchase shares of common stock and convertible notes
        were not included as they would be considered anti-dilutive as the Company
        had a
        loss for both periods.
 
 12
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                    2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  The
        following is a reconciliation of the computation for basic and diluted EPS:
 **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****2007**
                
                **2006**Net
                    (loss)
                
                $
                (3,281,475
                )
                $
                (712,424
                )Weighted-average
                    common shares outstanding
                    :Basic
                
                
                35,198,376
                
                
                28,568,400Options
                
                
                1,025,000
                
                
                975,000Warrants
                
                
                890,941
                
                
                200,000Diluted
                
                
                37,114,317
                
                
                29,743,400Basic
                    net (loss) per share
                
                $
                (0.09
                )
                $
                (0.02
                )Diluted
                    net (loss) per share
                
                $
                (0.09
                )
                $
                (0.02
                )
  **Recent
        Issued Accounting Standards**
  On
        December 16, 2004, FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,
        an amendment of APB Opinion 29, Accounting for Non-monetary Transaction” ("SFAS
        153"). This statement amends APB Opinion 29 to eliminate the exception for
        non-monetary exchanges of similar productive assets and replaces it with
        a
        general exception for exchanges of non-monetary assets that do not have
        commercial substance. Under SFAS 153, if a non-monetary exchange of similar
        productive assets meets a commercial-substance criterion and fair value is
        determinable, the transaction must be accounted for at fair value resulting
        in
        recognition of any gain or loss. SFAS 153 is effective for non-monetary
        transactions in fiscal periods that begin after June 15, 2005. The adoption
        of
        SFAS 153 has not had a material impact on its financial position, results
        of
        operations or cash flows.
  In
        May
        2005, the FASB issued Statement of Financial Accounting Standard No. 154, *“Accounting
        Changes and Error Corrections”* (“SFAS
        154”). SFAS 154 is a replacement of APB No. 20, *“Accounting
        Changes”* ,
        and
        SFAS No. 3, *“Reporting
        Accounting Changes in Interim Financial Statements”* .
        SFAS
        154 applies to all voluntary changes in accounting principle and changes
        the
        requirements for accounting and reporting of a change in accounting principle.
        This statement establishes that, unless impracticable, retrospective application
        is the required method for reporting of a change in accounting principle
        in the
        absence of explicit transition requirements specific to the newly adopted
        accounting principle. It also requires the reporting of an error correction
        which involves adjustments to previously issued financial statements similar
        to
        those generally applicable to reporting an accounting change retrospectively.
        SFAS 154 is effective for accounting changes and corrections of errors made
        in
        fiscal years beginning after December 15, 2005. The adoption of SFAS 154
        has not
        had a material impact on its financial position, results of operations or
        cash
        flows.
  13
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                    2-**
                  **SUMMARY
                      OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
 **Recent
        Issued Accounting Standards** **(Continued)**
 
 In
        February 2006, the FASB issued Statement of Financial Accounting Standard
        No.
        155, *“Accounting
        for Certain Hybrid Instruments”* (“SFAS
        155”). FASB 155 allows financial instruments that have embedded derivatives to
        be accounted for as a whole (eliminating the need to bifurcate the derivative
        from its host) if the holder elects to account for the whole instrument on
        a
        fair value basis. This statement is effective for all financial instruments
        acquired or issued after the beginning of an entity’s first fiscal year that
        begins after September 15, 2006. The adoption of SFAS 155 has not had a material
        impact on its financial position, results of operations or cash
        flows.
 
 In
        September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
        standard defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles, and expands disclosure about fair
        value measurements. This statement is effective for financial statements
        issued
        for fiscal years beginning after November 15, 2007. Early adoption is
        encouraged. The adoption of SFAS 157 is not expected to have a material impact
        on the consolidated financial statements.
  In
        September 2006, the FASB issued SFAS 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
        87, 88, 106 and 132(R)” (“SFAS 158”). SFAS 158 requires an employer to recognize
        the over-funded or under-funded status of a defined benefit postretirement
        plan
        (other than a multiemployer plan) as an asset or liability in its statement
        of
        financial position and to recognize changes in that funded status in the
        year in
        which the changes occur through comprehensive income. SFAS 158 also
        requires the measurement of defined benefit plan assets and obligations as
        of
        the date of the employer’s fiscal year-end statement of financial position (with
        limited exceptions). Management does not expect adoption of SFAS 158 to have
        a
        material impact on the Company’s consolidated financial statements.
  In
        February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities - Including an amendment of FASB Statement
        No.
        115”, (“FAS 159”) which permits entities to choose to measure many financial
        instruments and certain other items at fair value at specified election dates.
        A
        business entity is required to report unrealized gains and losses on items
        for
        which the fair value option has been elected in earnings at each subsequent
        reporting date. This statement is expected to expand the use of fair value
        measurement. FAS 159 is effective for financial statements issued for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal
        years.
  14
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                  2-**
                **SUMMARY
                    OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**
  **Recent
        Issued Accounting Standards** **(Continued)**
  In
        July
        2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
        Uncertainty in Income Taxes.” This interpretation requires recognition and
        measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
        15,
        2006. The adoption of FIN No. 48 is not expected to have a material impact
        on
        the consolidated financial statements.
  In
        September 2006, the United States Securities and Exchange Commission (“SEC”)
        issued SAB 108, “Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements.”
  This
        SAB
        provides guidance on the consideration of the effects of prior year
        misstatements in quantifying current year misstatements for the purpose of
        a
        materiality assessment. SAB 108 establishes an approach that requires
        quantification of financial statement errors based on the effects of each
        of the
        company’s financial statements and the related financial statement disclosures.
        SAB 108 permits existing public companies to record the cumulative effect
        of
        initially applying this approach in the first year ending after November
        15,
        2006 by recording the necessary correcting adjustments to the carrying values
        of
        assets and liabilities as of the beginning of that year with the offsetting
        adjustment recorded to the opening balance of retained earnings. Additionally,
        the use of the cumulative effect transition method requires detailed disclosure
        of the nature and amount of each individual error being corrected through
        the
        cumulative adjustment and how and when it arose. The adoption of SAB 108
        is not
        expected to have a material impact on the consolidated financial
        statements.
 
 **NOTE
                3-**
              **FIXED
                  ASSETS**
  Fixed
        assets consist of the following as of June 30, 2007:
 **Estimated
                    Useful****Lives
                    (Years)**Computer
                    equipment
                
                
                5
                
                $
                57,166Less:
                    Accumulated depreciation
                
                
                
                
                
                (53,997
                )Total,
                    net
                
                
                
                
                $
                3,169
  Depreciation
        expense was $322 and $ for $16,192 the six months ended June 30, 2007 and
        2006,
        respectively. The Company wrote off $8,118 of fully depreciated equipment
        in the
        six months ended June 30, 2007.
  15
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                4-**
              **CONVERTIBLE
                  NOTES PAYABLE**
  The
        Company from July 27, 2006 through April 4, 2007 raised $3,025,000 through
        Empire Financial Group in the form of convertible notes. The notes commenced
        interest accrual on January 1, 2007, at 15% per annum, and are convertible
        into
        Live Tissue Connect, Inc. shares at 50% of the IPO of the Company’s common stock
        price. The Company has accrued $370,767 in interest for the six months ended
        June 30, 2007. The total due the investors as of June 30, 2007 is $3,395,767.
        The entire balance is reflected as a current liability on the Company’s
        condensed consolidated balance sheet.
  Empire
        received 290,941 warrants on May 18, 2007 as part of their commission for
        the
        raising of the money. The Company recorded these warrants in accordance with
        EITF 96-18 and recognized an expense in the amount of $186,092.
 
 **NOTE
                5-**
              **NOTES
                  PAYABLE**
  The
        Company from time to time entered into various note agreements with shareholders
        of the Company. The 19 notes that remain as of June 30, 2007 commenced from
        2000
        through 2005, and accrue interest at rates ranging from 8% to 15%.
  The
        remaining principal of these 19 notes as of June 30, 2007 is $1,801,101.
        Accrued
        interest through June 30, 2007 on these notes is $1,092,917, for a total
        amount
        due as of June 30, 2007 of $2,894,018.
  The
        Company’s management has been very successful over the past few years in
        converting these notes into shares of common stock. For the six months ended
        June 30, 2007, the Company has been successful in converting $1,373,738 in
        notes
        plus accrued interest into 2,197,981 shares of stock. In addition, the Company
        recorded a discount in the amount of $761,421 to additional paid in capital
        based on the beneficial conversion price.
  Included
        in the notes payable are:
  ***Cornell
        Capital***
  On
        March
        29, 2004, the Company entered into an equity line of credit with Cornell
        Capital
        Partners whereby the Company may issue and sell to Cornell up to $10,000,000
        in
        common stock. Under this arrangement, Cornell advanced the Company $1,000,000
        in
        2004, all of which has been repaid through conversions to common stock.
  The
        Company in 2005 was advanced $600,000 under a convertible debenture. In
        accordance with this agreement, the Company has been repaying this through
        issuances of stock under Rule 144. The Company has repaid $358,000 in principal
        with the remaining balance of $242,000 plus interest in the amount of $141,459
        due as of June 30, 2007. The Company also has escrowed 488,854 shares of
        its
        common stock with Cornell’s escrow agent to use as repayment.
 
 16
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                5-**
              **NOTES
                  PAYABLE****(CONTINUED)**
  **Included
        in notes payable but remain in litigation are the
        following:** ******
  ***Stonegate
        Management, Ltd.***
  The
        Company in 2001 entered into four one-year note agreements with Stonegate
        Management in the original principal balance of $630,000. Accrued interest
        through June 30, 2007 on these notes amounts to $440,969, for a total amount
        due
        under these notes of $1,070,969. The notes accrue interest at rates ranging
        between 8% and 10% per annum. The Company’s attorneys and Stonegate have been
        negotiating a repayment schedule, however no agreement has been reached.
  In
        relation to these notes, the Company on December 12, 2005, was served a suit
        in
        the Circuit Court for Hillsborough County Florida by Nature Coast Collections,
        Inc. The suit named the Company as well as certain officers, Donald Robbins
        and
        Gordon Allison as guarantors of the four notes. Nature Coast Collections,
        Inc.
        is the assignee of the original payee, Stonegate Management, Ltd., a Costa
        Rican
        entity. The Company filed a motion for dismissal of the proceedings for lack
        of
        jurisdiction in Florida, and this was granted.
  On
        June
        30, 2006, the Company and the two officers were again served by Nature Coast
        Collections, Inc., this time in the Federal District Court for the Southern
        District of Texas. The Company has answered the complaint and filed a
        counterclaim alleging, among other matters, that Nature Coast Collections,
        Inc.
        is an affiliate of RTC, a debtor in bankruptcy, whom the Company entered
        into a
        transaction with in regards to their CO2 separation equipment. The Company
        alleges that they should be authorized to offset its losses caused by the
        contractual relationship with RTC against the claims brought on by Nature
        Coast
        Collections, Inc. The Company has moved to transfer these proceedings to
        the
        Federal District Court for the Northern District of Illinois, where the
        bankruptcy proceedings are. No discovery has commenced.
  ***Banco
        Panamericano***
  The
        Company is in default on a note with an initial balance of $203,800 to Banco
        Pamamericano that became due April 1, 2002. On February 10, 2005, Banco
        Panamericano filed suit in the Circuit Court of Cook County, Illinois for
        $514,920 (balance accrued as of June 30, 2007 including interest at 12% is
        $357,975).
  The
        note
        was funded in large part to assist in funds needed for the Chastang transaction,
        and the Company alleges that Banco Panamericano is not a bank, but a Nebraska
        corporation that is affiliated with RTC and that the proceeds were to be
        repaid
        from the proceeds of the sale of the methane gas that never occurred based
        on
        RTC’s failure to perform under the contract.
  The
        Company believes they are the injured party an that the litigation properly
        belongs in RTC’s Chapter 11 proceedings in the federal bankruptcy court. On
        December 6, 2005, the case was moved to the United States Bankruptcy Court.
  The
        entire balance of shareholder notes is reflected as current liabilities as they
        are all overdue.
  17
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                6-**
              **STOCKHOLDERS’
                  EQUITY (DEFICIT)**
  ***Preferred
        Stock***
  The
        Company has 10,000,000 authorized shares of preferred stock, par value
        $.001.
  On
        December 28, 1995, the Company authorized the issuance of 75,669 shares of
        Series A preferred stock, $10.00 face amount, $.001 par value which paid
        a
        cumulative dividend on net corporate profit equal to 8% of the face amount
        of
        the outstanding stock. If the Company did not realize profits, preferred
        stock
        dividends are not accruable. Such preferred stock is preferred over all common
        stock in the event of corporate liquidation and dissolution to the extent
        of its
        unredeemed face amount.
  On
        September 29, 2000, the Board of Directors approved the conversion of these
        shares into 1,210,704 common shares.
  As
        of
        June 30, 2007, there are no shares issued and outstanding.
 
 ***Common
        Stock***
  On
        January 18, 2007, the Company increased the authorized shares of common stock
        to
        80,000,000.
  As
        of
        June 30, 2007, the Company has 36,404,484 issued, 35,915,630 shares outstanding
        and 488,854 subscribed.
  For
        the
        six months ended June 30, 2007, the Company has issued the following
        stock:
  47,922
        shares issued for cash in the amount of $29,145.
  704,500
        shares issued for services at a value of $282,813.
  2,197,981
        shares issued in conversion of notes payable and accrued interest in the
        amount
        of $1,373,738.
 
 ***Options***
  The
        Company currently has three stock option plans. The following table summarizes
        the activity of the Company’s stock option plan.
 June
                    30, 2007Weighted-averageNumber
                    of
                
                exerciseOptions
                
                priceJune
                    30, 2007:Outstanding
                    - beginning of period
                
                
                975,000
                
                $
                0.42Granted
                
                
                50,000
                
                
                0.62Exercised/Expired
                
                
                (-
                )
                
                -Outstanding
                    - end of period
                
                
                1,025,000
                
                $
                0.45Exercisable
                    at end of period
                
                
                975,0003
                
                $
                0.45
 
 18
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                6-**
              **STOCKHOLDERS’
                  EQUITY (DEFICIT)****(CONTINUED)**
  ***Options
        (Continued)***
  The
        Company’s options expire at various times through 2017. All options issued in
        2003 through 2005 were issued at or above market value. The Company issued
        50,000 options to a consultant in February 2007 that were vested. These options
        were expensed at a value of $28,247 by utilizing the black-scholes method.
  ***Warrants***
  The
        Company has issued the following warrants as of June 30, 2007:
 **Exercise**
                
                **Date****Warrants**
                
                **Price**
                
                **Issued**
                
                **Term**200,000
                
                $
                0.40
                
                
                5/15/2006
                
                
                7.5
                    years400,000
                
                $
                0.40
                    - $0.75
                
                
                11/1/2006
                
                
                7
                    years290,941
                
                $
                0.57
                
                
                5/18/2007
                
                
                7
                    years890,941
 The
        290,941 Warrants issued in Nay 2007 were valued utilizing the Black - Scholes
        method as follows:
  Stock
                    Price
                
                $
                .74Strike
                    Price
                
                $
                .57Expected
                    Life of Warrant
                
                
                7
                    yrs.Annualized
                    Volatility
                
                
                100.61
                %Discount
                    Rate
                
                
                4.50
                %Annual
                    Rate of Quarterly Dividends
                
                
                NoneCall
                    Option Value
                
                $
                .6396
  19
 **CSMG
            TECHNOLOGIES, INC.**
 **(FORMERLY
            CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
            30, 2007 AND 2006 (UNAUDITED)**
 **NOTE
                        7-**
                    **COMMITMENTS**
  **Rental**
  The
        Company leases office space under an operating lease that has initial or
        remaining non-cancelable lease terms and expires in May 2008. The lease
        agreement provides for an annual 3% escalation of the base rent. As of June
        30,
        2007, the following presents the approximate future minimum lease payments
        required under this lease:
  **For
                    the Periods Ended****June
                    30,**2008
                
                $
                13,948
  Rent
        expense for the six months ended June 30, 2007 and 2006 was $ 7,608 and
        $7,583, respectively.
  **NOTE
                8-**
              **PROVISION
                  FOR INCOME TAXES**
  Deferred
        income taxes will be determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes are measured based on
        the tax rates expected to be in effect when the temporary differences are
        included in the Company’s tax return. Deferred tax assets and liabilities are
        recognized based on anticipated future tax consequences attributable to
        differences between financial statement carrying amounts of assets and
        liabilities and their respective tax bases.
 
 At
        June
        30, 2007, deferred tax assets consist of the following:
 Net
                    operating losses
                
                $
                3,285,861Valuation
                    allowance
                
                
                (3,285,861
                )$
                -
  At
        June
        30, 2007, the Company had net operating loss carryforward in the approximate
        amount of $9,664,000 available to offset future taxable income through 2027.
        The
        Company established valuation allowances equal to the full amount of the
        deferred tax assets due to the uncertainty of the utilization of the operating
        losses in future periods.
  20
  **CSMG
        TECHNOLOGIES, INC.**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2007 AND 2006 (UNAUDITED)**
  **NOTE
                8-**
              **PROVISION
                  FOR INCOME TAXES****(CONTINUED)**
  A
        reconciliation of the Company’s effective tax rate as a percentage of income
        before taxes and federal statutory rate for the six months ended June 30,
        2007
        and 2006 is summarized below.
 2007
                
                2006Federal
                    statutory rate
                
                
                (34.0
                )%
                
                (34.0
                )%State
                    income taxes, net of federal benefits
                
                
                0.0
                
                
                0.0Valuation
                    allowance
                
                
                34.0
                
                
                34.00
                %
                
                0
                %
  **NOTE
                  9-**
              **LITIGATION**
  Banco
        Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
        LLC , 
        Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
        District Court as Case No. 06 C 7195.  Plaintiff claims damages in the
        amount of $514,920 as of February 9, 2005, together with interest and costs,
        arising out of a disputed promissory note.  The Company has answered
        setting forth several affirmative defenses and counterclaims focused on the
        affiliation of the Plaintiff with a customer of the Company and based on
        misrepresentation.  The litigation is still in the pleading stage and
        discovery has commenced.
 
 Nature
        Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
        Donald S.  Robbins and Gordon W.  Allison ,
        Case
        No. 2:06-cv-273 originally pending in the Southern District of Texas
        District Court and recently ordered transferred to the Northern District
        of
        Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
        arising out of a series of disputed promissory notes. The Company has
        answered setting forth several affirmative defenses and counterclaims focused
        on
        the affiliation of the Plaintiff with an offshore affiliate of a customer
        of the
        Company and based on misrepresentation.  The litigation is in the pleading
        stage and discovery has commenced.
  There
        is
        a dispute, not subject to a court proceeding, between Waste Management Company,
        Inc. (“Waste Management”) and the Company with regard to the Chastang Waste Site
        in Chastang, Alabama.  Waste Management was to maintain the site so as to
        produce marketable levels of waste site gas. The site has failed to produce
        such
        volume and Waste Management has requested the Company to remove its equipment
        from the site. The Company has commenced the disassembly of the equipment
        in
        preparation for removal of the equipment from the site. A written demand
        for
        removal was received from Waste Management on August 9, 2007.
  21




**Item
      2. Management’s Discussion and Analysis or Plan of
      Operation.**




*The
      information set forth and discussed in this Management’s Discussion and Analysis
      or Plan of Operation is derived from our financial statements and the related
      notes, which are included. The following information and discussion should
      be
      read in conjunction with those financial statements and notes, as well as the
      information provided in our Annual Report on Form 10-KSB for our fiscal year
      ended December 31, 2006.*





**Overview**




The
      following is a discussion of: (i) our results of operations and financial
      condition for the six and three months ended June 30, 2007 versus June 30,
      2006;
      (ii) our liquidity and capital resources; and (iii) our critical accounting
      policies. CSMG Technologies Inc., formerly, Consortium Service Management Group,
      Inc. (the “Company”), a Texas corporation, was incorporated on November 17,
      1992. On January 18, 2007, the Company changed its name to CSMG Technologies,
      Inc. and increased its total number of authorized shares to 90,000,000 and
      the
      number of common shares to 80,000,000.





The
      Company is a technology management company. The technologies involve live tissue
      bonding and CO2 (carbon dioxide) separation of landfill gas.





The
      live
      tissue bonding technology focuses on bonding living soft biological tissue
      used
      in surgical procedures which eliminates the need for sutures, staples, sealants
      or glues. The Company has an agreement with the E.O. Paton Institute of
      Electrical Welding of the Ukraine National Academy of Sciences and International
      Association of Welding and owns the technology including the worldwide rights
      of
      licensing, patenting, manufacturing, development and distribution of this
      technology. To date, the Company has 37 issued or pending patents in the United
      States and overseas in connection with the live tissue bonding equipment. In
      addition, in June 2007, the Company filed a 510(K) submission with the U.S.
      Food
      and Drug Administration for the duct and vessel sealer and two instruments,
      as
      well as having its technology approved for commercial development in Ukraine
      by
      the Ukraine Ministry of Health. The Company expects to market the equipment
      in
      several countries that recognize the Ukraine Ministry of Health approval,
      including Russia, in Q4 2007 or Q1 2008. The Company has opened
      negotiations with several prominent U. S. medial device manufacturing and
      marketing companies interested in developing, licensing or marketing specific
      procedure types.





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





The
      Company made the first installation of the carbon dioxide separator at the
      Chastang landfill in Mobile, Alabama which was owned by the city of Mobile
      but
      operated by Waste Management Inc. and Transamerican Waste Industries Inc. An
      agreement existed between Transamerican Waste Industries Inc. and Resource
      Technology Corporation (RTC) which gave RTC the sole and exclusive right to
      collect, extract and remove landfill gas from the property. At this time RTC
      contracted with the Company to extract the methane gas. Accordingly, the Company
      installed the carbon dioxide separator at the landfill in 2002 and 2003. On
      February 14, 2006, the Company signed a contract with DuPont to provide up
      to
      500,000 MMbtu commercial quality gas to DuPont’s plant outside Mobile, Alabama.
      The Company produced commercial quality gas pursuant to the DuPont quality
      specifications under the contract. Waste Management Inc., however, asserted
      that
      the carbon dioxide equipment produced methane gas that failed to meet the Mobile
      Gas national pipeline quality specifications and also that it has failed to
      meet
      marketable levels of methane gas. As a result and as noted in Note 9 , Litigation, a legal dispute ensued as well as RTC filing for bankruptcy
      protection. The site has failed to produce marketable volumes of methane gas,
      and the Company received a written demand for removal of its equipment on August
      9, 2007. The Company has commenced the disassembly of the equipment in
      preparation for removal of the equipment from the site.




22




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





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





**Results
      of Operations and Financial Condition**




***Six
      Months Ended June 30, 2007 versus June 30, 2006***




*Total
      Operating Revenues*




The
      Company recognized $0 in revenue during the six months ended June 30, 2007
      or
      for the six months ended June 30, 2006. The revenues are anticipated to commence
      upon FDA approval as well as global acceptance of the products that are being
      manufactured.




*Total
      Cost of Operating Revenues*




Our
      cost
      of operating revenues represent research and development costs and are
      $1,205,284 and $34,997 for the six months ended June 30, 2007 and 2006,
      respectively.




*Total
      Operating Expenses*




Total
      operating expenses for the six months ended June 30, 2007 were $1,003,707,
      as
      compared to $485,450 for the six months ended June 30, 2006. This represented
      an
      increase of $518,257, or approximately 107%. Operating expenses included
      payroll, professional fees, and related expenses, rent expense, and other
      general and administrative expenses. The increase from 2007 to 2006 is a result
      of using additional consultants and outsourced investor and public relations
      to
      assist the Company in raising money.




We
      depreciate fixed assets. This resulted in an expense of $322 and $16,192 for
      the
      six months ended June 30, 2007 and 2006, respectively. We determine the fair
      value of the undiscounted cash flows annually, and sooner if circumstances
      change and determination is required, to value any impairment on our intangible
      assets and long-lived assets. As of June 30, 2007 and 2006, we determined that
      there was no impairment charge.




*Other
      Income (Expense)*




Included
      in other income (expense) is interest expense of $1,271,666 and $138,164 for
      the
      six months ended June 30, 2007 and 2006, respectively. Included in the 2007
      interest expense is $761,421 in discounts on the conversion of notes payable
      to
      common stock. The Company has also recognized a gain of $225,117 in the six
      months ended June 30, 2007 for the sale of United Engineering Company.




*Net
      Income (Loss)*




We
      reported a net (loss) from operations of $(3,255,540), or $(0.09) per share
      on a
      basic and diluted basis, for the six months ended June 30, 2007 versus
      $(712,424), or $(0.02) per share on a basic and diluted basis, for the six
      months ended June 30, 2006. The increase in the net loss is attributable to
      the
      expanded research and development efforts in Kiev and professional fees related
      to raising money, as well as the interest expense.




23




*Provision
      for Income Taxes*




There
      was
      no provision for income taxes for the six months ended June 30, 2007 and 2006,
      respectively. There was no provision due to the carry forward of approximately
      $9,639,000 of net operating losses as of June 30, 2007 that we reserved in
      valuation allowances against this deferred tax asset.




***Three
      Months Ended June 30, 2007 versus June 30, 2006***




*Total
      Operating Revenues*




The
      Company recognized $0 in revenue during the three months ended June 30, 2007
      or
      for the three months ended June 30, 2006. The revenues are anticipated to
      commence upon FDA approval as well as global acceptance of the products that
      are
      being manufactured.




*Total
      Cost of Operating Revenues*




Our
      cost
      of operating revenues represent research and development costs and are
      $1,030,908 and $1,095 for the three months ended June 30, 2007 and 2006,
      respectively.




*Total
      Operating Expenses*




Total
      operating expenses for the three months ended June 30, 2007 were $285,096,
      as
      compared to $208,679 for the three months ended June 30, 2006. This represented
      an increase of $76,417, or approximately 27%. Operating expenses included
      payroll, professional fees, and related expenses, rent expense, and other
      general and administrative expenses. The increase from 2007 to 2006 is a result
      of using additional consultants and outsourced investor and public relations
      to
      assist the Company in raising money.




We
      depreciate fixed assets. This resulted in an expense of $226 and $8,096 for
      the
      three months ended June 30, 2007 and 2006, respectively. We determine the fair
      value of the undiscounted cash flows annually, and sooner if circumstances
      change and determination is required, to value any impairment on our intangible
      assets and long-lived assets. As of June 30, 2007 and 2006, we determined that
      there was no impairment charge.




*Other
      Income (Expense)*




Included
      in other income (expense) is interest expense of $898,784 and $68,709 for the
      three months ended June 30, 2007 and 2006, respectively. Included in the 2007
      interest expense is $536,326 in discounts on the conversion of notes payable
      to
      common stock.




*Net
      Income (Loss)*




We
      reported a net (loss) from operations of $(2,214,788), or $(0.06) per share
      on a
      basic and diluted basis, for the three months ended June 30, 2007 versus
      $(304,660), or $(0.01) per share on a basic and diluted basis, for the three
      months ended June 30, 2006. The increase in the net loss is attributable to
      the
      expanded research and development efforts in Kiev and professional fees related
      to raising money, as well as the interest expense.




*Provision
      for Income Taxes*




There
      was
      no provision for income taxes for the three months ended June 30, 2007 and
      2006,
      respectively. There was no provision due to the carry forward of approximately
      $9,639,000 of net operating losses as of June 30, 2007 that we reserved in
      valuation allowances against this deferred tax asset.




24




**Liquidity
        and Capital Resources**


During
      the six months ended June 30, 2007, the balance in cash and cash equivalents
      decreased by $868,217 compared to no change for the six months ended June 30,
      2006. This decrease is attributable solely to cash used in operating activities,
      which was attributable to a net loss from operations of ($3,255,540) offset
      by
      the discount on notes payable of $761,421 and an increase in accounts payable
      and accrued expenses of $808,025. This compares to a decrease in cash from
      operating activities for the six months ended June 30, 2006 of ($556,383),
      which
      was attributable to a net loss from operations of ($712,424) and an increase
      in
      accounts payable and accrued expenses of $91,018. We received proceeds from
      the
      issuance of convertible notes in 2007 of $250,000 and stock for $29,145 and
      also
      in 2006 received proceeds from the sale of stock of $473,528.




As
      of
      June 30, 2007, we had no current assets.




As
      of
      June 30, 2007, we had $7,234,480 in current liabilities, primarily consisting
      of
      $563,173 in accounts payable and accrued expenses, $1,462,749 in accrued
      interest payable, $3,000,000 of convertible notes payable and $1,1801,101 of
      notes payable.




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




**Critical
      Accounting Policies**





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





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





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





***Principles
      of Consolidation***


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





***Research
      and Development***





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





***Revenue
      Recognition***





The
      Company has not generated revenue in many years. The Company anticipates that
      they will record revenue in accordance with Staff Accounting Bulletin 104.
      The
      criteria for recognition is as follows:


1)
            Persuasive
                evidence of an arrangement exists;


2)
            Delivery
                has occurred or services have been rendered;


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


4)
            Collectibility
                is reasonably assured.




25




***Income
      Taxes***





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





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





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





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





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





***Stock-Based
      Compensation***





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





***Fair
      Value of Financial Instruments***





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





***Recent
      Accounting Pronouncements***





In
      May
      2005, the FASB issued Statement of Financial Accounting Standard No. 154,
“Accounting Changes and Error Corrections” (“SFAS 154”). SFAS 154 is a
      replacement of APB No. 20, *“Accounting
      Changes”* ,
      and
      SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements”. SFAS
      154 applies to all voluntary changes in accounting principle and changes the
      requirements for accounting and reporting of a change in accounting principle.
      This statement establishes that, unless impracticable, retrospective application
      is the required method for reporting of a change in accounting principle in
      the
      absence of explicit transition requirements specific to the newly adopted
      accounting principle. It also requires the reporting of an error correction
      which involves adjustments to previously issued financial statements similar
      to
      those generally applicable to reporting an accounting change retrospectively.
      SFAS 154 is effective for accounting changes and corrections of errors made
      in
      fiscal years beginning after December 15, 2005. The adoption of SFAS 154 has
      not
      had a material impact on our condensed consolidated financial
      statements.




26





In
      February 2006, the FASB issued Statement of Financial Accounting Standard No.
      155, “Accounting for Certain Hybrid Instruments” (“SFAS 155”). FASB 155 allows
      financial instruments that have embedded derivatives to be accounted for as
      a
      whole (eliminating the need to bifurcate the derivative from its host) if the
      holder elects to account for the whole instrument on a fair value basis. This
      statement is effective for all financial instruments acquired or issued after
      the beginning of an entity’s first fiscal year that begins after September 15,
      2006. The adoption of SFAS 155 has not had a material impact on our condensed
      consolidated financial statements.





In
      March
      2006, the FASB issued Statement of Financial Accounting Standard No. 156,
“Accounting for Servicing of Financial Assets, an amendment of FSB Statement
      No.
      140” (“SFAS 156”). SFAS 156 requires all separately recognized servicing assets
      and servicing liabilities to be initially measured at fair value, if
      practicable. The standard permits an entity to subsequently measure each class
      of servicing assets or servicing liabilities at fair value and report changes
      in
      fair value in the statement of operations in the period in which the changes
      occur. SFAS 156 is effective for us as of December 1, 2006. The adoption of
      SFAS
      156 has not had a material impact on our condensed consolidated financial
      statements.





FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
      Interpretation of FASB Statement No. 109” - In June 2006, the FASB issued FASB
      Interpretation No. 48 (“FIN-48”), “Accounting for Uncertainty in Income Taxes -
      an Interpretation of FASB Statement No. 109.” The interpretation clarifies the
      accounting for uncertainty in income taxes recognized in an entity’s financial
      statements in accordance with SFAS No. 109, “Accounting for Income Taxes.”
Specifically, FIN-48 prescribes a recognition threshold and a measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken. The provisions of FIN-48 are effective
      for financial statements for fiscal years beginning after December 15, 2006.
      Accordingly, the Company will adopt FIN-48 as of January 1, 2007. The adoption
      of FIN-48 has not had a material impact on our condensed consolidated financial
      statements.





SFAS
      No.
      157, “Fair Value Measurements” - In September 2006, the FASB issued SFAS No.
      157, “Fair Value Measurements” (“SFAS 157”), which defines fair value,
      establishes a framework for measuring fair value and expands disclosures about
      fair value measurements. SFAS 157 applies whenever other accounting standards
      require or permit assets or liabilities to be measured at fair value.
      Accordingly, it does not expand the use of fair value in any new circumstances.
      Fair value under SFAS 157 is defined as the price that would be received to
      sell
      an asset or paid to transfer a liability in an orderly transaction between
      market participants at the measurement date. This Standard clarifies the
      principle that fair value should be based on the assumptions market participants
      would use when pricing an asset or liability. In support of this principle,
      SFAS
      157 establishes a fair value hierarchy that prioritizes the information used
      to
      develop those assumptions. The fair value hierarchy gives the highest priority
      to quoted prices in active markets and the lowest priority to unobservable
      data,
      for example, a reporting entity’s own data. Under SFAS 157, fair value
      measurements would be separately disclosed by level within the fair value
      hierarchy. SFAS 157 is effective for fiscal years beginning after November
      15,
      2007. Accordingly, the Company is to adopt SFAS 157 on January 1, 2008. The
      adoption of SFAS 157 is not expected to have a material effect on the Company’s
      financial position or results of operations.





Staff
      Accounting Bulletin No. 108, “Considering the Effects of Prior Year
      Misstatements When Quantifying Misstatements in Current Year Financial
      Statements” - In September 2006, the Securities and Exchange Commission issued
      Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
      Misstatements When Quantifying Misstatements in Current Year Financial
      Statements” (“SAB 108”), which provides guidance on the consideration of the
      effects of prior year misstatements in quantifying current year misstatements
      for the purpose of a materiality assessment two approaches are commonly used
      to
      evaluate the materiality of misstatements or errors in financial statements:
      the
      roll-over, also known as the current-period or income-statement approach, and
      the iron curtain, also known as the cumulative or balance-sheet approach. The
      roll-over approach quantifies a misstatement based on the amount of the error
      originating in the current-period income statement. This approach could allow
      balance sheet items to grow each year by immaterial amounts, until the
      cumulative error becomes material. The iron curtain approach quantifies a
      misstatement based on the effects of correcting the misstatement existing in
      the
      balance sheet at the end of the current period. This approach does not consider
      the income statement effects of correcting prior year misstatements in the
      current year to be errors.




27




The
      reliance on only one of these approaches, to the exclusion of the other, does
      not appropriately quantify all misstatements that could be material to
      financial-statement users. Accordingly, SAB 108 will require quantification
      of
      financial statement errors based on the effects of the error on each of an
      entity’s financial statements and the related financial statement disclosures.
      This model is commonly referred to as a dual approach because it essentially
      requires quantification of errors under both the iron-curtain and the roll-over
      approaches.





SAB
      108
      is effective for annual financial statements covering the first fiscal year
      ending after November 15, 2006. From a transition perspective, SAB 108 permits
      companies to record the cumulative effect of initially applying the dual
      approach in the first year ending after November 15, 2006 by recording any
      necessary correcting adjustments to the carrying values of assets and
      liabilities as of the beginning of that year with the offsetting adjustment
      recorded to the opening balance of retained earnings. The initial adoption
      of
      SAB 108 had no affect on the Company’s financial position, results of operations
      or cash flows.





**Item
      3. Controls and Procedures.**




***Evaluation
      of Disclosure Controls and Procedures***




We
      are
      responsible for maintaining disclosure controls and procedures designed to
      ensure that information required to be disclosed in our Exchange Act reports
      is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC’s rules and regulations, and that such information is accumulated and
      communicated to our management, including our chief executive officer and chief
      financial officer, as appropriate, to allow for timely decisions regarding
      required disclosure.




In
      designing and evaluating our disclosure controls and procedures, management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving their objectives
      and management necessarily is required to apply their judgment in evaluating
      the
      cost-benefit relationship of possible controls and procedures and implementing
      controls and procedures based upon the application of management’s
      judgment.




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act),
      including the remedial actions discussed above, as of the end of the period
      covered by this report. Based upon this evaluation, our Chief Executive Officer
      and Chief Financial Officer concluded that as of the date of filing this report,
      our disclosure controls and procedures were effective and designed to ensure
      that material information required to be disclosed in the reports that we file
      or submit under the Exchange Act is recorded, processed, summarized, and
      reported, within the time periods specified in the SEC’s rules and regulations
      and accumulated and communicated to them as appropriate to allow timely
      decisions regarding required disclosure.




***Changes
      in Internal Control over Financial Reporting***




There
      have not been any significant changes in our internal controls over financial
      reporting or in the factors that could significantly affect these controls
      subsequent to the date of their evaluation.




28







**PART
      II - OTHER INFORMATION**





**Item
      1.**   **Legal
      Proceedings** **.**





*Banco
      Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
      LLC* *,* ** Case
      No.  1:07-cv-00015 now pending in the Northern District of Illinois
      District Court as Case No. 06 C 7195. The
      complaint alleges that CSMG entered into a short-term promissory note dated
      February 15, 2002 (the “Note”) by which CSMG borrowed from Banco Panamericano
      $203,800 at 12% interest, the Note being due April 1, 2002. The complaint
      alleged that the Note was secured by all of CSMG's equipment, inventory,
      accounts, general intangibles and other properties. The complaint alleged that
      the Note is in default and that CSMG owed Banco Panamericano $514,920 as of
      February 9, 2005.




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




Banco
      Panamericano is not a bank but a Nebraska corporation that is affiliated with
      Resource Technologies Corporation (“RTC”), a company that is a debtor in a
      federal chapter 11 reorganization case CSMG and RTC had entered into a contract
      (the “Contract”) whereby CSMG would provide equipment (the “Equipment”), at
      CSMG's cost, to filter landfill gas from a landfill operated by RTC located
      in
      Alabama so as to provide marketable methane gas. Among RTC's obligations under
      the Contract was a commitment to provide a pipeline hookup to the purchaser
      of
      the gas. CSMG and RTC would share in the proceeds from a landfill operated
      by
      RTC located in Alabama so as to provide marketable methane gas. Among RTC's
      obligations under the Contract was a commitment to provide a pipeline hookup
      to
      the purchaser of the gas. CSMG and RTC would share in the proceeds from the
      sale
      of the methane gas.





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





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





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




CSMG
      believes that it, not the plaintiff, is the injured party and that this
      litigation properly belongs in RTC's chapter 11 proceedings in the federal
      bankruptcy court.





CSMG
      has answered the complaint and filed counterclaims. On March 2, 2005, the case
      was removed from the Circuit Court of Cook County, Illinois to the Federal
      District Court for the Northern District of Illinois. CSMG filed a motion to
      have the proceeding referred to the United States Bankruptcy Court for the
      Northern District of Illinois where the bankruptcy proceeding of Resource
      Technology Corporation is pending. The Federal District Court referred the
      proceeding to the United States Bankruptcy Court on December 6, 2005. A status
      call has been set by the United States Bankruptcy Court for October 26, 2006.
      At
      the status call, the Court stated that it would review the issue of CSMG's
      standing to bring a substantive consolidation suit in the United States
      Bankruptcy Court. The Court has not yet issued a ruling.





29




*Nature
      Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
      Donald S.  Robbins and Gordon W.  Allison* *,* ** Case
      No. 2:06-cv-273 originally pending in the Southern District of Texas
      District Court and recently ordered transferred to the Northern District of
      Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
      arising out of a series of disputed promissory notes. The Company has
      answered setting forth several affirmative defenses and counterclaims focused
      on
      the affiliation of the Plaintiff with an offshore affiliate of a customer of
      the
      Company and based on misrepresentation.  The litigation is in the pleading
      stage and discovery has commenced.




There
      is
      a dispute, not subject to a court proceeding, between Waste Management Company,
      Inc. (“Waste Management”) and the Company with regard to the Chastang Waste Site
      in Chastang, Alabama.  Waste Management was to maintain the site so as to
      produce marketable levels of waste site gas.  The site has failed to
      produce such volume and Waste Management has requested the Company to remove
      its
      equipment from the site.  The Company has commenced the disassembly of the
      equipment in preparation for removal of the equipment from the site. A written
      demand for removal was received from Waste Management on August 9,
      2007.





**Item
      2.**   **Unregistered
      Sales of Equity Securities**





Set
      forth
      below are previously unreported sales of our common stock since June 30, 2006
      in
      transactions exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933 on the basis that all purchasers were accredited
      investors.





**Person**
            **Date**
            **No.
                of**
              **Shares**
            **Price**
              **Per
                Share**
            **Type
                of**
              **Consideration**Donald
                Wilke
            4-5-07
            39,766
            .625
            Note
                conversionCharles
                Shoen
            4-9-07
            108,502
            .625
            Note
                ConversionRobert
                Jacquemotte
            4-9-07
            4,500
            .625
            Fee
                shares (note)Sam
                Allen
            4-11-07
            134,271
            .625
            Note
                conversionAndrea
                B. Currier Revocable Trust
            5-1-07
            812,812
            .625
            Note
                conversionM.
                Christine Jurzykowski Revocable Trust
            5-1-07
            188,964
            .625
            Note
                ConversionDonald
                S. Robbins
            5-30-07
            100,000
            .625
            Note
                ConversionWilliam
                Weldon
            6-14-07
            50,000
            .69
            Cash
                PurchaseRyan
                B. Foret
            6-14-07
            7,246
            .69
            Cash
                PurchaseBeton
                A. Foret
            6-14-07
            14,993
            .69
            Cash
                Purchase







30





**Item
      6.**   **Exhibits.**







31.1
            Certification
                by Donald S. Robbins, Chief Executive Officer, pursuant to Rule
                13a-14(a)
            
            Provided
                herewith31.2
            Certification
                by K. Bruce Jones, Principal Financial Officer, pursuant to Rule
                13a-14(a)
            
            Provided
                herewith32.1
            Certification
                by Donald S. Robbins and K. Bruce Jones, pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002*
            
            Provided
                herewith





**
      These certifications are not deemed filed by the SEC and are not to be
      incorporated by reference in any filing of the Registrant under the Securities
      Act of 1933 or the Securities Exchange Act of 1934, irrespective of any general
      incorporation language in any filings.




31




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly authorized.








**CSMG
      TECHNOLOGIES, INC.**


Date:August
                  20, 2007
              By:/s/
                  Donald S.
                  RobbinsDonald
                  S. Robbins, Chief Executive OfficerDate:August
                  20, 2007
              By:/s/
                  K. Bruce
                  JonesK.
                  Bruce Jones, Chief Financial
                  Officer




32