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, 2006

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

                   501 North Shoreline Drive, Suite 701 North
                            Corpus Christi, TX 78471
                                 (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 14, 2006, the Company had  30,383,131  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]


<PAGE>

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

PART I - FINANCIAL INFORMATION                                              3

Item 1.  Financial Statements                                               3

Item 2.  Management's Discussion and Analysis or Plan of Operation          10

Item 3.  Controls and Procedures                                            15

PART II - OTHER INFORMATION                                                 15

Item 1.  Legal Proceedings                                                  15

Item 2.  Unregistered Sales of Equity Securities                            17

Item 6.  Exhibits and Reports on Form 8-K                                   18

SIGNATURES                                                                  22




















                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                                                                            Page
                                                                            ----

         Consolidated Balance Sheets June 30, 2006 (Unaudited)
                  and December 31, 2005                                     4
         Consolidated Statement of Operations (Unaudited)
                  June 30, 2006 and 2005                                    6
         Consolidated Statement of Cash Flows (Unaudited)
                  June 30, 2006 and 2005                                    7
         Notes to the Financial Statements                                  8





















                                       3
<PAGE>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS


                                                   Unaudited         Audited
                                                 June 30, 2006     Dec 31, 2005
                                                 -------------    -------------

Current Assets
--------------
  Cash                                           $        --      $        --
                                                 -------------    -------------
              Total Current Assets                        --               --


Fixed Assets
------------
  Furniture and Equipment                               63,335           61,409
    Less Accumulated Depreciation                      (61,600)         (61,409)
                                                 -------------    -------------
              Total Fixed Assets                         1,735             --


Other Assets
------------
  Investment - United Engineering Company               87,405          136,236
  CO2 Equipment Patent                                   8,000            8,000
  Tissue Bonding Patent                                543,209          530,170
    Less Accumulated Amortization                      (77,866)         (61,866)
                                                 -------------    -------------
              Total Other Assets                 $     560,748    $     612,540


              Total Assets                       $     562,483    $     612,540
                                                 =============    =============







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


                                       4
<PAGE>
<TABLE>
<CAPTION>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                   LIABILITIES
                                                             Unaudited         Audited
                                                           June 30, 2006     Dec 31, 2005
                                                           -------------    -------------
<S>                                                        <C>              <C>
Current Liabilities
-------------------
   Deficit in Bank                                         $         109    $       1,534
   Accounts Payable                                              682,838          820,788
   Interest Payable                                            1,506,542        1,394,017
   Payroll Taxes Payable                                          67,671           90,968
   Notes Payable to Stockholders                               4,001,649        3,903,828
   CO2 Equipment Payable                                         206,749          206,749
   Accured CO2 expenses                                          134,833             --
                                                           -------------    -------------
              Total Current Liabilities                        6,600,391        6,417,884


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


              Total Liabilities                                6,900,391        6,717,884


Minority Interest in Consolidated Subsidiary                     206,000          206,000


        STOCKHOLDERS' EQUITY

Common stock $.001 par value, 40,000,000 shares
   authorized; 29,468,581 shares issued, 28,899,014
   shares outstanding, 488,854 shares subscribed
   at June 30, 2006; and 26,056,072 shares issued,
   25,036,546 shares outstanding, at
   December 31, 2005                                              29,469           26,056
Additional Paid in Capital                                     8,019,064        7,548,050
   Less - Common Stock Subscriptions Receivable                     (488)            (939)
Accumulated Other Comprehensive (Loss)                          (334,472)        (339,454)
Accumulated (Deficit)                                        (14,225,196)     (13,512,772)
Treasury Stock                                                   (32,285)         (32,285)
                                                           -------------    -------------
              Total Stockholders' Equity                      (6,543,908)      (6,311,344)


              Total Liabilities and Stockholders' Equity   $     562,483    $     612,540
                                                           =============    =============
</TABLE>



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


                                       5
<PAGE>
<TABLE>
<CAPTION>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF OPERATIONS

                                                          Unaudited        Unaudited        Unaudited        Unaudited
                                                         Apr 1, 2006-     Apr 1, 2005-     Jan 1, 2006-     Jan 1, 2005-
                                                        June 30, 2006    June 30, 2005    June 30, 2006    June 30, 2005
                                                        ------------------------------    ------------------------------
<S>                                                     <C>              <C>              <C>              <C>
Revenues                                                $        --      $         414    $        --      $         414

General and Administrative Expenses                           277,388          365,928          623,614          819,164
  Funded R & D                                                   --               --
  Cost of Funded R & D                                          1,095           74,056           34,997          121,185
  Net R & D Cost                                                1,095           74,056           34,997          121,185
                                                        ------------------------------    ------------------------------
      Operating (Loss)                                       (278,483)        (439,570)        (658,611)        (939,935)

Interest Income                                                  --                 13             --                 60
Interest in Income (Loss) of Unconsolidated Companies         (26,117)         (31,296)         (53,813)         (48,610)
                                                        ------------------------------    ------------------------------
      (Loss) from Continuing Operations                      (304,600)        (470,853)        (712,424)        (988,485)

Income Taxes                                                     --               --               --               --
       Net (Loss)                                       $    (304,600)   $    (470,853)   $    (712,424)   $    (988,485)
                                                        ==============================    ==============================

Net (Loss) Per Share Common Stock                               (0.01)           (0.03)           (0.02)           (0.07)
Weighted Average Common Shares Outstanding                 29,468,581       14,969,319       28,568,400       14,969,319
</TABLE>






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
















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


                                       6
<PAGE>
<TABLE>
<CAPTION>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                                                              Unaudited        Unaudited
                                                             Jan 1, 2006-     Jan 1, 2005-
                                                            June 30, 2006    June 30, 2005
                                                            -------------    -------------
<S>                                                         <C>              <C>
Cash Flows from Operating Activities
------------------------------------
  Net (Loss)                                                $    (712,424)   $    (988,485)
  Equity Loss from Investee                                        48,831           48,610
  Depreciation and Amortization                                    16,192           68,208
  Pay Fee Debenture                                                  --            (275,000)
  Services for Common Stock                                          --              6,500
  Increase (Decrease) Current Liabilities                         (21,501)         222,846
  Increase Accrued Interest                                       112,525          186,229
                                                            -------------    -------------
      Net Cash provided by (used in) Operating Activities        (556,377)        (731,092)


Cash Flows from Investing Activities
------------------------------------
  Deposits                                                           --             (2,300)
  Purchase Equipment and Patent                                   (14,972)        (241,668)
                                                            -------------    -------------
      Net Cash (used in) Investing Activities                     (14,972)        (243,968)


Cash Flows from Financing Activities
------------------------------------
  Increase Notes Payable                                           97,821          354,305
  Increase Stock Issue                                            473,528          534,751
                                                            -------------    -------------
      Net Cash provided by Financing Activities                   571,349          889,056


Net Increase (Decrease) in Cash and Cash Equivalents                 --            (86,004)

Cash and Cash Equivalents at Beginning of Period                     --             88,908
                                                            -------------    -------------
Cash and Cash Equivalents at End of Period                  $        --      $       2,904
                                                            =============    =============
</TABLE>








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


                                       7
<PAGE>

                    CONSORTIUM SERVICE MANAGEMENT GROUP, INC.
                                AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                        JUNE 30, 2006, DECEMBER 31, 2005

                                     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 (United States). 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  six-month  period  ending  June  30,  2006  are not
necessarily  indicative  of the results  that may be expected for the year ended
December  31,  2006.  For  further  information,  refer  to the  audited  annual
consolidated  financial  statements  and  footnotes  thereto  for the year ended
December 31, 2005.

                                     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  $(712,424)  for the six months  ended June 30, 2006 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 funds  through  equity  and/or debt
offerings and the  development  and marketing of  technologies.  In June 2006 we
signed with Empire  Financial  Group. The agreement is for a best efforts bridge
financing  of $3 million of which we have  received  over $1.2  million and a $5
million firm  commitment  for an IPO for Live Tissue  Connect,  Inc., our Tissue
Welding/Bonding  technology.  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.

The  Company's  ability to continue as a going  concern also involves the carbon
dioxide  separator  equipment  which  is  currently  inactive  due  to  possible
technical problems as stated in Note 1 under Significant  Accounting Policies on
the December 31, 2005 audited annual consolidated  financial  statements.  It is
unclear  if this  equipment  is  within  specification  and if  not,  additional
upgrades  estimated  to cost  between  $200,000 to $300,000  would be  required;
however,  with no prior  production at Chastang  there is no assurance that this
will be successful.

Although a gas  purchase  contract  was  recently  obtained  by the  Company and
litigation was recently favorably  resolved,  accounting  standard FAS 144 has a
requirement  that  because no cash flow has been  generated  as of December  31,
2005,  the CO2  equipment  had to be been  written  down to a zero value with an
impairment loss of $1,417,647  included in 2005 operating  expenses.  While this
affects the  financial  statements  of the company it does not affect the actual
value of the  equipment or the ability of the company to perform on its contract
for the sale of the gas.

The December 31, 2005 annual  financial  statements  explained under Note 6 that
the  Company  filed a  motion  to  dismiss  a  lawsuit  filed  by  Nature  Coast
Collections  regarding  loan defaults to Stonegate  Management.  The lawsuit was
originally  filed in the  Federal  District  Court for the  Middle  District  of
Florida and was dismissed on May 2, 2006 for lack of personal  jurisdiction  and
refiled June 30, 2006 in Federal  District  Court for the  Southern  District of
Texas.  The  lawsuit is  claiming  payment  for an  aggregate  principal  sum of
$630,000 plus interest and costs on four  defaulted  notes and it is unclear how
the ultimate resolution will impact the Company.




                                       8
<PAGE>
<TABLE>
<CAPTION>

The tissue  bonding  patent has a net  carrying  value of  $465,343  and with no
current  operating  cash flows this asset has been  considered for impairment as
required by accounting standards.  The Company's  assumptions,  knowledge of the
tissue bonding process and  demonstrated  success in Ukraine  hospitals  support
management's  assertion  that  eventual cash flows will be sufficient to recover
the above value.

                                     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 (loses):

                     April 1, 2006 -     April 1, 2005 -      January 1, 2006 -    January 1, 2005 -
                     June 30, 2006        June 30, 2005        June 30, 2006        June 30, 2005
                       ---------            ---------            ---------            ---------
<S>                    <C>                  <C>                  <C>                  <C>
Sales                  $  16,919            $ 359,453            $  70,003            $ 440,051
Gross Profit (Loss)
                         (16,035)             (34,447)             (39,710)             (35,091)
Other Gains              135,220              135,220
Loss from Continuing
Operations
                         (78,351)             (93,838)             (78,351)            (145,831)
Net (Loss)               (78,351)             (93,838)            (161,437)            (145,831)

CSMG's 1/3               (26,117)           $ (31,296)             (53,813)           $ (48,610)
</TABLE>



















                                       9
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

         The following  discussion  and analysis  should be read in  conjunction
with  the  financial  statements  and  the  accompanying  notes  thereto  and is
qualified  in its  entirety  by the  foregoing  and by more  detailed  financial
information appearing elsewhere. See "Item 1. Financial Statements."

         Results  of  Operations  - Second  Quarter of 2006  Compared  to Second
         -----------------------------------------------------------------------
         Quarter of 2005
         ---------------

         We had $0 revenues in Q2 2006 and $414 in Q2 2005.

         Operating  expenses  decreased  by $161,087 to $278,483  during Q2 2006
compared to $439,570 in Q2 2005.  The  decrease  is  attributable  primarily  to
decreased financing fees.

         We had a loss  from  continuing  operations  of  $304,600  for Q2  2006
compared  to a loss from  continuing  operations  of $470,853  for Q2 2005.  The
$166,253  reduction in loss is due  primarily to a reduction in financing  fees,
general and administrative expenses.

         We  accrued  a loss in Q2 2006 of  $26,117  from our joint  venture  in
Ukraine with United Engineering Company, as compared with a loss of $31,296 from
this activity in Q2 2005.

         Our net loss for Q2 2006 was  $304,600,  or $0.01 a share,  as compared
with  a net  loss  in Q2  2005  of  $470,853,  or  $0.03  a  share,  a  decrease
attributable to decreased expenses.

         We were able to remain liquid  during this quarter  through (1) reduced
spending, (2) a decrease in notes payable of $54,210, (3) an increase in accrued
interest of  $137,494,  and (4) the sale of  $180,000 of common  stock under the
Cornell Equity Line of Credit Agreement.

         Interim  Results of  Operations - First Half of 2006  Compared to First
         -----------------------------------------------------------------------
         Half of 2005
         ------------

         We had no revenues in the first half of 2006 and $414 in the first half
of 2005.

         Operating  expenses  of  $658,611  in the  first  half of 2006  were 70
percent of those of the first half of 2005 - $939,935. The decrease is primarily
attributable to reduction in operating costs and financing expenses.

         We had a loss from continuing  operations of $712,424 in the first half
of 2006 as compared with a loss from continuing  operations in the first half of
2005 of $988,485 - a 25% percent  decrease  attributable to decreased  financing
expenses and lower operating costs.

         We  recorded  accrued  losses of $53,813 in the first half of 2006 from
our Ukraine joint venture operations in United Engineering Company,  compared to
an accrued loss of $48,610 in the first half of 2005.



                                       10
<PAGE>

         Taking into account our joint venture  operations in Ukraine,  we had a
net loss of $712,424, or $0.01 a share in the first half of 2006 compared with a
net loss of $988,485, or $0.07 a share, in the first half of 2005. Nevertheless,
we feel that we are on the  right  course  for the  company,  that our  business
ventures hold considerable promise for our company in 2006.

         Overview
         --------

         Live  Tissue  Bonding  Equipment.   The  E.O.  Paton  Electric  Welding
Institute of Kiev,  Ukraine developed  equipment that bonds and reconnects blood
vessels  and other soft  tissues  and organs  using  radio  frequency  fusion in
substantially less time than other technologies take and apparently leaves no or
minimal trace scar tissues after a lapse of six to seven months.

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

         In the Ukraine  clinical trials we developed a universal tissue welding
device  prototype  that  does  more than 70 types of  procedures.  Now,  we have
started  developing and testing  specific  procedure  tissue welding devices for
specific  surgical markets so that will allow us to license  specific  procedure
uses. In the first quarter of 2006 we began developing procedure-specific tissue
welding  devices  starting with a duct and vessel  sealing  device.  We have had
successful  results  in  demonstrations  and  are  expecting  completion  of the
prototype  device in September 2006. The second specific  purpose device will be
the device for reconnecting intestine for end-to-end, end-to-side,  side-to-side
and keyhole  surgery that will begin in October 2006 with  prototype  completion
expected in February 2007.

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

         E.O.  Paton  Institute  of  Electric  Welding of the  Ukraine  National
Academy of Sciences and  International  Association  of Welding "IAW" filed U.S.
and  international  patent  applications on the process in February 1997.  Three
U.S., one European Union,  and one Australian  patents have been issued.  We own
the technology and have been assigned the exclusive  world rights of the patents
- should they be issued. See Exhibit 10.3 filed as part of our Form 10-SB.

         Until the end of 2005 all  surgeries  were  performed  using  prototype
equipment in the Ukraine  hospitals  during  clinical  trials.  IAW has received
approval from the Ukraine Ministry of Health to commercialize the tissue bonding
products  in  Ukraine.  In late  2005 our  Ukraine  partner  received  its first
commercial  order from the  Ministry of Health in Ukraine for 10 tissue  welding



                                       11
<PAGE>

sets of surgical equipment. We will not participate in the revenues of this sale
but will benefit from the  additional  funding into the tissue  welding  project
development.

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

         To date we have submitted no applications,  requests or testing results
to the Federal  Drug  Administration  but plan to during the next 12 months.  We
have not marketed the bonding equipment in Ukraine or any other non-U.S. country
but we plan to market the  commercial  equipment  once  regulatory  approval  is
received.  We have continued our plans to manufacture  prototypes in Ukraine and
are continuing  clinical trials in Ukraine for comprehensive  human testing.  We
began this clinical work in May 2000. To date we have  completed more than 6,000
successful  human  surgeries  and more  than 70  procedure  types at 10  Ukraine
hospitals. We have signed two agreements with Empire Financial Group. One is for
a $3 million  bridge  financing  part of which will be used to do FDA filings on
the duct and vessel sealer, and a $5 million firm commitment for an IPO for Live
Tissue Connect, Inc.

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

         We  estimate  that in excess of $4.5  million  have  been  expended  in
developing  the  project  and that $1.5  million  of  additional  funds  must be
expended to bring the duct and vessel sealer product to market. On March 8, 2005
Live Tissue Connect executed an agreement with ConMed  Corporation of Utica, New
York pursuant to which ConMed was granted exclusive  worldwide product licensing
and marketing  rights to bring our patented,  platform,  life-biological  tissue
bonding and welding technology to the U.S. and world markets.

         The agreement  expired on May 31, 2005 without  action by ConMed or us.
Until  now we  have  used a  universal  power  source  that  performs  types  of
procedures. We are now developing power sources designated for specific types of
procedures  to enable  us to  license  different  procedure  types to  different
medical device distribution  companies.  The first tested power source prototype
of this specific  procedure is for duct and vessel sealing and will be delivered
in September 2006. The second  prototype for end-to-end,  end-to-side or keyhole
reconnection  of intestines  will be completed at the end of the fourth  quarter
2006.  We plan to begin U.S. FDA and European CE Mark filings  during the fourth
quarter 2006. U.S. and Australian  patents have been issued, and European patent
applications  are  approved  and  are in the  process  of  being  issued.  Other
international patent applications have been filed. In April 2006 we received the
European  Union  patent  approval  and in May 2006 we  received  our third  U.S.
patent.

         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 than 70
surgical instruments.  Improvements in the instruments are possible, and testing




                                       12
<PAGE>

on live tissue of humans to U.S.  testing  standards  may be  required  for some
procedures.   Approval  of  the  process  and  equipment  by  the  Federal  Drug
Administration  is  required.  We  anticipate  that  some  applications  of  the
technology  will be  approved  by the FDA by 2007 and that  full  approval  will
follow by 2008.

         We have  opened  dialog  with a  number  of  medical  device  companies
interested in bringing specific procedures to market.

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

         CO2  Separator.  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  thus
necessitating  installing  upgrades  estimated  to  cost  between  $200,000  and
$300,000  to enable the  equipment  to meet the gas  quality  requirements.  The
company is negotiating  with several  industrial  companies nearby the site that
will not require pipeline quality gas for their usage. 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.

         Outlook
         -------

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




                                       13
<PAGE>

         On March 29, 2004,  we entered into an Equity Line of Credit  Agreement
with Cornell Capital  Partners.  Under this agreement,  we may issue and sell to
Cornell  Capital  Partners  common stock for a total purchase price of up to $10
million.  Subject to certain  conditions,  we are  entitled  to draw down on the
Equity  Line of Credit now that the common  stock to be issued  under the Equity
Line of Credit is registered with the Securities and Exchange Commission and the
registration statement is declared effective.  The purchase price for the shares
is equal to 95% of, or a 5% discount to, the market  price,  which is defined as
the lowest  closing bid price of the common  stock  during the five trading days
following the notice date. We have the right, but not the obligation, to require
Cornell Capital to purchase shares in the company's  common stock in amounts not
to exceed  $140,000  per draw up to a maximum of $420,000 per month with a total
of $10 million over a consecutive 24-month period. Cornell Capital Partners 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
Equity Line of Credit.  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.

         On June 30,  2006,  we  engaged  the  investment  banking  firm  Empire
Financial  Group,  Inc., a qualified  and  experienced  underwriter,  for a firm
commitment  underwriting,  to raise a minimum  of $5  million in an IPO for Live
Tissue  Connect,  Inc. and to  immediately  raise for CSMG up to $3 million in a
privately placed bridge funding. Neither the offering price of the shares of the
IPO, nor the amount of shares has yet been determined.  As of August 11, 2006 we
have received just over $1.2 million from the bridge  financing and paid $97,000
in fees along with an initial $10,000 fee to Empire Financial Group, Inc.

         We received  $2,083,638  under a loan  agreement  with Cornell  Capital
Partners in July, August and December 2004,  January and March 2005, and January
through  May 2006 which was repaid at the rate of $25,000  per week  through the
Cornell  Equity  Line of  Credit  Agreement.  These  funds  are  being  used for
operations of the parent and subsidiaries.

         As of June 30, 2006 we have sold  15,215,734  shares of common stock to
Cornell  Capital for $2,083,638  pursuant to the Equity Line of Credit.  We have
escrowed  478,472  shares with  Cornell's  escrow  agent to use as  repayment of
current credit line balance and future credit line use. We are currently working
with Cornell to repay the  remaining  note amount of $442,000  plus  interest in
cash or restricted Rule 144 stock.

         The   company's   future   results   of   operations   and  the   other
forward-looking  statements  contained in this Outlook 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 other key  executives  as result of accident or for health



                                       14
<PAGE>

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.

Off-Balance Sheet Arrangements

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

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


Item 3.  Controls and Procedures

         Evaluation of disclosure  controls and procedures.  The Company carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's management,  including the Company's Chief Executive Officer and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of the
Company's disclosure controls and procedures as of the end of the period covered
by this report.  Based upon that  evaluation,  the Chief  Executive  Officer and
Chief Financial  Officer  concluded that the Company's  disclosure  controls and
procedures  provide  reasonable  assurances  that the information the Company is
required to disclose  in the  reports it files or submits  under the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time  period  required  by the  Commission's  rules  and  forms.  There  were no
significant  changes in the Company's internal control over financial  reporting
during the period covered by this report that have materially  affected,  or are
reasonably  likely to materially  affect our internal  controls  over  financial
reporting.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

         The  registrant  ("CSMG")  was  sued on  February  10,  2005  by  Banco
Panamericano,  Inc.  in  the  Circuit  Court  of  Cook  County,  Illinois  Banco
Panamericano, Inc. v. Consortium Service Management Group, Inc. and CSMG Gastech
LLC,  Case  No.2005L001514.  The  complaint  alleges  that CSMG  entered  into a
short-term  promissory  note dated  February 15, 2002 ("the Note") by which CSMG
borrowed from Banco  Panamericano  $203,800 at 12% interest,  the Note being due
April 1, 2002. The complaint  alleges that the Note was secured by all of CSMG's



                                       15
<PAGE>

equipment,  inventory,  accounts,  general intangibles and other properties. The
complaint  alleges  that  the  Note  is in  default  and  that  SMG  owed  Banco
Panamericano $514,920 as of February 9, 2005.

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

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

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

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

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

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

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

         On March 2, 2005,  the case was removed from the Circuit  Court of Cook
County,  Illinois to the Federal  District  Court for the  Northern  District of
Illinois.  CSMG filed its Motion to have the  proceeding  referred to the United
States  Bankruptcy  Court  for the  Northern  District  of  Illinois  where  the



                                       16
<PAGE>

bankruptcy  proceeding  of RTC  continues to pend.  The Federal  District  Court
referred the  proceeding  to the United States  Bankruptcy  Court on December 6,
2005. A status call was held by the United States Bankruptcy Court on August 15,
2006 and a 60-day continuance was granted.

         The  registrant  ("CSMG") was sued on September 6, 2005 by Nature Coast
Collections,  Inc. in the Circuit Court for Hillsborough County, Florida, Nature
Coast Collections,  Inc. v. Consortium Service Management Group, Inc., Donald S.
Robbins and Gordon W. Allison,  Case No.  05-7894.  The  complaint  alleges that
Nature Coast Collections,  Inc. is the assignee of the original payee, Stonegate
Management,  ltd., a Costa Rican entity,  of four  promissory  notes executed by
CSMG,  Donald S. Robbins,  as guarantor and Gordon W. Allison as guarantor.  The
amount  claims in the suit is the  aggregate  principal  sum of  $630,000,  with
interest, costs, and attorney fees.

         CSMG had the proceedings  removed to the Federal District Court for the
Middle District of Florida.  CSMG  subsequently  filed its motion to dismiss the
proceedings  for lack of  jurisdiction  in Florida.  On May 2, 2006,  the United
States   District  Court   dismissed  the   proceedings  for  lack  of  personal
jurisdiction over the defendants.

         On June 30, 2006,  the  registrant  ("CSMG") was served by Nature Coast
Collections,  Inc. in the Federal  District  Court for the Southern  District of
Texas,  Nature Coast  Collections,  Inc. v. Consortium Service Management Group,
Inc., Donald S. Robbins and Gordon W. Allison.  CSMG has an extension of time to
answer or otherwise plead through August 21, 2006.

Item 2.  Unregistered Sales of Equity Securities

         Set forth below are  previously  unreported  sales of our common  stock
since March 31, 2006 in transactions  exempt from  registration  pursuant to the
provisions of Regulation D, Rule 506.

         ---------- ------------------ --------- ----------- -------------------
                                       No. of    Price       Type of
         Date       Person             Shares    Per Share   Consideration
         ---------- ------------------ --------- ----------- -------------------
         07-06-06   Robert Machen       200,000  $0.21       Cash
         ---------- ------------------ --------- ----------- -------------------
         07-06-06   Bruce Berger         55,556  $0.18       Cash
         ---------- ------------------ --------- ----------- -------------------
         07-06-06   Keith Wilson         23,809  $0.21       Cash
         ---------- ------------------ --------- ----------- -------------------
         07-06-06   Don Early            45,000  $0.33       Consulting services
         ---------- ------------------ --------- ----------- -------------------
         07-06-06   K. Bruce Jones        5,000  $0.33       Consulting services
         ---------- ------------------ --------- ----------- -------------------
         07-11-06   Robert Machen       185,185  $0.27       Cash
         ---------- ------------------ --------- ----------- -------------------
         07-11-06   Donald S. Robbins   200,000  $0.27       Cash
         ---------- ------------------ --------- ----------- -------------------
         07-11-06   K. Bruce Jones      200,000  $0.27       Cash
         ---------- ------------------ --------- ----------- -------------------

         All of the  persons  purchasing  shares of common  stock  were known to
management, they were all accredited investors

Item 6.           Exhibits  and  Reports  on  Form  8-K

         (a)      Exhibits




                                       17
<PAGE>

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

         Exhibit No.                                 Description

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

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

             10      -    Founders' Agreement of United Engineering Company*

             10.1    -    Statutes (Bylaws) of United Engineering Company*

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

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

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

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

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

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

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



                                       18
<PAGE>

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

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

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

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

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

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

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

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

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



                                       19
<PAGE>

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

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

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

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

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

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

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

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

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

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

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



                                       20
<PAGE>

             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.

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

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

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

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

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

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

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

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

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



                                       21

<PAGE>

                                   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.

Dated:  August 21, 2006                          CONSORTIUM SERVICE MANAGEMENT
                                                 GROUP, INC.



                                                 By  /s/ Donald S. Robbins
                                                    ----------------------------
                                                    Donald S. Robbins, President



















                                       22