U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





**AMENDMENT
NO. 1 TO 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 September 30, 2004





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)








500
North Shoreline Drive, Suite 701 North


Corpus
Christi, TX 78471


512-887-7546


____________________________________________________


(Address
and telephone number of registrant's principal


executive
offices and principal place of business)





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





As
of November 10, 2004, there were 16,336,896 shares of the Registrant's Common
Stock, par value $0.001, outstanding.





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





1






TABLE
      OF CONTENTSPagePART
      I - FINANCIAL INFORMATION
    3Item
      1. Financial Statements
    3Item
      2. Management’s Discussion and Analysis or Plan of
    Operation
    11Item
      3. Controls and Procedures
    15PART
      II - OTHER INFORMATION
    16Item
      1. Legal Proceedings
    16Item
      2. Unregistered Sales of Equity Securities
    16Item
      3. Defaults Upon Senior Securities
    17Item
      4. Submission of Matters to a Vote of Security Holders
    17Item
      5. Other Information
    17Item
      6. Exhibits and Reports on Form 8-K
    17SIGNATURES
    21


2





PART
      I - FINANCIAL INFORMATIONItem
      1. Financial StatementsConsolidated
      Balance Sheet September 30, 2004 and December 31, 2003
    4Consolidated
      Statement of Operations September 30, 2004 and 2003
    5Consolidated
      Statement of Cash Flows September 30, 2004 and 2003
    7Consolidated
      Statement of Stockholders’ Equity Three MonthsEnded
      September 30, 2004
    8Notes
      to Financial Statements
    9












3
  **CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.****AND
      SUBSIDIARIES**CONSOLIDATED
      BALANCE SHEETSASSETSSep
      30, 2004
    
    
    Dec
      31, 2003CURRENT
      ASSETSCash
    
    $
    129,566
    
    $
    13,118Total
      Current Assets
    
    
    129,566
    
    
    13,118FIXED
      ASSETSFurniture
      and Equipment
    
    
    61,409
    
    
    61,409Less
      Accumulated Depreciation
    
    
    (61,409
    )
    
    (58,881
    )Total
      Fixed Assets
    
    
    -
    
    
    2,528OTHER
      ASSETSInvestment
      - United Engineering Company
    
    
    236,118
    
    
    255,318Investment
      - CO2Equipment
    
    
    1,454,206
    
    
    1,450,490Less
      Accumulated Depreciation
    
    
    (72,548
    )
    
    -CO2Equipment Patent
    
    
    8,000
    
    
    8,000Tissue
      Bonding Patent
    
    
    334,687
    
    
    236,018Less
      Accumulated Amortization
    
    
    (28,014
    )
    
    (20,514
    )Total
      Other Assets
    
    $
    1,932,449
    
    $
    1,929,312Total
      Assets
    
    $
    2,062,015
    
    $
    1,944,958The
      accompanying notes are an integral part of these interim financial
      statements.


4
  **CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.****AND
      SUBSIDIARIES**CONSOLIDATED
      BALANCE SHEETS (CONTINUED)LIABILITIESSep
      30, 2004
    
    
    Dec
      31, 2003CURRENT
      LIABILITIESAccounts
      Payable
    
    $
    576,066
    
    $
    680,969Interest
      Payable
    
    
    515,165
    
    
    199,266Payroll
      Taxes Payable
    
    
    525
    
    
    26,046Notes
      Payable to Stockholders
    
    
    3,781,527
    
    
    3,475,802CO2Equipment Payable
    
    
    206,749
    
    
    206,749Fee
      Debenture Payable
    
    
    126,000
    
    
    -Total
      Current Liabilities
    
    
    5,206,032
    
    
    4,588,832LONG
      TERM LIABILITIESFee
      Debenture Payable
    
    
    169,000
    
    
    -Total
      Long Term Liabilities
    
    
    169,000
    
    
    -Total
      Liabilities
    
    
    5,375,032
    
    
    4,588,832Minority
      Interest in Consolidated Subsidiary
    
    
    206,000
    
    
    206,000STOCKHOLDERS'
      EQUITYCommon
      stock $.001 par value, 40,000,000shares
      authorized; 13,314,697 shares issued and13,233,984
      shares outstanding at Sep 30, 2004and
      9,175,874 shares issued and 9,095,161 sharesoutstanding
      at Dec 31, 2003
    
    
    13,315
    
    
    9,175Additional
      Paid in Capital
    
    
    6,364,721
    
    
    5,410,293Accumulated
      Other Comprehensive (Loss)
    
    
    (342,275
    )
    
    (343,375
    )Accumulated
      (Deficit)
    
    
    (9,522,493
    )
    
    (7,893,682
    )Treasury
      Stock
    
    
    (32,285
    )
    
    (32,285
    )Total
      Stockholders' Equity
    
    
    (3,519,017
    )
    
    (2,849,874
    )Total
      Liabilities and Stockholders' Equity
    
    $
    2,062,015
    
    $
    1,944,958The
      accompanying notes are an integral part of these interim financial
      statements.
 
  5
 
 **CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.****AND
      SUBSIDIARIES**CONSOLIDATED
      STATEMENT OF OPERATIONSJul
      1, 2004-
    
    
    Jul
      1, 2003-
    
    
    Jan
      1, 2004-
    
    
    Jan
      1, 2003-Sep
      30, 2004
    
    
    Sep
      30, 2003
    
    
    Sep
      30, 2004
    
    
    Sep
      30, 2003Revenues
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -General
      and Administrative Expenses
    
    
    485,568
    
    
    477,866
    
    
    1,443,168
    
    
    1,136,790Funded
      R & D
    
    
    -
    
    
    -
    
    
    -
    
    
    -Cost
      of Funded R & D
    
    
    84,799
    
    
    -
    
    
    165,473
    
    
    8,910Net
      R & D Cost
    
    
    84,799
    
    
    -
    
    
    165,473
    
    
    8,910Operating
      (Loss)
    
    
    (570,367
    )
    
    (477,866
    )
    
    (1,608,641
    )
    
    (1,145,700
    )Interest
      Income
    
    
    119
    
    
    9
    
    
    130
    
    
    12Interest
      in Income (Loss) ofUnconsolidated
      Companies
    
    
    21,580
    
    
    (15,058
    )
    
    (20,300
    )
    
    (45,455
    )(Loss)
      from Continuing Operations
    
    
    (548,668
    )
    
    (492,915
    )
    
    (1,628,811
    )
    
    (1,191,143
    )Income
      Taxes
    
    
    -
    
    
    -
    
    
    -
    
    
    -Net
      (Loss)
    
    $
    (548,668
    )
    $
    (492,915
    )
    $
    (1,628,811
    )
    $
    (1,191,143
    )Net
      (Loss) Per Share Common Stock
    
    
    (0.04
    )
    
    (0.07
    )
    
    (0.14
    )
    
    (0.16
    )Weighted
      AverageCommon
      Shares Outstanding
    
    
    12,764,890
    
    
    7,495,708
    
    
    11,589,765
    
    
    7,274,475Basic
      and diluted earnings per share are the same. The corporation is reporting
      a net (loss) for thereporting
      periods and any potentially dilutive securities are antidilutive (reduce
      net loss) and thereforenot
      presented.The
      accompanying notes are an integral part of these interim financial
      statements.
  6
  **CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.****AND
      SUBSIDIARIES**CONSOLIDATED
      STATEMENT OF CASH FLOWSJan
      1, 2004-
    
    
    Jan
      1, 2003-Sep
      30, 2004
    
    
    Sep
      30, 2003CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (Loss)
    
    $
    (1,628,811
    )
    $
    (1,191,143
    )Depreciation
      and Amortization
    
    
    82,576
    
    
    13,280Increase
      (Decrease) Accounts Payable
    
    
    (104,903
    )
    
    85,493Increase
      (Decrease) Accrued Interest
    
    
    317,899
    
    
    183,425Increase
      (Decrease) Taxes Payable
    
    
    (25,520
    )
    
    17,888Increase
      (Decrease) Salary Payable
    
    
    -
    
    
    323,460Increase
      (Decrease) Office Expense Payable
    
    
    -
    
    
    36,000Equity
      (Income) Loss from Investees
    
    
    20,300
    
    
    45,455Issue
      Stock for Interest and Services
    
    
    244,089
    
    
    98,873Increase
      (Decrease) Fee Debenture Payable
    
    
    320,000
    
    
    -Net
      Cash (used by) Operating Activities
    
    
    (774,370
    )
    
    (387,269
    )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      Equipment and Patent
    
    
    (102,386
    )
    
    (245,242
    )Increase
      Patent
    
    
    -
    
    
    (1,291
    )Employee
      Advance
    
    
    -
    
    
    (62,673
    )Net
      Cash (used by) Investing Activities
    
    
    (102,386
    )
    
    (309,206
    )CASH
      FLOWS FROM FINANCING ACTIVITIESIncrease
      (Decrease) Notes Payable
    
    
    637,591
    
    
    362,580Increase
      (Decrease) in Stock Issue
    
    
    355,613
    
    
    352,018Net
      Cash provided by Financing Activities
    
    
    993,204
    
    
    714,598NET
      INCREASE (DECREASE) IN CASHAND
      CASH EQUIVALENTS
    
    
    116,448
    
    
    18,123Cash
      at Beginning of Period
    
    
    13,118
    
    
    3,905Cash
      at End of Period
    
    $
    129,566
    
    $
    22,028Financing
      Activities Not Affecting Cash$328,866
      in common stock was issued to retire $328,866 in notes and debentures
      payable.The
      accompanying notes are an integral part of these interim financial
      statements.
 7
   **CONSORTIUM
      SERVICE MANAGEMENT GROUP, INC.****AND
      SUBSIDIARIES**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITYJANUARY
      1, 2004 - SEPTEMBER 30, 2004AccumulatedAdditional
    
    
    OtherNo.
      Common
    
    
    Par
    
    
    Paid
      In
    
    
    Comprehensive
    
    
    Accumulated
    
    
    TreasuryDescription
    
    
    Shares
      (Ea.)
    
    
    Value
    
    
    Capital
    
    
    Income
      (Loss
    )
    
    Deficit
    
    
    Stock
    
    
    TotalBalance
      January 1, 2004
    
    
    9,175,874
    
    $
    9,175
    
    $
    5,410,293
    
    $
    (343,375
    )
    $
    (7,893,682
    )
    $
    (32,285
    )
    $
    (2,849,874
    )Common
      Stock Sold
    
    
    1,239,944
    
    
    1,239
    
    
    354,374
    
    
    
    
    
    
    
    
    
    
    
    355,613Common
      Stock Issued for Services
    
    
    2,053,495
    
    
    2,054
    
    
    53,428
    
    
    
    
    
    
    
    
    
    
    
    55,482Common
      Shares Issued for Interest
    
    
    309,222
    
    
    311
    
    
    188,298
    
    
    
    
    
    
    
    
    
    
    
    188,609Common
      Stock Issued for Notes
    
    
    536,162
    
    
    536
    
    
    358,328
    
    
    
    
    
    
    
    
    
    
    
    358,864Net
      (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,628,811
    )
    
    
    
    
    (1,628,811
    )Other
      Comprehensive Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    -Foreign
      Exchange Gain (Loss)
    
    
    
    
    
    
    
    
    
    
    
    1,100
    
    
    
    
    
    
    
    
    1,100Balance
      September 30, 2004
    
    
    13,314,697
    
    $
    13,315
    
    $
    6,364,721
    
    $
    (342,275
    )
    $
    (9,522,493
    )
    $
    (32,285
    )
    $
    (3,519,017
    )Treasury
      Shares
    
    
    (80,713
    )Shares
      Outstanding
    
    
    13,233,984The
      accompanying notes are an integral part of these interim financial
      statements.
  
  8
  **CONSORTIUM
SERVICE MANAGEMENT GROUP, INC.**
 **AND
SUBSIDIARIES**
 **NOTES
TO FINANCIAL STATEMENTS**
 **SEPTEMBER
30, 2004, DECEMBER 31, 2003**
 
 **NOTE
1**
 **BASIS
OF PRESENTATION**
 
 The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with standards established by the Public Company
Accounting Oversight Board. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the nine month period ending September 30, 2004 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2004. For further information, refer to the audited annual consolidated
financial statements and footnotes thereto for the year ended December 31,
2003.
 
 **NOTE
2**
 **GOING
CONCERN**
 
 The
Company’s financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred a net loss
of $(1,628,811) for the nine months ended September 30, 2004 and when combined
with prior year net losses raises substantial doubt as to the Company’s ability
to obtain debt and/or equity financing and achieve profitable
operations.
 
 The
Company’s management intends to raise additional operating funds through equity
and/or debt offerings and the development and marketing of
technologies. However, there can be no assurance management will be successful
in its endeavors. The possible consequences of not obtaining additional funds
either through equity offerings, debt offerings, or sale of technologies is that
there will not be sufficient money to fund the capital projects required to earn
long term planned revenues of the company.
 
 During
the three months ending September 30, 2004 the Company has been notified
by one creditor that a note payable approximating $203,800 including
accrued interest is in default adding additional concern about the
Company’s ability to continue operations.  The Company filed a Form 8-K
with the SEC.  This note is with an RTC principal and is associated to the
RTC bankruptcy and the Chastang landfill project that is currently being
litigated.
 
  9
  **CONSORTIUM
SERVICE MANAGEMENT GROUP, INC.**
 **AND
SUBSIDIARIES**
 **NOTES
TO FINANCIAL STATEMENTS**
 **SEPTEMBER
30, 2004, DECEMBER 31, 2003**
 
 
 The
Company’s ability to continue as a going concern also involves the carbon
dioxide separator equipment which is currently inactive due to legal and
possible technical problems. As stated in Note 1 under Significant Accounting
Policies on the December 31, 2003 audited annual consolidated financial
statements this equipment has been considered for impairment. The technology has
been successfully installed on similar equipment in Eastern Europe and with
management continually monitoring the CO 2 project the equipment is being carried at its original cost less normal
depreciation. Projected cash flows are still adequate to recover the net book
value including upgrades if the equipment becomes operational but it is unclear
if this will happen in view of the above problems.
 
 **NOTE
3**
 **INCOME
(LOSS) FROM UNCONSOLIDATED COMPANY**
 
 The
Company’s 33% owned subsidiary United Engineering Company, a Ukraine company,
reported the following sales, gross profits and net income (loses):
 
 Jul
      1, 2004-
    
    
    Jul
      1, 2003-
    
    
    Jan
      1, 2004-
    
    
    Jan
      1, 2003-Sep
      30, 2004
    
    
    Sep
      30, 2003
    
    
    Sep
      30, 2004
    
    
    Sep
      30, 2003Sales
    
    $
    290,108
    
    $
    325,553
    
    $
    747,528
    
    $
    808,889Gross
      Profit
    
    
    117,960
    
    
    12,785
    
    
    117,960
    
    
    86,419Net
      Income (Loss)
    
    $
    64,740
    
    $
    (45,172
    )
    $
    (60,900
    )
    $
    (135,628
    )
    10
 
 Item
2.Management's
Discussion and Analysis or Plan of Operation
 
 The
following discussion and analysis should be read in conjunction with the
financial statements and the accompanying notes thereto for the three-month
period ended September 30, 2004 and is qualified in its entirety by the
foregoing and by more detailed financial information appearing elsewhere. See
"Item 1. Financial Statements."
 
 **Results
      of Operations - Third Quarter of 2004 Compared to Third Quarter of
      2003**
 
 We
had no revenues either for Q3 2004 or Q3 2003.
 
 Operating
expenses increased by $92,501 to $570,367 during Q3 2004 compared to $477,866 in
Q3 2003. The increase is attributable primarily to costs attributed to the
Cornell Capital funding agreement and research and development
expense.
 
 We
had a loss from operations of $570,367 for Q3 2004 compared to an operating loss
of $477,866 for Q3 2003.
 
 We
accrued a gain in Q3 2004 of $21,580 from our joint venture in Ukraine with
United Engineering Company, as compared with an accrued loss of
$15,058 from this activity in Q3 2003. The gain is attributed to lower operating
costs.
 
 Our
net loss for Q3 2004 was $548,668, or $0.04 a share, as compared with a net loss
in Q3 2003 of $492,915, or $0.07 a share, an increase attributable to increased
expenses.
 
 We
were able to remain liquid during this quarter through (1) funding from our
Cornell Capital Standby Equity Distribution Agreement and (2) reduced current
costs on the CO2 separator project.
 
 On
March 29, 2004, we entered into a Standby Equity Distribution Agreement ("SEDA")
with Cornell Capital Partners. Under this agreement, we may issue and sell to
Cornell Capital Partners common stock for a total purchase price of up to $10
million. Subject to certain conditions, we are entitled to draw down on the SEDA
now that the common stock to be issued under the SEDA is registered with the
Securities and Exchange Commission and the registration statement is declared
effective. The purchase price for the shares is equal to 95% of, or a 5%
discount to, the market price, which is defined as the lowest closing bid price
of the common stock during the five trading days following the notice date. We
have the right, but not the obligation, to require Cornell Capital to purchase
shares in the company’s common stock in amounts not to exceed $140,000 per draw
up to a maximum of $420,000 per month with a total of $10 million over a
consecutive 24-month period. Cornell Capital Partners will receive a fee
debenture of $390,000, in the form of convertible debentures. Cornell will also
receive a $10,000 legal fee of which $5,000 has been paid and the balance will
be paid from the proceeds from the initial advance under the SEDA. Cornell
Capital Partners is entitled to retain a fee of 5% of each advance. The net
effect of the 5% discount and the 5% retainage of each advance is that Cornell
Capital Partners shall pay 90.25% of the applicable closing bid price for each
share of our common stock. In addition, we have entered into a placement agent
agreement with Newbridge Securities, a registered broker-dealer. Pursuant to the
placement agent agreement, we will pay a one-time placement agent fee in shares
of common stock equal to approximately $10,000 based on the stock price on the
date we agreed to engage the placement agent.
 11
  We
received $700,000 under a loan agreement with Cornell in July and August 2004
which is being repaid at the rate of $25,000 per week through the Cornell SEDA
Agreement. These funds are being used for operations of the parent and
subsidiaries. In addition we converted $390,000 of outstanding investor loans to
restricted 144 stock.
 
 **Results
of Operations - First Nine Months of 2004 Compared to First Nine Months of
2003**
 
 We
had no revenues in the first nine months of either in 2003 or 2004.
 
 Operating
expenses of $1,608,641 in the first nine months of 2004 were 140 percent of
those of the first nine months of 2003 - $1,145,700. The increase of $462,941 is
primarily attributable to expenses attributed to the Cornell Capital SEDA
agreement.
 
 We
had an operating loss of $1,608,641 in the first nine months of 2004 as compared
with an operating loss in the first nine months of 2003 of $1,145,700 - a 40
percent increase attributable to increased expenses on tissue bonding/welding
research and development and expenses attributed to the Cornell Capital SEDA
agreement.
 
 We
recorded accrued losses of $20,300 in the first nine months of 2004 from our
Ukraine joint venture operations in United Engineering Company, compared to an
accrued loss of $45,455 in the first nine months of 2003. This reduction of
$25,155 is attributed to reduction in operating expenses.
 
 Taking
into account our joint venture operations in Ukraine, we had a net loss of
$1,628,811, or $0.14 a share in the first nine months of 2004 compared with a
net loss of $1,191,143, or $0.16 a share, in the first nine months of 2003.
Nevertheless, we feel that we are on the right course for the company, that our
CO2 separator project, our anaerobic animal waste project and our human tissue
bonding/welding project all hold considerable promise for our company in 2004.
 ****
 **Overview**
 
 Live
Biological Tissue Bonding/Welding
 
 The
status of our tissue bonding project is that we have completed more than 2,500
human surgeries in Ukraine clinical trials and continue to develop new methods
of surgical procedures and instruments. We have started the development of
equipment from prototype model to a commercial model. The equipment bonds the
soft biological tissue with a special miniature surgical instrument. No glues,
sutures, staples or other foreign matter are used. The process is best described
as a welding process. The scar tissue is either minimal or non-existent. Tests
conducted in Louisville, Kentucky by U.S. surgeons on rabbits' stomachs resulted
in scar tissue only forty microns wide six months after surgery. It appears that
the Ukraine scientists have developed a superior, all-purpose, seamless method
of bonding soft biological tissues, which method is characterized by simple
manipulation applicable to different surgical operations and the fast
restoration of tissues without the formation of coarse scars. Apparently there
is no need for prolonged special training of surgeons and surgical
personnel.
 12
 
 The
Ukraine prototype for the equipment was successfully demonstrated to physicians
and surgeons in the U.S. in June 1996 on the blood vessels, nerves and stomachs
of rats and rabbits. Additional, subsequent demonstrations on animals were
performed in Ukraine by Ukraine surgeons with U.S. surgeons in attendance. In
1998 the U.S. surgeons performed successful tests on animals in Louisville,
Kentucky. Testing on humans in Ukraine began in mid-year 1998. One patient had a
blood vessel welded, and the other patient had a torn uterus repaired using
minimally invasive surgery instruments. According to the Ukraine doctors, both
patients recovered in the normal amount of healing time without side
effects.
 
 E.O.
Paton Institute of Electric Welding of the Ukraine National Academy of Sciences
and International Association of Welding filed U.S. and international patent
applications on the process in February 1999. Two U.S. and one Australian
patents have been issued, but no other patents have been issued. We own the
technology and have been assigned the exclusive world rights of the patents -
should they be issued. See Exhibit 10.3 filed as part of our Form
10-SB.
 
 We
have begun the process for FDA discovery and developing the regulatory and
commercial equipment models for submission to FDA. We have engaged U.S.
regulatory and equipment consultants to assist in this process.
 
 To
date we have submitted no applications, requests or testing results to the
Federal Drug Administration but plan to during the next 12 months. We have not
marketed the bonding equipment in the Ukraine or any other non-U.S. country but
we plan to market the commercial equipment once regulatory approval is received.
We have continued our plans to manufacture prototypes in Ukraine and are
continuing clinical trials in Ukraine for comprehensive human testing. We began
this clinical work in May 2000. To date we have completed more than 2,500
successful human surgeries at Ukraine hospitals. We are currently negotiating
with a group of private investors and international medical device companies,
who are familiar with our company’s need additional development
funds.
 
 In
2002 we formed Live Tissue Connect, Inc., a Delaware corporation, through which
we propose to develop our Tissue Bonding technology. We own 86 percent of Live
Tissue Connect, Inc.
 
 We
estimate that in excess of $2.5 million have been expended in developing the
project and that $2.5 million of additional funds must be expended to bring this
product to market. We estimate that the first surgical equipment will be
manufactured in the U.S. during the next 12 months for FDA and US clinical work
now that the U.S. patent applications are approved and patents are
issued.
 
 We
successfully demonstrated live tissue welding on porcine models in
demonstrations during May, June and September of 2004 for the medical community
in Louisville, Kentucky, New York, Massachusetts and Ohio.
 
 This
project is still in the development stage, even though the Ukrainians have
created a finished prototype product and a line of more that 20 surgical
instruments. Improvements in the instruments are possible, and testing on live
tissue of humans to U.S. testing standards is required. Approval of the process
and equipment by the Federal Drug Administration is required.
 13
 
 CO2
Separation for Landfill Methane Gas
 
 The
status of our CO2 separator project in Chastang County, Alabama is that the
installation was completed during March 2003. Start-up and equipment adjustment
were delayed while waiting for the landfill gas owner to complete installation
of the end-user pipeline and gas metering system. This was installed near the
end of March just as our Ukraine supervisory team had to return to Ukraine. In
addition, the landfill gas quality was well below expected levels and required
repairs to the gas gathering system to reduce air intake. The landfill gas owner
coordinated and completed these repairs during the next few weeks, finishing
toward the end of May. The Ukraine supervisory team returned in early June to
oversee service, start-up and adjust the equipment. Poor weather caused some
delays but this was completed in about two weeks. As we prepared to begin
start-up operations and equipment adjustment, Waste Management Inc. ("WMC", the
operator of the landfill) ordered Resource Technology Corporation "RTC" (the
holder of the gas ownership contract) off the landfill and contended that our
CO2 separator equipment produces methane gas that fails to meet gas quality
specifications and that, therefore, the agreement to buy the gas is terminated.
This contention is now being litigated in RTC’s chapter 11 reorganization
proceeding. It is possible that our gas collection and conversion systems could
be determined to be out of specifications due to the landfill raw gas obtaining
a higher oxygen and nitrogen content than was originally provided to the company
for plant design, thus necessitating installing additional oxygen and nitrogen
removal systems estimated to cost between $200,000 and $300,000 to enable the
equipment to meet the gas quality requirements using lower quality raw gas.
Currently the Company has a caretaker at the landfill to maintain the equipment.
If additional funds are required to upgrade the system the possibility remains
that the process will still not meet the Mobile Gas specifications and if so it
will be necessary to move the equipment from the Chastang landfill. Should this
occur it is unclear if any future carbon dioxide projects will be possible and
if so the continued existence of the Company will depend on live tissue bonding
and anaerobic farm waste technology sales.
 
 
 Anaerobic
Farm Waste, Inc.
 
 We
have met resistance from swine, dairy and poultry farmers in our efforts to sell
our farm waste anaerobic plant, due to the long period of time required for
small farms to recover the costs of the plant and due to falling producer prices
in these industries. Our efforts at this time are concentrated on building a
demonstration plant with the Southeast Oklahoma Poultry Growers Association.
Also, we have retained a Native American consultant to negotiate an arrangement
with the Native American tribes for a grant from the U.S. Corps of Engineers to
do a feasibility study for building an anaerobic plant in Northeastern Oklahoma.
The resolution has been drawn but not signed as of this date.
 
 Our
Native American consultant has introduced us to investors in Seminole County,
Oklahoma, that we are negotiating with in order to build an anaerobic farm waste
plant as a demonstrator unit. Seminole County has 43 hog farms, and the
investors are working with some of these operators at this time. A letter of
intent has been signed but no definitive agreement has been signed.
 
 We are looking at other opportunities with an
agriculture consultant who retired from the USDA after 20 years of
service.
 
 **Off-Balance
Sheet Arrangements**
 
 Our
company has not entered into any transaction, agreement or other contractual
arrangement with an entity unconsolidated with us under which we have
 14
 ·
    an
      obligation under a guarantee contract,
 ·
    a
      retained or contingent interest in assets transferred to the
      unconsolidated entity or similar arrangement that serves as credit,
      liquidity or market risk support to such entity for such
  assets,
 ·
    any
      obligation, including a contingent obligation, under a contract that would
      be accounted for as a derivative instrument, or
 ·
    any
      obligation, including a contingent obligation, arising out of a variable
      interest in an unconsolidated entity that is held by us and material to us
      where such entity provides financing, liquidity, market risk or credit
      risk support to, or engages in leasing, hedging or research and
      development services with us.
 
 The
company's future results of operations and the other forward-looking statements
contained in this report involve a number of risks and uncertainties. Among the
factors that could cause actual results to differ materially are the following:
inability of the company to obtain needed additional capital, loss of personnel
- particularly Chief Executive Officer Donald S. Robbins or Executive Vice
President and Chief Financial Officer Gordon W. Allison - as a result of
accident or for health reasons, interruptions in the supply of equipment from
manufacturers of the equipment, the development of competing products by
well-capitalized competitors, and an accident involving life or serious bodily
harm that fairly or unfairly would bring into question the safety of using the
company's products.
 
 Item
3.Controls
and Procedures
 
 Evaluation
of disclosure controls and procedures .
The Company’s management, with the participation of the Company’s Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company’s disclosure controls and procedures as of September 30, 2004.
Based on this evaluation, the Company’s Chief Executive Officer and Chief
Financial Officer concluded that the Company’s disclosure controls and
procedures are effective for gathering, analyzing and disclosing the information
the Company is required to disclose in the reports it files under the Securities
Exchange Act of 1934, within the time periods specified in the SEC’s rules and
forms.
 
 Changes
in internal controls .
There were no significant changes in internal controls or other factors that
could significantly affect our internal controls subsequent to the date of our
evaluation.
 
 **PART
II - OTHER INFORMATION**
 
 **Item
      1.**
    ****
    **Legal
      Proceedings**
 
 On
March 2, 2004 a default judgment was entered against the Company in the amount
of $32,091 in favor of Bagby & Russell Electric Company. The judgment is a
result of an unpaid invoice for electrical work performed pertaining to
installing carbon dioxide equipment at Chastang landfill in Mobile, Alabama. The
original amount was $48,000 and, although the Company made payments and offered
to pay $5,000 per month, it was rejected. The judgment was paid in July
2004.
 During
the three months ending September 30, 2004 the Company has been notified by one
creditor that a note payable approximating $203,800 including accrued interest
is in default adding additional concern about the Company’s ability to continue
operations.  The Company filed a Form 8-K with the SEC.  This note is
with an RTC principal and is associated to the RTC bankruptcy and the Chastang
landfill project that is currently being litigated.
 15
 
 No
director, officer or affiliate of the company, and no owner of record or
beneficial owner of more than 5.0% of the securities of the company, or any
associate of any such director, officer or security holder is a party adverse to
the company or has a material interest adverse to the Company in reference to
any litigation.
 
 **Item
      2.**
    ****
    **Unregistered
      Sales of Equity Securities**
 
 During
the third quarter of 2004, we issued 173,556 shares of our common stock in
several transactions exempt from registration pursuant to the provisions of
Regulation D, Rule 506. In all instances, the purchasers were accredited
investors, as defined in Regulation D, and had preexisting relationships with
our company. The dates of the transactions, the number of accredited investors,
the number of shares and amount of cash received by our company, and the nature
of any transaction effected for consideration other than cash are set forth in
the below table:
 
 **Date**
    **Number
      of**
      **Purchasers**
    **Number
      of**
      **Shares**
    ****
      ****
      **Cash
      Received**
    ****
      ****
      **Other
      Consideration**07-12-04
    1
    5,701
    
    Stock
      for debt reduction and accrued interest on debt; value
    $3,56307-26-04
    1
    8,571
    
    Stock
      for services; value $3,00008-12-04
    5
    18,250
    
    Stock
      for services; value $11,40608-12-04
    5
    36,456
    
    Stock
      for debt reduction and accrued interest on debt; value
    $22,78508-18-04
    2
    52,000
    
    Stock
      for debt reduction and accrued interest on debt; value
    $32,50009-16-04
    4
    52,578
    
    Stock
      for debt reduction and accrued interest on debt; value
    $32,861
 There
were no commissions or underwriters’ discounts paid or given. All securities
were sold through officers of our company.
 
 Item
3.Defaults
Upon Senior Securities
 
 None.
 
 Item
4.Submission
of Matters to a Vote of Security Holders
 
 None.
 
 Item
5.Other
Information
 
 None.
 16
 
 Item
6.Exhibits
and Reports on Form 8-K
 
 **(a)**
    **Exhibits**
 
 The
following exhibits are filed, by incorporation by reference, as part of this
Amendment No. 1 to Form 10-QSB:
 
 Exhibit
      No.
    Description3
    Amended
      and Restated Articles of Incorporation of Consortium Service Management
      Group, Inc.*3.1
    Bylaws
      of Consortium Service Management Group, Inc.*10
    Founders'
      Agreement of United Engineering Company*10.1
    Statutes
      (Bylaws) of United Engineering Company*10.2
    Agreement
      of April 24, 1996 between Consortium Service Management Group, Inc.
      and The L Group, Inc. concerning tissue bonding technology* (rescinded in
      January 2000)10.3
    Agreement
      of July 9, 1996 between Consortium Service Management Group, Inc. and
      International Welding concerning tissue bonding
  technology*10.4
    Agreement
      among Consortium Service Management Group, Inc., United Engineering
      Company and Ivan V. Semenenko, the inventor of the anaerobic farm
      waste technology*10.5
    Agreement
      of June 9, 1998 among Consortium Service Management Group, Inc., The
      Sumy Frunze Machine Building Science and Production Association, and
      United Engineering Company concerning the anaerobic farm waste
      technology*10.6
    Agreement
      between Consortium Service Management Group, Inc. and Western Waste
      Management, Inc. concerning the anaerobic farm waste
      technology*10.7
    Agreement
      between Consortium Service Management Group, Inc. and Aardema Dairy
      concerning the anaerobic farm waste technology*10.8
    Agreement
      between Consortium Service Management Group, Inc. and John and Ruth
      Beukers concerning the anaerobic farm waste
technology*
 17
  10.9
    Agreement
      of December 1998 between International Welding Association of Kiev,
      Ukraine and Consortium Service Management Group, Inc. concerning the
      carbon dioxide separator technology*10.10
    Operating
      Agreement of June 14, 2001 between Consortium Service Management Group,
      Inc. and Resource Technology Corporation***10.11
    Contract
      Agreement Effective August 14, 2000 between Consortium Service Management
      Group/Anaerobic Farm Waste Co. and Rondeau Anaerobic***10.12
    Contract
      IAW-USA 002-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.13
    Contract
      IAW-USA 003-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.14
    Contract
      IAW-USA 004-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.15
    Contract
      IAW-USA 005-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.16
    Contract
      IAW-USA 006-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.17
    Contract
      IAW-USA 007-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.18
    Contract
      IAW-USA 008-PR between International Association Welding, Kiev, Ukraine
      and Consortium Service Management Group,
Inc.***
 18
  10.19
    Natural
      Gas Purchase Agreement of June 20, 2000 between Texas Energy Transfer
      Company, Ltd. and Resource Technology Corp.****10.20
    Agency
      Agreement between Joint Stock Company "Sumy Frunze Machine-Building
      Science and Production Association" of Ukraine and Consortium Service
      Management Group, Inc.+10.21
    2003
      Stock Option Plan adopted by the board of directors of Consortium Service
      Management Group, Inc.++10.22
    Joint Development and Exclusive
      License Agreement of March 8, 2005 between Live Tissue Connect, Inc.
      andConMed
      Corporation.+*10.23
    Standby
      Equity Distribution Agreement of March  , 2004 between Cornell
      Capital Partners, LP and ConsortiumServiceManagement Group, Inc. ++*14
    Code
      of Ethics for the Chief Executive Officer and Senior Financial Officers.
      ++*16
    Letter
      dated January 29, 2000 from Jaak (Jack) Olesk to Consortium Service
      Management Group, Inc. Re: Termination as Auditor**31
    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.1
    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  19
 32.1
    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99
    Ukraine
      Ministry of Health, State Department, Certificate of State Registration
      No. 1105-193***99.1
    Extract
      of U.S. Patent No. 6,562,037 May 13, 2003.+++99.2
    Extract
      of U.S. Patent No. 6,733,498 May 11, 2004.+++*Previously
      filed with Form 10-SB; Commission File No. 0-27359 incorporated
      herein.**Previously
      filed with Amendment No. 1 to Form 10-SB; Commission File No.
      0-27359 incorporated herein.***Previously
      filed with Amendment No. 2 to Form 10-SB; Commission File No. 0-27359
      incorporated herein.****Previously
      filed with Amendment No. 1 to Form 10-QSB for the period ended September
      30, 2002; Commission File No. 0-27359 incorporated
  herein.
 20
  +Previously
      filed with Form 10-KSB for the year ended December 31, 2002; Commission
      File No. 0-27359 incorporated herein.++Previously
      filed with Amendment No. 1 to Form 10-QSB for the period ended March 31,
      2003; Commission File No. 0-27359 incorporated herein.+++Previously
      filed with Form 10-QSB for the period ended June 30, 2004; Commission File
      No. 0-27359 incorporated herein.+*Previously
      filed with Form 8-K (Date of Report March 8, 2005) filed 3-09-05,
      Commission File No. 0-27359 incorporated herein.++*Previously filed with Form
      10-KSB for the year ended December 31, 2004, Commission File No.
      0-27359 incorporated herein.
 (b)Forms
8-K
 
 Form
8-K dated August 24, 2004, reporting Item 8.01 Other Events, filed October 22,
2004, EDGAR Accession Number 0001060830-04-000349.
 21
 
 **SIGNATURES**
 
 Pursuant
to the requirements of the Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly
authorized.
  Consortium
      Service Management Group, Inc.Date: April 22,
      2005
    By:
    /s/Donald S.
    RobbinsDonald
      S. RobbinsPresident and
      Chief Executive
Officer
 22
 **Consortium
Service Management Group, Inc.**
 **Commission
File No. 0-27359**
 ****
 **EXHIBIT
INDEX**
 
 **AMENDMENT
NO. 1 TO FORM 10-QSB**
 **For
the quarterly period ended September 30, 2004**
 
 
 The
following exhibits are filed, by incorporation by reference, as part of this
Amendment No. 1 to Form 10-QSB:


Exhibit
      No.
    Description3
    Amended
      and Restated Articles of Incorporation of Consortium Service Management
      Group, Inc.*3.1
    Bylaws
      of Consortium Service Management Group, Inc.*10
    Founders'
      Agreement of United Engineering Company*10.1
    Statutes
      (Bylaws) of United Engineering Company*10.2
    Agreement
      of April 24, 1996 between Consortium Service Management Group, Inc.
      and The L Group, Inc. concerning tissue bonding technology* (rescinded in
      January 2000)10.3
    Agreement
      of July 9, 1996 between Consortium Service Management Group, Inc. and
      International Welding concerning tissue bonding
  technology*10.4
    Agreement
      among Consortium Service Management Group, Inc., United Engineering
      Company and Ivan V. Semenenko, the inventor of the anaerobic farm
      waste technology*10.5
    Agreement
      of June 9, 1998 among Consortium Service Management Group, Inc., The
      Sumy Frunze Machine Building Science and Production Association, and
      United Engineering Company concerning the anaerobic farm waste
      technology*10.6
    Agreement
      between Consortium Service Management Group, Inc. and Western Waste
      Management, Inc. concerning the anaerobic farm waste
      technology*
 1
 10.7
    Agreement
      between Consortium Service Management Group, Inc. and Aardema Dairy
      concerning the anaerobic farm waste technology*10.8
    Agreement
      between Consortium Service Management Group, Inc. and John and Ruth
      Beukers concerning the anaerobic farm waste
technology*
  10.9
    Agreement
      of December 1998 between International Welding Association of Kiev,
      Ukraine and Consortium Service Management Group, Inc. concerning the
      carbon dioxide separator technology*10.10
    Operating
      Agreement of June 14, 2001 between Consortium Service Management Group,
      Inc. and Resource Technology Corporation***10.11
    Contract
      Agreement Effective August 14, 2000 between Consortium Service Management
      Group/Anaerobic Farm Waste Co. and Rondeau Anaerobic***10.12
    Contract
      IAW-USA 002-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.13
    Contract
      IAW-USA 003-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.14
    Contract
      IAW-USA 004-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.15
    Contract
      IAW-USA 005-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.16
    Contract
      IAW-USA 006-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group, Inc.***10.17
    Contract
      IAW-USA 007-PR-19.04.2000 between International Association Welding, Kiev
      and E.O. Paton Electric Welding Institute National Academy Science Ukraine
      and Consortium Service Management Group,
Inc.***
 2
 10.18
    Contract
      IAW-USA 008-PR between International Association Welding, Kiev, Ukraine
      and Consortium Service Management Group,
Inc.***
 10.19
    Natural
      Gas Purchase Agreement of June 20, 2000 between Texas Energy Transfer
      Company, Ltd. and Resource Technology Corp.****10.20
    Agency
      Agreement between Joint Stock Company "Sumy Frunze Machine-Building
      Science and Production Association" of Ukraine and Consortium Service
      Management Group, Inc.+10.21
    2003
      Stock Option Plan adopted by the board of directors of Consortium Service
      Management Group, Inc.++10.22
    Joint Development and Exclusive
      License Agreement of March 8, 2005 between Live Tissue Connect, Inc.
      andConMed
      Corporation.+*10.23
    Standby
      Equity Distribution Agreement of March  , 2004 between Cornell
      Capital Partners, LP and ConsortiumService
      Management Group, Inc. ++*14
    Code
      of Ethics for the Chief Executive Officer and Senior Financial Officers.
      ++*16
    Letter
      dated January 29, 2000 from Jaak (Jack) Olesk to Consortium Service
      Management Group, Inc. Re: Termination as Auditor**31
    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.1
    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32
    Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 32.1
    Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99
    Ukraine
      Ministry of Health, State Department, Certificate of State Registration
      No. 1105-193***99.1
    Extract
      of U.S. Patent No. 6,562,037 May 13, 2003.+++99.2
    Extract
      of U.S. Patent No. 6,733,498 May 11, 2004.+++*Previously
      filed with Form 10-SB; Commission File No. 0-27359 incorporated
      herein.
  3
 **Previously
      filed with Amendment No. 1 to Form 10-SB; Commission File No.
      0-27359 incorporated herein.***Previously
      filed with Amendment No. 2 to Form 10-SB; Commission File No. 0-27359
      incorporated herein.****Previously
      filed with Amendment No. 1 to Form 10-QSB for the period ended September
      30, 2002; Commission File No. 0-27359 incorporated
  herein.
  +Previously
      filed with Form 10-KSB for the year ended December 31, 2002; Commission
      File No. 0-27359 incorporated herein.++Previously
      filed with Amendment No. 1 to Form 10-QSB for the period ended March 31,
      2003; Commission File No. 0-27359 incorporated herein.+++Previously
      filed with Form 10-QSB for the period ended June 30, 2004; Commission File
      No. 0-27359 incorporated herein.+*Previously
      filed with Form 8-K (Date of Report March 8, 2005) filed 3-09-05,
      Commission File No. 0-27359 incorporated herein.++*Previously filed with Form
      10-KSB for the year ended December 31, 2004, Commission File No.
      0-27359 incorporated herein.
 4