**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-Q**





(Mark
      One)





x  QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      quarterly period ended June 30, 2008


or





o  TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      transition period from _______ to _______





Commission
      File Number: 000-27359





**CSMG
      Technologies, Inc.**


(Exact
      name of registrant as specified in its charter)





Texas
            
            74-2653437(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)501
                North Shoreline Drive, Suite 701 North
              Corpus
                Christi, Texas
            
            78471(Address
                of principal executive offices)
            
            (Zip
                Code)





(361)
      887-7546


(Registrant’s
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
                accelerated filer o
            Accelerated
                filer oNon-accelerated
                filer o
            Smaller
                reporting company x(Do
                not check if a smaller reporting company)





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o No x





As
      of
      June 30, 2008, there were outstanding 39,919,375 shares of the registrant’s
      common stock, $.0001 par value.








Table
      of Contents





PagePART
                I – FINANCIAL INFORMATIONItem
                1.
            Financial
                Statements
            3Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            37Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            43Item
                4(T)
            Controls
                and Procedures
            43PART
                II – OTHER INFORMATIONItem
                1.
            Legal
                Proceedings
            44Item
                1A.
            Risk
                Factors
            45Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            45Item
                3.
            Defaults
                Upon Senior Securities
            46Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            46Item
                5.
            Other
                Information
            46Item
                6.
            Exhibits
            46





2




**PART
      I**


**FINANCIAL
      INFORMATION**




**Item
                1.**
            **Financial
                Statements**




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**INDEX
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      (UNAUDITED)**




Condensed
                Consolidated Balance Sheets as of June 30, 2008 and December 31,
                2007
                (Audited)
            
            
            4Condensed
                Consolidated Statements of Operations For the Six and Three Months
                Ended
                June 30, 2008 and 2007, with Cumulative Totals Since January 1, 2006
                the
                Commencement of the Development Stage
            
            
            5Condensed
                Consolidated Statements of Cash Flows For the Six Months Ended June
                30,
                2008 and 2007, with Cumulative Totals Since January 1, 2006 the
                Commencement of the Development Stage
            
            
            6Notes
                to Condensed Consolidated Financial Statements
            
            
            7





3




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**JUNE
      30, 2008 AND DECEMBER 31, 2007 (AUDITED)**




**JUNE 30, 2008**
            
            **RESTATED AUDITED**
              **DECEMBER 31, 2007****ASSETS****CURRENT
                ASSETS**Cash
            
            $
            137,858
            
            $
            1,004,376Inventory
            
            
            93,058
            
            
            35,670**Total
                current assets**
            
            
            230,916
            
            
            1,040,046Fixed
                assets, net of depreciation
            
            
            126,929
            
            
            42,605Intangible
                assets
            
            
            63,797
            
            
            37,157Deposits
                and other assets
            
            
            43,499
            
            
            -Goodwill
            
            
            434,093
            
            
            -**TOTAL
                ASSETS**
            
            $
            899,234
            
            $
            1,119,808**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                LIABILITIES**Accounts
                payable and accrued expenses
            
            $
            1,604,606
            
            $
            640,713Accrued
                interest payable
            
            
            2,289,862
            
            
            1,699,124Liability
                for stock to be issued
            
            
            -
            
            
            143,459Convertible
                notes payable
            
            
            6,994,000
            
            
            6,845,000Notes
                payable
            
            
            1,437,604
            
            
            1,508,407Other
                current liabilities
            
            
            219,579
            
            
            279,689**Total
                current liabilities**
            
            
            12,545,651
            
            
            11,116,392**TOTAL
                LIABILITIES**
            
            
            12,545,651
            
            
            11,116,392**Minority
                interest**
            
            
            146,000
            
            
            206,000**STOCKHOLDERS'
                EQUITY (DEFICIT)**Preferred
                stock, par value $0.001 per share, 10,000,000 shares authorized and
                no
                shares issued and outstanding
            
            
            -
            
            
            -Preferred
                stock subscribed
            
            
            530,000
            
            
            -Common
                stock, par value $0.001 per share, 80,000,000 shares authorized and
                39,919,375 and 38,018,544 issued and outstanding,
                respectively
            
            
            39,919
            
            
            38,018Additional
                paid-in capital
            
            
            17,661,561
            
            
            15,476,749Accumulated
                deficit
            
            
            (13,512,773
            )
            
            (13,512,773
            )Deficits
                accumulated during the development stage
            
            
            (16,478,351
            )
            
            (12,171,805
            )Treasury
                stock
            
            
            (32,773
            )
            
            (32,773
            )**Total
                stockholders' equity (deficit)**
            
            
            (11,792,417
            )
            
            (10,202,584
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
            
            $
            899,234
            
            $
            1,119,808




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





4


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**FOR
      THE SIX AND THREE MONTHS ENDED JUNE 30, 2008 AND 2007**


**(WITH
      CUMULATIVE TOTALS SINCE JANUARY 1, 2006,**


**THE
      COMMENCEMENT OF THE DEVELOPMENT STAGE)**




**SIX MONTHS ENDED**
              **JUNE 30,**
            
            **THREE MONTHS ENDED**
              **JUNE 30,**
            
            **CUMULATIVE
                TOTALS SINCE****2008**
            
            **2007**
            
            **2008**
            
            **2007**
            
            **JANUARY 1, 2006****REVENUE**
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -**COST
                OF REVENUES**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**Total
                costs of revenues**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**GROSS
                PROFIT (LOSS)**
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**OPERATING
                EXPENSES**Research
                and development costs
            
            
            1,388,474
            
            
            1,205,284
            
            
            736,652
            
            
            1,030,908
            
            
            4,663,204General
                and administrative
            
            
            1,894,057
            
            
            1,028,385
            
            
            1,338,592
            
            
            309,870
            
            
            8,395,657Depreciation
            
            
            9,645
            
            
            322
            
            
            7,713
            
            
            226
            
            
            10,890**Total
                operating expenses**
            
            
            3,292,176
            
            
            2,233,991
            
            
            2,082,957
            
            
            1,341,004
            
            
            13,069,751**NET
                LOSS FROM OPERATIONS BEFORE OTHER EXPENSE AND****PROVISION
                FOR INCOME TAXES, MINORITY INTEREST AND****EXTRAORDINARY
                ITEM**
            
            
            (3,292,176
            )
            
            (2,233,991
            )
            
            (2,082,957
            )
            
            (1,341,004
            )
            
            (13,069,751
            )**OTHER
                INCOME (EXPENSE)**Equity
                in net income (losses) of unconsolidated companies
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (85,118
            )Loss
                on sale of United Engineering
            
            
            -
            
            
            (112,072
            )
            
            -
            
            
            (112,072
            )
            
            (112,072
            )Interest
                expense, net of interest income
            
            
            (1,014,370
            )
            
            (1,272,601
            )
            
            (362,444
            )
            
            (899,719
            )
            
            (3,412,215
            )**NET
                LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES, MINORITY
                INTEREST
                AND EXTRAORDINARY ITEM**Minority
                interest
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**NET
                LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME TAXES****AND
                EXTRAORDINARY ITEM**
            
            
            (4,306,546
            )
            
            (3,618,664
            )
            
            (2,445,401
            )
            
            (2,352,795
            )
            
            (16,679,156
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -**NET
                LOSS FROM OPERATIONS BEFORE EXTRAORDINARY ITEM**
            
            
            (4,306,546
            )
            
            (3,618,664
            )
            
            (2,445,401
            )
            
            (2,352,795
            )
            
            (16,679,156
            )Extraordinary
                gain
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            200,805**NET
                (LOSS)**
            
            $
            (4,306,546
            )
            $
            (3,618,664
            )
            $
            (2,445,401
            )
            $
            (2,352,795
            )
            $
            (16,478,351
            )**NET
                (LOSS) PER BASIC AND DILUTED SHARES BEFORE EXTRAORDINARY
                ITEM**
            
            $
            (0.11
            )
            $
            (0.10
            )
            $
            (0.06
            )
            $
            (0.07
            )
            $
            (0.48
            )**NET
                (LOSS) PER BASIC AND DILUTED SHARES**
            
            $
            (0.11
            )
            $
            (0.10
            )
            $
            (0.06
            )
            $
            (0.07
            )
            $
            (0.48
            )**WEIGHTED
                AVERAGE NUMBER OF SHARES OUTSTANDING**
            
            
            38,752,463
            
            
            35,198,376
            
            
            39,090,235
            
            
            35,982,956
            
            
            34,542,805





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





5


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**JUNE
      30, 2008 AND DECEMBER 31, 2007 (AUDITED)**




**SIX MONTHS ENDED**
              **JUNE 30,**
            
            **CUMULATIVE**
              **TOTAL SINCE****2008**
            
            **2007**
            
            **JANUARY 1, 2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                (loss)
            
            $
            (4,306,546
            )
            $
            (3,618,664
            )
            $
            (16,478,351
            )**Adjustments
                  to reconcile net (loss)to
                  net cash (used in) operating activities:**Stock
                issued for services
            
            
            93,666
            
            
            282,813
            
            
            609,186Stock
                issued for interest
            
            
            43,350
            
            
            -
            
            
            43,350Stock
                issued for financing fees
            
            
            17,099
            
            
            -
            
            
            17,099Stock
                based compensation
            
            
            146,345
            
            
            -
            
            
            1,817,321Discount
                on conversion of notes payable
            
            
            279,681
            
            
            761,421
            
            
            1,798,856Warrants
                issued for commissions
            
            
            -
            
            
            186,092
            
            
            186,092Options
                issued to consultant
            
            
            -
            
            
            28,247
            
            
            96,322Equity
                loss from investee
            
            
            -
            
            
            -
            
            
            85,118Depreciation
            
            
            9,645
            
            
            322
            
            
            10,890Impairment
                of patents
            
            
            -
            
            
            -
            
            
            476,304Loss
                on sale of United Engineering
            
            
            -
            
            
            112,072
            
            
            112,072**Change
                in assets and liabilities**(Increase)
                in inventory
            
            
            (57,388
            )
            
            -
            
            
            (93,058
            )(Increase)
                in deposits and other assets
            
            
            (43,499
            )
            
            -
            
            
            (43,499
            )Increase
                in accounts payable and accrued expenses
            
            
            1,603,644
            
            
            808,960
            
            
            2,082,354(Decrease)
                in other current liabilities
            
            
            (60,110
            )
            
            -
            
            
            (136,003
            )Total
                adjustments
            
            
            2,032,433
            
            
            2,179,927
            
            
            7,062,404Net
                cash (used in) operating activities
            
            
            (2,274,113
            )
            
            (1,438,737
            )
            
            (9,415,947
            )**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Capital
                expenditures
            
            
            (93,969
            )
            
            -
            
            
            (137,819
            )Acquisitions
                of intangible assets
            
            
            (26,640
            )
            
            -
            
            
            (63,797
            )Proceeds
                from sale of United Engineering
            
            
            -
            
            
            278,500
            
            
            278,500Net
                cash provided by (used in) investing activities
            
            
            (120,609
            )
            
            278,500
            
            
            76,884**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Increase
                in cash overdraft
            
            
            -
            
            
            16,030
            
            
            -Issuance
                of stock for cash
            
            
            740,400
            
            
            29,145
            
            
            2,034,730Cash
                received for stock to be issued
            
            
            530,000
            
            
            49,845
            
            
            530,000Repayment
                of notes payable
            
            
            (5,196
            )
            
            (78,000
            )
            
            (51,640
            )Repayment
                of convertible notes payable
            
            
            (225,000
            )
            
            -
            
            
            (325,000
            )Borrowings
                of notes payable
            
            
            114,000
            
            
            -
            
            
            2,719,831Borrowings
                of convertible notes payable
            
            
            374,000
            
            
            275,000
            
            
            4,569,000Net
                cash provided by financing activities
            
            
            1,528,204
            
            
            292,020
            
            
            9,476,921**NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            (866,518
            )
            
            (868,217
            )
            
            137,858**CASH
                AND CASH EQUIVALENTS - BEGINNING OF YEAR**
            
            
            1,004,376
            
            
            868,217
            
            
            -**CASH
                AND CASH EQUIVALENTS - END OF PERIOD**
            
            $
            137,858
            
            $
            -
            
            $
            137,858**SUPPLEMENTAL
                INFORMATION OF CASH FLOW ACTIVITY**Cash
                paid during the period for interest
            
            $
            7,112
            
            $
            -
            
            $
            248,001Cash
                paid during the period for income taxes
            
            $
            -
            
            $
            -
            
            $
            -**SUPPLEMENTAL
                INFORMATION ON NONCASH ACTIVITY**Conversion
                of notes payable to common stock
            
            $
            179,607
            
            $
            957,877
            
            $
            2,941,192Conversion
                of accrued interest to common stock
            
            $
            49,014
            
            $
            494,974
            
            $
            646,361Conversion
                of notes payable and accrued interest for liability for stock to
                be
                issued
            
            $
            -
            
            $
            -
            
            $
            143,459Issuance
                of stock for notes payable and accrued interest previously
                converted
            
            $
            103,060
            
            $
            -
            
            $
            103,060Issuance
                of stock for acquisition of subsidiaryGoodwill
            
            $
            434,093
            
            $
            -
            
            $
            434,093




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





6





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF
                PRESENTATION**




The
      unaudited condensed consolidated financial statements included herein have
      been
      prepared, without audit, pursuant to the rules and regulations of the Securities
      and Exchange Commission (“SEC”). The condensed consolidated financial statements
      and notes are presented as permitted on Form 10-QSB and do not contain
      information included in the Company’s annual statements and notes. Certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America have been condensed or omitted pursuant to such rules
      and regulations, although the Company believes that the disclosures are adequate
      to make the information presented not misleading. It is suggested that these
      condensed consolidated financial statements be read in conjunction with the
      December 31, 2007 Form – 10-K and audited financial statements and the
      accompanying notes thereto.





These
      condensed unaudited condensed consolidated financial statements reflect all
      adjustments, including normal recurring adjustments which, in the opinion of
      management, are necessary to present fairly the consolidated operations and
      cash
      flows for the periods presented.




CSMG
      Technologies Inc., formerly, Consortium Service Management Group, Inc. (the
      “Company”), a Texas corporation, was incorporated on November 17, 1992. On
      January 18, 2007, the Company changed its name to CSMG Technologies, Inc. and
      increased its total number of authorized shares to 90,000,000 and the number
      of
      common shares to 80,000,000.




The
      Company is a technology management company. The technologies involve live tissue
      bonding and CO2 (carbon dioxide) separation of landfill gas, however, the carbon
      dioxide separation of landfill gas component has not been an active service
      since 2005. In June 2008, the Company acquired Carbon Capture Technologies,
      Inc.
      a company that owns the world wide rights to a CO2 separation technology that
      may be used for stack gas emissions that was developed at the University of
      Ottawa, Canada.




Pursuant
      to EITF 98-3, “Determining Whether a Nonmonetary Transaction Involves the
      Receipt of Productive Assets or of a Business”, it was determined that the
      acquisition of Carbon Capture Technologies, Inc. was the acquisition of a
      business as it contained all of the necessary inputs, processes and outputs
      to
      conduct normal operations, including the ability to sustain a revenue stream.
      (See Note 3)




7





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF PRESENTATION****(CONTINUED)**




The
      live
      tissue bonding operations are through Live Tissue Connect, Inc., a subsidiary
      that is owned 86% by the Company. The live tissue bonding technology focuses
      on
      bonding living soft biological tissue used in surgical procedures which
      eliminates the need for sutures, staples, sealants or glues. The Company has
      an
      agreement with the E.O. Paton Institute of Electrical Welding of the Ukraine
      National Academy of Sciences (the “Paton Institute”) and International
      Association of Welding (the “IAW”) and owns the technology including the
      worldwide rights of licensing, patenting, manufacturing, development and
      distribution of this technology, except in the former Soviet Republics that
      are
      current members of the Commonwealth of Independent States (the “CIS”) where the
      IAW and Paton Institute have exclusive rights. To date, we have 31 issued or
      pending patents worldwide relating to the live tissue bonding equipment. In
      addition, in June 2007, the Company filed a 510(K) submission with the U.S.
      Food
      and Drug Administration for the duct and vessel sealer and two instruments,
      and
      received notification on July 30, 2008 that the 510(K) submission was cleared
      by
      the U.S. Food and Drug Administration. In December 2007, Stellartech Research
      Corporation, with whom we have contracted to manufacture the electrosurgery
      generator, obtained the European Conformité Européne (“CE”) Mark on the
      electrosurgery generator. In February 2008, the Company’s majority owned
      subsidiary, Live Tissue Connect, Inc. opened an office in Goleta, California,
      hired a worldwide sales manager, software engineer, and three instrument
      engineers.




In
      June
      2008, the Company entered into a new agreement with the IAW under license of
      the
      Paton Institute for the realization of the RF Live Soft Tissue/Welding Project.
      Under the IAW agreement, beginning September 1, 2008 through August 31, 2009,
      the Company will pay $40,000 per month for a staff of surgeons, engineers,
      and
      medical staff to advance the refinement of the prototype automation for specific
      procedures and basic clinical work. In addition, the Company will pay the
      greater of a total of $210,000 annually or 1% of the annual net selling price
      for items which the manufacture, use or sale that is covered by one or more
      valid and extant patent claims.




The
      Company and its majority owned subsidiary, Live Tissue Connect, Inc. entered
      into an agreement for the continuation of the research and development and
      marketing of the Live Biological Tissue Bonding project. Under the terms of
      this
      agreement, Live Tissue Connect, Inc. shall pay to the Company: a) a minimum
      management fee of $200,000 for the first year beginning on the date of the
      initial filing of a proposed Form S-1 for Live Tissue Connect, Inc. and shall
      be
      negotiated annually thereafter, but shall not be less than $200,000 annually;
      b)
      all costs of IAW agreement estimated at $480,000 annually ($40,000 monthly)
      as
      noted above depending on devices being developed to be undertaken by IAW; c)
      a
      $300,000 one time fee on the 80 th day
      following FDA approval (October 18, 2008); repayment of the note payable between
      the two companies, in addition, the stipulation that interest charges at 8%
      annually be provided commencing July 1, 2008; d) the payment of the greater
      of
      2% of net manufacturers price world wide sales or $220,000 annually with the
      first payment by the 80 th day
      following FDA approval (October 18, 2008); and e) the continued payment of
      an
      estimated $60,000 annually in costs to reimburse the Company for its Kiev
      development office.




8




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF PRESENTATION****(CONTINUED).**




In
      May
      2008, Live Tissue Connect, Inc. through its Orthopedic Division (“LTCOD”)
      entered into a development agreement with a major multi-national medical device
      company to jointly develop a prototype “bread board” proof of concept level
      working instrument, RF generator and software system that can perform
      meniscus-to-meniscus welding (“M-M Weld”) where each item is a “product”. The
      agreement is for a one-year period and pursuant to this agreement, Live Tissue
      Connect, Inc. is responsible for the costs of the project and is entitled to
      reimbursement of 75% of the cost expended until they have paid a total of
      $100,000. Thereafter, the Live Tissue Connect, Inc. cost sharing obligation
      shall cease and the medical device company shall pay all of the project costs.




In
      June
      2008 we acquired 100% ownership of Carbon Capture Technologies, Inc., a wholly
      owned subsidiary of UTEK, in a stock transaction.  Carbon
      Capture Technologies, Inc. holds a worldwide exclusive license to a composition
      and method for use of a novel Carbon Dioxide (CO 2 )
      adsorbent. Researchers at the University of Ottawa have developed recyclable
      CO 2 adsorbents based on surface modified nanoporous silicas. The materials show
      high
      adsorption capacity that is both fast and reversible, allowing it to be reused
      repeatedly in a high throughput periodic cyclic adsorption process. The
      adsorbents can be used in both wet and dry environments, potentially eliminating
      significant engineering challenges. The potential uses for the technology
      include capturing the bulk of C0 2 emissions from coal-fired power plants in order that these greenhouse gasses
      could be sequestered and thus reduce the carbon footprint of such facilities,
      as
      well as surgical and mine rescue applications. The acquisition was for 371,020
      shares of the Company’s common stock Additionally, the Company has an obligation
      to the University of Ottawa in the amount of $30,000 for each of the first
      two
      years,  and
      the
      greater of 3% of net sales or $10,000 in year 2, $25,000 in year 3, $50,000
      in
      year 4 and $100,000 the 5 th year and
      thereafter for this technology. (See Note 3)




Based
      upon the technology’s ability to operate at lower temperatures and pressures,
      the tolerance of the University of Ottawa’s novel materials to water vapors and
      their recyclability, the Company believes that this technology could be
      significantly more efficient than current liquid amine based methods and other
      absorption systems for capturing a pure stream of CO 2 ,




The
      Company has one patent pending on the CCTI technology.




The
      Company also has one patent issued in both the United States and Canada on
      the carbon dioxide separator technology. This was also developed in Ukraine,
      and
      promotes the economical separation of methane from carbon dioxide gas emanating
      from landfills. Landfills generate a commingled mixture of methane and carbon
      dioxide gas which prevents it from being commercially sold as fuel. The Ukraine
      technology has developed an economical carbon dioxide separator that removes
      the
      carbon dioxide to allow the methane gas to be sold to utility companies as
      well
      as other industrial and commercial customers. The first installation began
      in
      2002 in Mobile, Alabama with completion originally estimated to be in the second
      quarter of 2003.




9


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF PRESENTATION****(CONTINUED)**




The
      carbon dioxide separator equipment was installed at the Chastang landfill in
      Mobile, Alabama which is owned by the city of Mobile but operated by Waste
      Management Inc. and Transamerican Waste Industries Inc., and has since been
      removed and put into storage. An agreement existed between Transamerican Waste
      Industries Inc. and Resource Technology Corporation (RTC) which gave RTC the
      sole and exclusive right to collect, extract and remove landfill gas from the
      property.





At
      this
      time RTC contracted with the Company to extract the methane gas. Accordingly,
      the Company installed the carbon dioxide separator at the landfill in 2002
      and
      2003. Waste Management Inc. asserted that the carbon dioxide equipment produced
      methane gas that failed to meet Mobile Gas quality specifications. As a result
      and as noted in Note 11, Litigation, a legal dispute ensued as well as RTC
      filing bankruptcy.





On
      February 14, 2006, the Company signed a contract with DuPont to provide up
      to
      500,000 MMbtu commercial quality gas to their plant outside Mobile, Alabama.
      There is no requirement in this contract for gas quality specifications. During
      2007, the Company dismantled the equipment and moved the equipment to storage
      due to the fact that there was not sufficient raw gas at the landfill. The
      contract has expired.





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





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




In
      October 2007, the Board of Directors agreed to have the Company’s majority-owned
      subsidiary Live Tissue Connect, Inc. submit to the Securities and Exchange
      Commission (SEC) an initial public offering (IPO). The Company anticipates
      this
      to occur in 2008.





10


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF PRESENTATION****(CONTINUED)**




**Going
      Concern**





As
      shown
      in the accompanying condensed consolidated financial statements the Company
      has
      incurred a loss of **$** 4,306,546
      and $3,618,664 for the six months ended June 30, 2008 and 2007, respectively,
      as
      well as a cumulative loss from January 1, 2006 (commencement of the development
      stage) through June 30, 2008 of $16,478,351 and has a working capital deficiency
      of $12,314,735 and $10,076,346 as of June 30, 2008 and December 31, 2007,
      respectively.




The
      Company’s management has raised funds through equity and debt offerings. In June
      2006, Empire Financial Group and the Company entered into a best efforts bridge
      financing transaction for $3,025,000.




Empire
      Financial Group was successful in raising the full $3,025,000 which is currently
      classified as “Convertible
      Notes
      Payable” on
      the condensed consolidated balance sheet at June 30, 2008 and December 31,
      2007
      and which will likely be converted to equity. The Company and Empire Financial
      Group has extended this offering for up to a minimum of $3,000,000 as well
      as a
      letter of intent relating to the raising of an additional $25,000,000 for a
      potential initial public offering of Live Tissue Connect, Inc., the tissue
      welding technology subsidiary of the Company, of which Empire has raised
      $4,294,000 ($100,000 was paid back to an investor on October 1, 2007, $150,000
      was paid to an investor on February 25, 2008, and $75,000 was paid to investors
      during the current quarter)) as of June 30, 2008. Additionally the Company
      offered through a private placement up to 5 million shares of preferred stock
      at
      $1 per share in our subsidiary Live Tissue Connect, Inc. through Empire-Jesup
      Lamont of which $530,000 was raised during the Company’s second fiscal quarter.
      As of June 30, 2008, none of these shares had been issued to any of the
      shareholders. The Company is in the process of retaining an independent
      valuation specialist to conduct a valuation of Live Tissue Connect, Inc. and
      determine whether an adjustment may be necessary for the beneficial conversion
      feature as it relates to the convertible notes and preferred stock.




One
      of
      the principal reasons for the Company’s substantial doubt regarding its ability
      to continue as a going concern involves the carbon dioxide separator business.
      The equipment manufactured removes CO2 from landfill gas, raw landfill gas
      that
      has high air content requires additional landfill gathering system tuning to
      reduce air content or additional oxygen and nitrogen removal equipment. Our
      system fits well is within specifications on the Company’s agreement with
      DuPont. The Chastang project however, generated no production, and cost the
      Company approximately $2,000,000. The Company has moved their equipment from
      the
      Chastang site to storage. Despite, the new gas purchase contract the Company
      entered into, the Company did impair the value of their equipment. In addition
      to this impairment, the Company impaired the value of obtaining their patents
      for both the CO2 separator equipment as well as the patents related to the
      live
      tissue bonding. The total of the patent impairment was approximately $650,000.




11




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              1-**
            **ORGANIZATION
                AND BASIS OF PRESENTATION****(CONTINUED)**




**Going
      Concern** **(Continued)**







Management’s
      plans to address these conditions include raising additional funds, through
      Empire Financial Group, as well as commercially, manufacturing and distributing
      their live tissue bonding equipment in the second half of 2008. The Company
      has
      signed contracts with leading instrument and electro surgery generator design
      and manufacturing companies and has started manufacturing of the commercial
      equipment that will be licensed or sold to perform surgeries.




The
      Company’s long-term success is dependent on its electro surgery generator as
      well as worldwide acceptance of their products.




The
      Company is subject to certain risks common to technology-based companies.
      Principal risks to the Company include uncertainty of growth in market
      acceptance for its products; history of losses in recent years; ability to
      remain competitive in response to new technologies; costs to defend, as well
      as
      risks of losing patent and intellectual property rights; reliance on limited
      number of suppliers; reliance on outsourced manufacture of its products for
      quality control and product availability; uncertainty of demand for its products
      in certain markets; ability to manage growth effectively; dependence on key
      members of its management; and its ability to obtain adequate capital to fund
      future operations.




The
      condensed consolidated financial statements do not include any adjustments
      relating to the carrying amounts of recorded assets or the carrying amounts
      and
      classification of recorded liabilities that may be required should the Company
      be unable to continue as a going concern.




**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**




**Principles
      of Consolidation**




The
      condensed consolidated financial statements include those of the Company and
      its
      majority-owned subsidiary. All intercompany accounts and transactions have
      been
      eliminated in consolidation. Minority interests have been reflected in the
      consolidated financial statements for the percentage of the subsidiary not
      owned
      by the Company.




12




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Development
      Stage Company**




The
      Company commencing on January 1, 2006 entered into the development stage. Prior
      to January 1, 2006, the Company was operating in the carbon dioxide separator
      of
      landfill gas business exclusively. The Company has not been conducting
      significant operations in this business for 2006 and 2007, and has been in
      the
      development of their live tissue connect business. Therefore, management
      considers themselves to have commenced the development stage effective January
      1, 2006 as defined in Statement of Financial Accounting Standards (SFAS) No.
      7,
“ *Accounting
      and Reporting by Development Stage Enterprises* ”.
      Additionally, the Company has allocated a substantial portion of their time
      and
      investment in bringing their services to the market, and the raising of capital.
      The Company has commenced the purchasing of raw materials to manufacture their
      generators in late 2007, and believes that they will commence revenues in
      2008.




**Use
      of Estimates**




The
      preparation of condensed consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenue and expenses during the reporting period. Actual results could differ
      from those estimates.




**Cash
      and Cash Equivalents**




The
      Company considers all highly liquid debt instruments and other short-term
      investments with a maturity of three months or less, when purchased, to be
      cash
      equivalents.




The
      Company maintains cash and cash equivalent balances at one financial institution
      that is insured by the Federal Deposit Insurance Corporation up to $100,000.
      All
      amounts contained in this financial institution pose a risk to the Company
      however the Company believes the risk to be minimal.




**Fixed
      Assets**




Fixed
      assets are stated at cost, less accumulated depreciation. Depreciation is
      provided using the straight-line method over the estimated useful lives of
      the
      related assets (primarily three to five years). Costs of maintenance and repairs
      are charged to expense as incurred.




13




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Recoverability
      of Long-Lived Assets**




The
      Company reviews the recoverability of its long-lived assets on a periodic basis
      whenever events and changes in circumstances have occurred which may indicate
      a
      possible impairment. The assessment for potential impairment is based primarily
      on the Company’s ability to recover the carrying value of its long-lived assets
      from expected future cash flows from its operations on an undiscounted basis.
      If
      such assets are determined to be impaired, the impairment recognized is the
      amount by which the carrying value of the assets exceeds the fair value of
      the
      assets. Fixed assets to be disposed of by sale are carried at the lower of
      the
      then current carrying value or fair value less estimated costs to
      sell.




**Research
      and Development**




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




**Revenue
      Recognition**




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




1)
            Persuasive
                evidence of an arrangement exists;


2)
            Delivery
                has occurred or services have been
                rendered;


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


4)
            Collectibility
                is reasonably assured.




**Comprehensive
      Income**




The
      Company adopted Statement of Financial Accounting Standards No, 130, “Reporting
      Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
      comprehensive income in addition to net income from operations.




Comprehensive
      income is a more inclusive financial reporting methodology that includes
      disclosure of information that historically has not been recognized in the
      calculation of net income.




14


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Currency
      Risk**




The
      Company transacts business in currencies other than the U.S. Dollar. All
      currency transactions occur in the spot foreign exchange market and the Company
      does not use currency forward contracts, currency options, currency borrowings
      interest rate swaps or any other derivative hedging strategy at this point
      in
      time.




The
      Company has determined that based on the cash flow, sales price, sales market,
      expense, financing, and inter-company transactions and arrangements indicators
      set forth in FASB 52, *Foreign
      Currency Translation* ,
      that
      the functional currency of the Company is that of the US Dollars.




**Inventory**




Inventory
      is recorded at the lower of cost and net realizable value and is accounted
      for
      on the first-in first-out basis (FIFO).




**Stock-Based
      Compensation**




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




On
      January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based
      Payment” (“FAS 123R”) which requires recognition of stock-based compensation
      expense for all share-based payments based on fair value. Prior to January
      1,
      2006, the Company measured compensation expense for all of its share-based
      compensation using the intrinsic value method prescribed by Accounting
      Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to
      Employees” (“APB 25”) and related interpretations. The Company has provided pro
      forma disclosure amounts in accordance with FAS No. 148, “Accounting for
      Stock-Based Compensation – Transition and Disclosure – an amendment of
      FASB Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS
      No. 123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied
      to its stock-based compensation.





15


**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Stock-Based
      Compensation** **(Continued)**




The
      Company has elected to use the modified-prospective approach method. Under
      that
      transition method, the calculated expense in 2006 is equivalent to compensation
      expense for all awards granted prior to, but not yet vested as of January 1,
      2006, based on the grant-date fair values estimated in accordance with the
      original provisions of FAS 123. Stock-based compensation expense for all awards
      granted after January 1, 2006 is based on the grant-date fair values estimated
      in accordance with the provisions of FAS 123R. The Company recognizes these
      compensation costs, net of an estimated forfeiture rate, on a pro rata basis
      over the requisite service period of each vesting tranche of each award. The
      Company considers voluntary termination behavior as well as trends of actual
      option forfeitures when estimating the forfeiture rate.





The
      Company measures compensation expense for its non-employee stock-based
      compensation under the Financial Accounting Standards Board (FASB) Emerging
      Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
      for Equity Instruments that are Issued to Other Than Employees for Acquiring,
      or
      in Conjunction with Selling, Goods or Services* ”.
      The
      fair value of the option issued is used to measure the transaction, as this
      is
      more reliable than the fair value of the services received. The fair value
      is
      measured at the value of the Company’s common stock on the date that the
      commitment for performance by the counterparty has been reached or the
      counterparty’s performance is complete. The fair value of the equity instrument
      is charged directly to compensation expense and additional paid-in
      capital.




The
      Company’s warrants issued in May 2007, were not stock based compensation and
      were recorded in accordance with EITF 96-18. The Company recognized $186,092
      in
      expense for the year ended December 31, 2007.




The
      Company’s options issued in 2007 were valued in accordance with SAFAS 123R. The
      Company recognized $96,322 in expense for the year ended December 31, 2007.
      The
      options issued in Live Tissue Connect, Inc. to the board were valued at
      $1,588,478 and $82,498 for the years ended December 31, 2007 and 2006,
      respectively, and $99,307 for the three months ended March 31, 2008 and are
      considered stock based compensation and reflected as such in the condensed
      consolidated statements of operations.




16




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Segment
      Reporting**




The
      Company follows the provisions of SFAS 131, “Disclosures about Segments of an
      Enterprise and Related Information.” This standard requires that companies
      disclose operating segments based on the manner in which management
      disaggregates the Company in making internal operating decisions. The Company
      believes that there is only one operating segment at this time as their CO2
      separator business is inactive despite the CCTI acquisition as there is still
      substantial research and development to be concluded. .




**Fair
      Value of Financial Instruments**




The
      carrying amounts reported in the condensed consolidated balance sheets for
      cash
      and cash equivalents, and accounts payable approximate fair value because of
      the
      immediate or short-term maturity of these financial instruments. For
      the
      notes payable, the carrying amount reported is based upon the incremental
      borrowing rates otherwise available to the Company for similar borrowings.




**Income
      Taxes**




Under
      Financial Accounting Standards Board Statement No. 109, “Accounting for Income
      Taxes,” the liability method is used in accounting for income taxes. Under this
      method, deferred tax assets and liabilities are determined based on differences
      between financial reporting and tax bases of assets and liabilities, and are
      measured using the enacted tax rates and laws that will be in effect when the
      differences are expected to reverse.




**Uncertainty
      in Income Taxes**




In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes.” This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
      15,
      2006. Management has adopted FIN 48 for 2007, and they evaluate their tax
      positions on an annual basis, and has determined that as of June 30, 2008,
      no
      additional accrual for income taxes is necessary.




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




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




17




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




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




All
      options and warrants to purchase shares of common stock and convertible notes
      were not included as they would be considered anti-dilutive as the Company
      had a
      loss for both periods.




The
      following is a reconciliation of the computation for basic and diluted EPS:




**Six
                Months Ended****June
                30,**
            
            **June
                30,****2008**
            
            **2007**Net
                (loss)
            
            $
            (4,306,546
            )
            $
            (3,618,664
            )Weighted-average
                  common sharesoutstanding
                  :Basic
            
            
            38,752,463
            
            
            35,198,376Options
            
            
            1,125,000
            
            
            1,025,000Warrants
            
            
            830,941
            
            
            600,000Diluted
            
            
            40,708,404
            
            
            36,823,376Basic
                net (loss) per share
            
            $
            (0.11
            )
            $
            (0.10
            )Diluted
                net (loss) per share
            
            $
            (0.11
            )
            $
            (0.10
            )




**Recent
      Issued Accounting Standards**




In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosure about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Early adoption is
      encouraged. The adoption of SFAS 157 is not expected to have a material impact
      on the condensed consolidated financial statements.





In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an amendment of FASB Statement
      No. 115”, (“FAS 159”) which permits entities to choose to measure many financial
      instruments and certain other items at fair value at specified election dates.
      A
      business entity is required to report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. This statement is expected to expand the use of fair value
      measurement. FAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years.





18




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Recent
      Issued Accounting Standards** **(Continued)**




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of Accounting Research Bulletin
      No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
      ownership interests in subsidiaries held by parties other than the parent,
      changes in a parent’s ownership of a noncontrolling interest, calculation and
      disclosure of the consolidated net income attributable to the parent and the
      noncontrolling interest, changes in a parent’s ownership interest while the
      parent retains its controlling financial interest and fair value measurement
      of
      any retained noncontrolling equity investment. SFAS 160 is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and interim periods within those fiscal years. Early adoption is prohibited.
      Management is determining the impact that the adoption of SFAS No. 160 will
      have
      on the Company’s condensed consolidated financial position, results of
      operations or cash flows.





In
      December 2007, the FASB issued SFAS 141R, *Business Combinations* (“SFAS
      141R”), which replaces FASB SFAS 141, *Business Combinations.* This
      Statement retains the fundamental requirements in SFAS 141 that the acquisition
      method of accounting be used for all business combinations and for an acquirer
      to be identified for each business combination. SFAS 141R defines the acquirer
      as the entity that obtains control of one or more businesses in the business
      combination and establishes the acquisition date as the date that the acquirer
      achieves control.  SFAS 141R will require an entity to record
      separately from the business combination the direct costs, where previously
      these costs were included in the total allocated cost of the
      acquisition.  SFAS 141R will require an entity to recognize the assets
      acquired, liabilities assumed, and any non-controlling interest in the acquired
      at the acquisition date, at their fair values as of that date.  This
      compares to the cost allocation method previously required by SFAS No.
      141.  SFAS 141R will require an entity to recognize as an asset or
      liability at fair value for certain contingencies, either contractual or
      non-contractual, if certain criteria are met.  Finally, SFAS 141R will
      require an entity to recognize contingent consideration at the date of
      acquisition, based on the fair value at that date.  This Statement
      will be effective for business combinations completed on or after the first
      annual reporting period beginning on or after December 15,
      2008.  Early adoption of this standard is not permitted and the
      standards are to be applied prospectively only.  Upon adoption of this
      standard, there would be no impact to the Company’s results of operations and
      financial condition for acquisitions previously completed.  The
      adoption of SFAS No. 141R is not expected to have a material effect on the
      Company’s condensed consolidated financial position, results of operations or
      cash flows.





19




**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              2-**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES****(CONTINUED)**




**Recent
      Issued Accounting Standards** **(Continued)**




In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, “ *Use
      of a Simplified Method in Developing Expected Term of Share
      Options* ”
(“SAB
      110”). SAB 110 expenses the current view of the staff that it will accept a
      company’s election to use the simplified method discussed in Staff Accounting
      Bulletin No. 107, “ *Share
      Based Payment* ”,
      (“SAB
      107”), for estimating the expected term of “plain vanilla” share options
      regardless of whether the company has sufficient information to make more
      refined estimates. SAB 110 became effective for the Company on January 1, 2008.
      The adoption of SAB 110 is not expected to have a material impact on the
      Company’s financial position.




In
      March
      2008, the FASB issued SFAS No. 161, “ Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133.” Constituents have expressed concerns that the existing
      disclosure requirements in FASB Statement No. 133, Accounting for Derivative
      Instruments and Hedging Activities, do not provide adequate information about
      how derivative and hedging activities affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires enhanced
      disclosures about an entity’s derivative and hedging activities and thereby
      improves the transparency of financial reporting. This Statement is effective
      for financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier periods
      at
      initial adoption. The adoption of FASB 161 is not expected to have a material
      impact on the Company’s condensed consolidated financial position.


In
        May
        2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
        Accounting Principles.” The
        current GAAP hierarchy, as set forth in the American Institute of Certified
        Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning
        of Present Fairly in Conformity With Generally Accepted Accounting Principles,
        has been criticized because (1) it is directed to the auditor rather than
        the
        entity, (2) it is complex, and (3) it ranks FASB Statements of Financial
        Accounting Concepts. The FASB believes that the GAAP hierarchy should be
        directed to entities because it is the entity (not its auditor) that is
        responsible for selecting accounting principles for financial statements
        that
        are presented in conformity with GAAP. Accordingly, the FASB concluded that
        the
        GAAP hierarchy should reside in the accounting literature established by
        the
        FASB and is issuing this Statement to achieve that result. This Statement
        is
        effective 60 days following the SEC’s approval of the Public Company Accounting
        Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
        in
        Conformity With Generally Accepted Accounting Principles. The
        adoption of FASB 162 is not expected to have a material impact on the Company’s
        condensed consolidated financial position.
 
 In
        May
        2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
        Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
        exists in practice in accounting for financial guarantee insurance contracts
        by
        insurance enterprises under FASB Statement No. 60, Accounting and Reporting
        by
        Insurance Enterprises. This results in inconsistencies in the recognition
        and
        measurement of claim liabilities. This
        Statement requires that an insurance enterprise recognize a claim liability
        prior to an event of default (insured event) when there is evidence that
        credit
        deterioration has occurred in an insured financial obligation.  This
        Statement requires expanded disclosures about financial guarantee insurance
        contracts. The accounting and disclosure requirements of the Statement will
        improve the quality of information provided to users of financial
        statements. The
        adoption of FASB 163 is not expected to have a material impact on the Company’s
        condensed consolidated financial position.





Other
      accounting standards that have been issued or proposed by the FASB or other
      standards-setting bodies that do not require adoption until a future date and
      are not expected to have a material impact on the condensed consolidated
      financial statements upon adoption.




**NOTE
              3-**
            **ACQUISITION**




The
      acquisition of Carbon Capture Technologies, Inc. was accounted for using the
      purchase method of accounting under SFAS 141R. The purchase price is equivalent
      to the value of $434,093 which represents the value of the 371,020 shares of
      common stock issued in the acquisition. The entire value of $434,093 was
      allocated to goodwill. CCTI had only conducted research and development which
      was not capitalized prior to the acquisition. There were no other identifiable
      intangible assets noted in the acquisition.




20





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**


**NOTE
                4-**
              **INVENTORY**
  Inventory
        consists of the following at June 30, 2008 and December 31, 2007,
        respectively:
  **June
                  30,**
              
              **December 31,****2008**
              
              **2007**Parts
                  and materials
              
              $
              140,618
              
              $
              47,560Less:
                  Reserve for obsolescence
              
              
              (47,560
              )
              
              (11,890
              )Total,
                  net
              
              $
              93,058
              
              $
              35,670


**NOTE
              5-**
            **FIXED
                ASSETS**




Fixed
      assets consist of the following as of June 30, 2008 and December 31,
      2007:




**Estimated Useful**
            
            **June 30,**
            
            **December 31,****Lives (Years)**
            
            **2008**
            
            **2007**Equipment
            
            3-7
            
            $
            108,195
            
            $
            58,027Furniture
                and fixtures
            
            7
            
            
            55,041
            
            
            39,114Software
            
            3
            
            
            11,312
            
            
            -Leasehold
                improvements
            
            15
            
            
            16,561
            
            
            -191,109
            
            
            97,141Less:
                Accumulated depreciation
            
            
            
            
            
            (64,180
            )
            
            (54,536
            )Total,
                net
            
            
            
            
            $
            126,929
            
            $
            42,605




Depreciation
      expense was $9,645 and $322 for the six months ended June 30, 2008 and 2007,
      respectively. The Company wrote off $8,118 of fully depreciated equipment in
      the
      six months ended June 30, 2007.




**NOTE
              6-**
            **INTANGIBLE
                ASSETS**




Intangible
      assets consist of patent costs on the live tissue connect technology. Until
      the
      Company receives approval on these patents, no amortization will be expensed.
      Upon approval, the Company anticipates the amortization to be over a period
      of
      fifteen years.




**NOTE
              7-**
            **CONVERTIBLE
                NOTES PAYABLE**




The
      Company from July 27, 2006 through June 30, 2008 raised $7,319,000 (of which
      $325,000 was repaid during 2007 and 2008) through Empire Financial Group in
      the
      form of unsecured convertible notes. The notes commenced interest accrual on
      January 1, 2007, at 15% per annum, and are convertible into Live Tissue Connect,
      Inc. shares at 50% of the IPO of the LTC’s common stock price. The Company has
      accrued $1,284,562 in interest through June 30, 2008. The total due the
      investors as of June 30, 2008 is $8,278,562. The entire balance is reflected
      as
      a current liability on the Company’s condensed consolidated balance sheets.




21





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              7-**
            **CONVERTIBLE
                NOTES PAYABLE****(CONTINUED)**




These
      notes matured on July 15, 2008 and the Company is currently working with their
      investment banker to extend these notes until completion of the LTC IPO. In
      addition, the Company is in the process of retaining an independent valuation
      specialist to conduct a valuation of Live Tissue Connect, Inc. and determine
      whether an adjustment may be necessary for the beneficial conversion feature
      as
      it relates to the convertible notes. The Company is working with the investment
      bankers currently to structure the extension and modifications to the existing
      convertible note agreements. These modifications may require the Company to
      extinguish the debt in accordance with EITF 06-6, ‘Debtor’s Accounting for a
      Modification (or Exchange) of Convertible Debt Instruments” and EITF 96-19,
“Debtor’s Accounting for a Modification or Exchange of Debt Instruments”.




The
      Company has had one investor request a repayment of his $100,000 convertible
      note coming due July 15, 2008. Additionally we offered through a private
      placement up to 5 million shares of preferred stock at $1 per share in our
      majority owned subsidiary Live Tissue Connect, Inc. through Empire-Jesup Lamont
      of which $530,000 was raised during the Company’s second fiscal quarter. These
      preferred shares have not been issued as of June 30, 2008. The preferred stock
      carries a cumulative dividend of 8%. Each holder of Series A Preferred will
      have
      the right, at the earlier of the IPO and the end of 18 months, to convert the
      total amount of money due to the owners of the Series A Preferred into shares
      of
      Common Stock at a conversion ratio of 50% of the Initial Public Offering (IPO)
      price. If no IPO has been completed at the 18 th month,
      the holder of the Series A Preferred may convert total amount of money due
      into
      shares of Common Stock at a price equal to 50% of the closing price of CSMG
      Technologies, Inc. stock on the first business day following the anniversary
      of
      the eighteenth (18th) month of the Closing. The Company is in the process of
      retaining an independent valuation specialist to conduct a valuation of Live
      Tissue Connect, Inc. and determine whether an adjustment may be necessary for
      the beneficial conversion feature as it relates to the preferred
      stock.




Through
      July 31, 2008 Empire Jesup-Lamont has raised a total of $680,000 in the
      preferred stock offering.




Empire
      received 290,941 warrants on May 18, 2007 as part of their commission for the
      raising of the money. The Company recorded these warrants in accordance with
      EITF 96-18 and recognized an expense in the amount of $186,092.




**NOTE
              8-**
            **NOTES
                PAYABLE**




The
      Company from time to time entered into various note agreements with shareholders
      of the Company. The 10 notes that remain as of June 30, 2008 commenced from
      2000
      through 2005, and accrue interest at rates ranging from 8% to 12%.




The
      remaining principal of these 10 notes as of June 30, 2008 is $1,437,604. Accrued
      interest through June 30, 2008 on these notes is $1,005,300, for a total amount
      due as of June 30, 2008 of $2,442,904.


22
  **CSMG
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




**NOTE
              8-**
            **NOTES
                PAYABLE****(CONTINUED)**




Four
      of
      these unsecured notes are convertible to the Company’s Rule 144 common stock at
      $.625 per share at any time until the note is repaid. One note for $464,572
      is
      owed to the Company’s president and accrues at 10% interest per annum and has an
      open maturity date, two notes to a board member for $114,000 and accrues at
      11%
      due in June 2010 with the interest rate increasing to 15% per annum if unpaid
      on
      the maturity date, and one note for $8,000 is accruing at 15% to an investor
      we
      have been unable to locate. The remaining 6 notes are described below in notes
      payable but in litigation.




The
      Company’s management has been very successful over the past few years in
      converting these notes into shares of common stock. For the six months ended
      June 30, 2008, the Company has converted $331,680 in accrued interest ($49,014),
      notes payable ($179,067, and a discount on conversion of the notes payable
      of
      ($103,060) to additional paid in capital based on the beneficial conversion
      price into 530,688 shares of common stock. For the year ended December 31,
      2007,
      the Company has converted $1,748,423 in notes plus accrued interest into
      2,733,248 shares of stock. In addition, the Company recorded a discount in
      the
      amount of $922,001 to additional paid in capital based on the beneficial
      conversion price. All these notes were unsecured.




Included
      in the notes payable are:




***Y.A.
      Global Investments, L.P.***




On
      March
      29, 2004, the Company entered into an equity line of credit with Y.A. Global
      Investments, L.P. (f/k/a Cornell Capital Partners) whereby the Company may
      issue
      and sell to YA Global Investments, L.P. up to $10,000,000 in common stock.
      Under
      this arrangement, Cornell advanced the Company $1,000,000 in 2004, all of which
      has been repaid through conversions to common stock.




The
      Company in 2005 was advanced $600,000 under a convertible debenture. In
      accordance with this agreement, the Company has been repaying this through
      issuances of stock under Rule 144. The Company on October 18, 2007 repaid the
      remaining $242,000 in principal along with interest in the amount of $132,687
      with the issuance of 535,267 shares of common stock to YA Global Investments,
      L.P. There is no further indebtedness to YA Global Investments, L.P. These
      shares were issued pursuant to an exemption from registration under Section
      4(2)
      of the Securities Act of 1933, as amended. The purchaser of these shares is
      aware that they are restricted. There were no warrants or options issued in
      the
      Cornell transaction.




23





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              8-**
            **NOTES
                PAYABLE****(CONTINUED)**




**Included
      in notes payable but remain in litigation are the
      following:**




***Stonegate
      Management, Ltd.***




The
      Company in 2001 entered into four one-year note agreements with Stonegate
      Management in the original principal balance of $630,000. Accrued interest
      through June 30, 2008 on these notes amounts to $550,248, for a total amount
      due
      under these notes of $1,180,248. The notes accrue interest at rates ranging
      between 8% and 10% per annum.




In
      relation to these notes, the Company on December 12, 2005, was served a suit
      in
      the Circuit Court for Hillsborough County Florida by Nature Coast Collections,
      Inc. The suit named the Company as well as certain officers, Donald Robbins
      and
      Gordon Allison as guarantors of the four notes. Nature Coast Collections, Inc.
      is the claimed assignee of the original payee, Stonegate Management, Ltd.,
      a
      Costa Rican entity. The Company filed a motion for dismissal of the proceedings
      for lack of jurisdiction in Florida, and this was granted.




On
      June
      30, 2006, the Company and the two officers were again served by Nature Coast
      Collections, Inc., this time in the Federal District Court for the Southern
      District of Texas. The Company has answered the complaint and filed a
      counterclaim alleging, among other matters, that Nature Coast Collections,
      Inc.
      is an affiliate of RTC, a debtor in bankruptcy, whom the Company entered into
      a
      transaction with in regards to their CO2 separation equipment. The Company
      alleges that they should be authorized to offset its losses caused by the
      contractual relationship with RTC against the claims brought on by Nature Coast
      Collections, Inc. The Company has moved to transfer these proceedings to the
      Federal District Court for the Northern District of Illinois, where the
      bankruptcy proceedings are.




Nature
      Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
      Donald S.  Robbins and Gordon W.  Allison ,
      Case
      No. 2:06-cv-273 originally pending in the Southern District of Texas
      District Court and recently ordered transferred to the Northern District of
      Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
      arising out of a series of disputed promissory notes bringing the total claim
      over $900,000 and under $1,000,000. The Company has answered setting forth
      several affirmative defenses and counterclaims focused on the affiliation of
      the
      Plaintiff with an offshore affiliate of a customer of the Company and based
      on
      misrepresentation.  Discovery has been completed and the Company has filed
      a motion for summary judgment with respect to the Plaintiff’s claims, the
      briefing of which by the parties has yet to be fully completed. No trial date
      has been set.


24





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              8-**
            **NOTES
                PAYABLE****(CONTINUED)**




***Banco
      Panamericano***




The
      Company is in default on a note with an initial balance of $203,800 to Banco
      Panamericano that became due April 1, 2002. On February 10, 2005, Banco
      Panamericano filed suit in the Circuit Court of Cook County, Illinois for
      $514,920 (balance accrued as of June 30, 2008 including interest at 12% is
      $402,840).




The
      note
      was funded in large part to assist in funds needed for the Chastang transaction,
      and the Company alleges that Banco Panamericano is not a bank, but a Nebraska
      corporation that is affiliated with RTC and that the proceeds were to be repaid
      from the proceeds of the sale of the methane gas that never occurred based
      on
      RTC’s failure to perform under the contract.




The
      Company believes they are the injured party an that the litigation properly
      belongs in RTC’s Chapter 11 proceedings in the federal bankruptcy court. On
      December 6, 2005, the case was moved to the United States Bankruptcy Court.




Banco
      Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
      LLC , 
      Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
      District Court as Case No. 06 C 7195.  Plaintiff claims damages in the
      amount of $514,920 as of February 9, 2005, together with interest and costs,
      arising out of a disputed promissory note bringing the total claim to
      $1,013,648.  The Company has answered setting forth several affirmative
      defenses and counterclaims focused on the affiliation of the Plaintiff with
      a
      customer of the Company and based on misrepresentation.  Discovery has been
      completed and Plaintiff has submitted a contested motion for summary judgment
      that is under consideration by the Court. A trial date of December 10, 2007,
      has
      been continued pending the outcome of this motion.





The
      entire balance of shareholder notes is reflected as current liabilities as
      they
      are all overdue.




25





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              9-**
            **STOCKHOLDERS’
                EQUITY (DEFICIT)**




***Preferred
      Stock***




The
      Company has 10,000,000 authorized shares of preferred stock, par value
      $.001.




On
      December 28, 1995, the Company authorized the issuance of 75,669 shares of
      Series A preferred stock, $10.00 face amount, $.001 par value which paid a
      cumulative dividend on net corporate profit equal to 8% of the face amount
      of
      the outstanding stock. If the Company did not realize profits, preferred stock
      dividends are not accruable. Such preferred stock is preferred over all common
      stock in the event of corporate liquidation and dissolution to the extent of
      its
      unredeemed face amount.




On
      September 29, 2000, the Board of Directors approved the conversion of these
      shares into 1,210,704 common shares.




As
      of
      June 30, 2008 and December 31, 2007, there are no shares issued and
      outstanding.




***Common
      Stock***




On
      January 18, 2007, the Company increased the authorized shares of common stock
      to
      80,000,000.




As
      of
      June 30, 2008 and December 31, 2007, the Company had 39,919,375 and 38,018,544
      shares issued and outstanding.




For
      the
      six months ended June 30, 2008, the Company had issued the following
      stock:




530,688
      shares issued in conversion of notes payable, accrued interest and discount
      on
      conversion in the amount of $331,680.




819,150
      shares issued for cash in the amount of $740,400.




51,155
      shares issued for conversion of warrants in the amount of $93,655 which were
      expensed in the six months ended June 30, 2008.




114,916
      shares issued to two former owners of a subsidiary of the company for their
      investment of $60,000 plus interest that was accrued for $43,350 (total
      investment $103,350).




13,902
      shares were issued for $17,099 for services




371,020
      shares were issued for the purchase of CCTI valued at $434,093.




For
      the
      years ended December 31, 2007 and 2006, the Company had issued the following
      stock:




1,086,715
      and 4,549,122 shares issued for cash in the amount of $620,991 and $672,889,
      respectively.




744,500
      and 366,115 shares issued for services at a value of $314,413 and $201,107,
      respectively.




2,733,248
      and 2,493,109 shares issued in conversion of notes payable and accrued interest
      in the amount of $1,748,423 and $1,507,458, respectively.


26





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              9-**
            **STOCKHOLDERS’
                EQUITY (DEFICIT)****(CONTINUED)**




***Options***




The
      Company currently has three stock option plans. The following table summarizes
      the activity of the Company’s stock option plan.


June 30, 2008Weighted-averageNumber of
              
              exerciseOptions
              
              priceJune
                  30, 2008:Outstanding –
                  beginning of period
              
              
              1,125,000
              
              $
              0.46Granted
              
              
              -
              
              
              -Exercised/Expired
              
              
              (-
              )
              
              -Outstanding –
                  end of period
              
              
              1,125,000
              
              $
              0.46Exercisable
                  at end of period
              
              
              1,125,000
                  3
              
              $
              0.46


June 30, 2007Weighted-averageNumber of
              
              exerciseOptions
              
              priceJune
                  30, 2007:Outstanding –
                  beginning of period
              
              
              925,000
              
              $
              0.42Granted
              
              
              50,000
              
              
              .62Exercised/Expired
              
              
              (-
              )
              
              -Outstanding –
                  end of period
              
              
              975,000
              
              $
              0.45Exercisable
                  at end of period
              
              
              975,000
                  3
              
              $
              0.40




The
      Company’s options expire at various times through 2017. All options issued in
      2003 through 2005 were issued at or above market value. The Company issued
      50,000 options to a consultant in February 2007 and 100,000 options to a
      consultant in October 2007 that were vested. These options were expensed at
      a
      value of $96,322 by utilizing the black-scholes method.




27





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              9-**
            **STOCKHOLDERS’
                EQUITY (DEFICIT)****(CONTINUED)**




***Options***




The
      fair
      value of each option is estimated on the date of grant using the Black-Scholes
      option-pricing model. The following weighted average assumptions were used
      in
      the model:




**Feb-07**
            
            **Oct-07**Stock
                price
            
            $
            0.62
            
            $
            0.75Strike
                price
            
            $
            0.62
            
            $
            0.75Expected
                lives (years)
            
            
            10
            
            
            10Annualized
                volatility
            
            
            100.61
            %
            
            100.19
            %Discouint
                rate
            
            
            4.50
            %
            
            4.00
            %Annual
                rate of quarterly dividends
            
            
            0.00
            %
            
            0.00
            %Call
                option value
            
            $
            0.5649
            
            $
            0.6807




In
      addition, Live Tissue Connect, Inc. granted 70,000, 2,875,000 and 1,000,000
      options in the six months ended June 30, 2008, and the years ended December
      31,
      2007 and 2006, respectively. Of those options granted 73,333, 2,800,000 and
      1,000,000 were vested and Live Tissue Connect, Inc. recorded $146,345,
      $1,588,478 and $82,498 in stock based compensation.




**Jan-08****Jun-07**
            
            **Jun-07**
            
            **Jun-08**
            
            **Jan-08**Stock price
            
            $
            0.72
            
            $
            0.72
            
            $
            2.03
            
            $
            2.03Strike
                price
            
            $
            0.24
            
            $
            0.20
            
            $
            0.20
            
            $
            0.24Expected
                lives (years)
            
            
            10.00
            
            
            10.00
            
            
            10.00
            
            
            10.00Annualized
                volatility
            
            
            15.85
            %
            
            15.85
            %
            
            15.85
            %
            
            15.85
            %Discount
                rate
            
            
            3.00
            %
            
            3.00
            %
            
            3.00
            %
            
            3.00
            %Annual
                rate of quarterly dividends
            
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %
            
            0.00
            %Call
                option value
            
            $
            0.5419
            
            $
            0.5715
            
            $
            1.8815
            
            $
            1.8518




28





**CSMG
      TECHNOLOGIES, INC. AND SUBSIDIARIES**


**(FORMERLY
      CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**


**(A
      DEVELOPMENT STAGE COMPANY)**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**


**JUNE
      30, 2008 AND 2007 (UNAUDITED)**





**NOTE
              9-**
            **STOCKHOLDERS’
                EQUITY (DEFICIT)****(CONTINUED)**




***Warrants***




The
      Company has issued the following warrants as of June 30, 2008:




**Exercise**
            
            **Date****Warrants**
            
            **Price**
            
            **Issued**
            
            **Term**180,000
            
            $
            0.40
            
            5/15/2006
            
            7.5
                years360,000
            
            $
            0.40
                - $0.75
            
            11/1/2006
            
            7
                years290,941
            
            $
            0.57
            
            5/18/2007
            
            7
                years830,941







The
      290,941 Warrants issued in May 2007 were valued utilizing the Black –
Scholes method as follows:


Stock
                  Price
              
              $
              .74Strike
                  Price
              
              $
              .57Expected
                  Life of Warrant
              
              
              7
                  yrs.Annualized
                  Volatility
              
              
              100.61
              %Discount
                  Rate
              
              
              4.50
              %Annual
                  Rate of Quarterly Dividends
              
              
              NoneCall
                  Option Value
              
              $
              .6396




**NOTE
              10-**
            **COMMITMENTS**




**Rental –
      CSMG - Texas**




The
      Company leases office space at its corporate headquarters in Corpus Christi,
      Texas under an operating lease that has initial or remaining non-cancelable
      lease terms and expires in March 2013. The following presents the approximate
      future minimum lease payments required under this lease:




**For the Periods Ended****June 30,**2009
            
            $
            59,9942010
            
            
            62,3942011
            
            
            64,8902012
            
            
            67,4852013
            
            
            52,117$
            306,880




29




**CSMG
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**




**NOTE
              10-**
            **COMMITMENTS****(CONTINUED)**




**Rental –
      CSMG - Texas** **(Continued)**




In
      accordance with this lease, the Company paid a security deposit in the amount
      of
      $4,950 in March 2008 (lease commencement) and this amount is included in the
      condensed consolidated balance sheets as “Deposits and other assets.” The office
      space
      is not ready for the Company to move into as of July 31, 2008.




**Rental
      – LTC - California**




The
      Company leases office space for its majority owned subsidiary in Goleta,
      California under an operating lease that has initial or remaining non-cancelable
      lease terms and expires in February 2010. The following presents the approximate
      future minimum lease payments required under this lease:




**For the Periods Ended****June 30,**2009
            
            $
            49,3922010
            
            
            35,280$
            84,672




In
      accordance with this lease, the Company paid a security deposit in the amount
      of
      $30,429 in February 2008 (lease commencement) and this amount is included in
      the
      condensed consolidated balance sheets as “Deposits
      and other
      assets.”




Rent
      expense for the six months ended June 30, 2008 and 2007 were $32,068 and $7,608,
      respectively and are included in the condensed consolidated statements of
      operations under general and administrative expenses.




**NOTE
              11-**
            **PROVISION
                FOR INCOME TAXES**




Deferred
      income taxes will be determined using the liability method for the temporary
      differences between the financial reporting basis and income tax basis of the
      Company’s assets and liabilities. Deferred income taxes are measured based on
      the tax rates expected to be in effect when the temporary differences are
      included in the Company’s tax return. Deferred tax assets and liabilities are
      recognized based on anticipated future tax consequences attributable to
      differences between financial statement carrying amounts of assets and
      liabilities and their respective tax bases.


30




**CSMG
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
          CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
          DEVELOPMENT STAGE COMPANY)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2008 AND 2007 (UNAUDITED)**


**NOTE
              11-**
            **PROVISION
                FOR INCOME TAXES****(CONTINUED)**




At
      June
      30, 2008, deferred tax assets consist of the following:





Net
                operating losses
            
            $
            7,739,787Valuation
                allowance
            
            
            (7,739,787
            )$
            -




At
      June
      30, 2008, the Company had net operating loss carryforward in the amount of
      $22,113,677 available to offset future taxable income through 2028. The Company
      established valuation allowances equal to the full amount of the deferred tax
      assets due to the uncertainty of the utilization of the operating losses in
      future periods.




A
      reconciliation of the Company’s effective tax rate as a percentage of income
      before taxes and federal statutory rate for the six months ended June 30, 2008
      and 2007 is summarized below.




2008
            
            2007Federal
                statutory rate
            
            
            (35.0
            )%
            
            (35.0
            )%State
                income taxes, net of federal benefits
            
            
            0.0
            
            
            0.0Valuation
                allowance
            
            
            35
            
            
            35.00
            %
            
            0
            %




**NOTE
              12-**
            **LITIGATION**




Banco
      Panamericano v.  Consortium Service Management Group. Inc. and CSMG Gastech
      LLC , 
      Case No.  1:07-cv-00015 now pending in the Northern District of Illinois
      District Court as Case No. 06 C 7195.  Plaintiff claims damages in the
      amount of $514,920 as of February 9, 2005, together with interest and costs,
      arising out of a disputed promissory note bringing the total claim to
      $1,013,648.  The Company has answered setting forth several affirmative
      defenses and counterclaims focused on the affiliation of the Plaintiff with
      a
      customer of the Company and based on misrepresentation.  Discovery has been
      completed and Plaintiff has submitted a contested motion for summary judgment
      that is under consideration by the Court. A trial date of December 10, 2007,
      has
      been continued pending the outcome of this motion.


31




**CSMG
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
          CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
          DEVELOPMENT STAGE COMPANY)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2008 AND 2007 (UNAUDITED)**


**NOTE
              12-**
            **LITIGATION****(CONTINUED)**




Nature
      Coast Collections, Inc. v.  Consortium Service Management Group, Inc.,
      Donald S.  Robbins and Gordon W.  Allison ,
      Case
      No. 2:06-cv-273 originally pending in the Southern District of Texas
      District Court and recently ordered transferred to the Northern District of
      Illinois.  Plaintiff claims damages of $630,000, with interest and costs,
      arising out of a series of disputed promissory notes bringing the total claim
      over $900,000 and under $1,000,000. The Company has answered setting forth
      several affirmative defenses and counterclaims focused on the affiliation of
      the
      Plaintiff with an offshore affiliate of a customer of the Company and based
      on
      misrepresentation.  Discovery has been completed and the Company has filed
      a motion for summary judgment with respect to the Plaintiff’s claims, the
      briefing of which by the parties has yet to be fully completed. No trial date
      has been set.





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





CSMG
      Technologies, Inc. v.  Gordon W.  Allison ,
      Case
      No. 4:07-cv-00715 in the Southern District of Texas District Court. In
      Gordon Allison’s answer to the Company’s complaint seeking unspecified damages
      in connection with claims based upon fraudulent statements, breach of fiduciary
      duty and promissory estoppel with respect to investments in projects Gordon
      Allison involved the Company, Allison filed a counterclaim seeking damages
      of
      approximately $328,041 principal and interest for amounts allegedly due under
      the terms of a November 5, 2003 promissory note issued to him by the Company,
      unpaid salary of $150,000, unspecified payment for services rendered,
      reimbursement of expenses estimated at $23,000 and punitive damages in an
      unspecified amount. The litigation is in the discovery stage, and the Company
      believes the counterclaim is without merit. The Company is vigorously defending
      the counterclaim.


32




**CSMG
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
          CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
          DEVELOPMENT STAGE COMPANY)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2008 AND 2007 (UNAUDITED)**


**NOTE13-**
            **RESTATEMENT
                OF PRIOR FINANCIAL
                STATEMENTS**




The
      Company has restated its consolidated financial statements for the years ended
      December 31, 2007 and 2006 to account for the correction of an error related
      to
      an adjustment made to record the value of the granting of stock options by
      Live
      Tissue Connect, Inc. The adjustments increased the net loss and deficits
      accumulated during the development stage in the amounts of $1,976,902 and
      $82,498 for the years ended December 31, 2007 and 2006, respectively. In
      addition, additional paid in capital increased $1,588,478 and $82,498 at
      December 31, 2007 and 2006. The net loss per share for the year ended December
      31, 2007 increased ($.05) from ($.20) to ($.25). The net loss per share for
      the
      year ended December 31, 2006 increased ($.01) from ($.09) to
      ($.10).





The
      following charts reflect the changes of the individual line items changed in
      the
      consolidated financial statements.





**December
                31, 2006**Net
                loss prior to restatement
            
            $
            (3,038,041
            )(1)
            
            
            (82,498
            )Net
                loss after restatement
            
            $
            (3,120,539
            )Deficits
                accumualted during the development stage - prior to
                restatement
            
            $
            -(2)
                Represents reclass from Accumulated (deficit)
            
            
            (3,038,040
            )(1)
            
            
            (82,498
            )Deficits
                accumualted during the development stage - after restatement NOTE
                prior
                auditor had a $1 difference
            
            $
            (3,120,538
            )Loss
                per share - prior to restatement
            
            $
            (0.09
            )(1)
            
            
            (0.01
            )Loss
                per share - after restatement
            
            $
            (0.10
            )




(1)
      Reflects correction of an error related to the value attributable to the
      1,000,000 options vested


(2)
      Accumulated deficit previously was $16,550,813, restated to $13,512,773 (change
      of $3,038,040)


33




**CSMG
          TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
          CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
          DEVELOPMENT STAGE COMPANY)**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
          30, 2008 AND 2007 (UNAUDITED)**


**NOTE
              13-**
            **RESTATEMENT
                OF PRIOR FINANCIAL STATEMENTS****(CONTINUED)**




**December
                31, 2006****Previously**
            
            
            
            
            
            **Cumulative****Reported**
            
            **Restated**
            
            **Change**
            
            **Column*****Statement
                of Operations***General
                and administrative
            
            
            2,606,143
            
            
            2,263,470
            
            
            342,673
            
            
            342,673Depreciation
                expense
            
            
            -
            
            
            384
            
            
            (384
            )
            
            (384
            )Interest
                income
            
            
            (10,903
            )
            
            -
            
            
            (10,903
            )
            
            (10,903
            )Interest
                expense
            
            
            -
            
            
            413,884
            
            
            (413,884
            )
            
            (413,884
            )Net
                loss
            
            
            (3,038,041
            )
            
            (3,120,539
            )
            
            (82,498
            )
            
            (82,498
            )***Balance
                Sheet***Additional
                paid-in capital
            
            
            9,922,095
            
            
            10,004,593
            
            
            82,498Accumulated
                deficit
            
            
            (16,550,813
            )
            
            (13,512,773
            )
            
            3,038,040Deficits
                accumulated during the development stage ($1 difference)
            
            
            -
            
            
            (3,120,539
            )
            
            (3,120,539
            )***Statement
                of Changes in Stockholders' (Deficit)***Additional
                paid-in capital
            
            
            9,922,095
            
            
            10,004,593
            
            
            82,498Net
                loss for the period
            
            
            (3,038,041
            )
            
            (3,120,539
            )
            
            (82,498
            )***Statement
                of Cash Flow***Net
                loss
            
            
            (3,038,041
            )
            
            (3,120,539
            )
            
            (82,498
            )
            
            (82,498
            )Stock
                based compensation
            
            
            -
            
            
            82,498
            
            
            82,498
            
            
            82,498




34




**CSMG
        TECHNOLOGIES, INC. AND SUBSIDIARIES**
 **(FORMERLY
        CONSORTIUM SERVICE MANAGEMENT GROUP, INC.)**
 **(A
        DEVELOPMENT STAGE COMPANY)**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)**
 **JUNE
        30, 2008 AND 2007 (UNAUDITED)**


**NOTE
              13-**
            **RESTATEMENT
                OF PRIOR FINANCIAL STATEMENTS****(CONTINUED)**




**December
                31, 2007**Net
                loss prior to restatement
            
            $
            (7,074,364
            )(2)
            
            
            (388,424
            )(1)
            
            
            (1,588,478
            )Net
                loss after restatement
            
            $
            (9,051,266
            )Deficits
                accumualted during the development stage - prior to
                restatement
            
            $
            (9,893,176
            )(1)
                and (2)
            
            
            (1,976,902
            )Deficits
                accumualted during the development stage - after
                restatement
            
            $
            (11,870,078
            )Loss
                per share - prior to restatement
            
            $
            (0.20
            )(1)
            
            
            (0.05
            )Loss
                per share - after restatement
            
            $
            (0.25
            )





(1)
      Reflects correction of an error related to the value attributable to the
      1,000,000 options vested in
      2006
      and the 2,800,000 options vested in 2007


(2)
      Adjustment due to reversal of amount posted for losses of subsidiarys' minority
      interest


35





**NOTE
              14-**
            **SUBSEQUENT
                EVENTS**




On
      July
      30, 2008, Live Tissue Connect, Inc. received US FDA 510K clearance for its
      VAD.400 electrosurgery generator and two sealing instruments one curved and
      one
      straight for open surgery.




Through
      July 31, 2008 Empire Jesup-Lamont has raised a total of $680,000 in the
      preferred stock offering.





On
      July
      24, 2008 The Company has entered into a 3 year non-recourse collateralized
      loan
      agreement with Angel Trust to loan the Company a net 54% on the date of
      valuation of 600,000 shares of the Company’s common stock. The note carries an
      annual interest rate of 7% paid quarterly and principal payment upon note
      maturity. This is a related party transaction.





On
      July
      31, 2008, the Company received comments from the SEC regarding our Form 10-K/A
      for the year ended December 31, 2007 and Form 10-Q for the period ended March
      31, 2008. The Company is in the process of responding to the comments but were
      unable to complete the response by the filing of there Form 10-Q for the period
      ended June 30, 2008.


36




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




*The
      following discussion should be read in conjunction with the Financial Statements
      and the notes thereto that appear in Item 1 of this Quarterly Report on Form
      10-Q, as well as the information provided in our Annual Report on Form 10-K
      for
      our fiscal year ended December 31, 2007.*




**Overview**




The
      following is a discussion of: (i) our results of operations and financial
      condition for the six months ended June 30, 2008 versus June 30, 2007; (ii)
      our
      liquidity and capital resources; and (iii) our critical accounting policies.
      CSMG Technologies Inc., formerly,
      Consortium Service Management Group, Inc., a
      Texas
      corporation (“we”, “us” or the “Company”), was incorporated on November 17,
      1992. On January 18, 2007, we changed our name to CSMG Technologies, Inc. and
      increased our total number of authorized shares to 90,000,000,
      which includes 80,000,000 authorized shares of common stock and 10,000,000
      shares of undesignated preferred stock .




The
      Company is a technology management company. The technologies involve live tissue
      bonding and CO2 (carbon dioxide) separation of landfill gas. Although the carbon
      dioxide separation of landfill gas component had not been an active service
      since 2005, in June 2008, the Company acquired Carbon Capture Technologies,
      Inc.
      a company that owns the world wide rights to a CO2 separation technology that
      may be used for stack gas emissions that was developed at the University of
      Ottawa, Canada.




The
      live
      tissue bonding operations are through Live Tissue Connect, Inc., a subsidiary
      that is owned 86% by the Company. The live tissue bonding technology focuses
      on
      bonding living soft biological tissue used in surgical procedures which
      eliminates the need for sutures, staples, sealants or glues. The Company has
      an
      agreement with the E.O. Paton Institute of Electrical Welding of the Ukraine
      National Academy of Sciences (the “Paton Institute”) and International
      Association of Welding (the “IAW”) and owns the technology including the
      worldwide rights of licensing, patenting, manufacturing, development and
      distribution of this technology, except
      in
      the former Soviet Republics that are current members of the Commonwealth of
      Independent States (the “CIS”) where the IAW and Paton
      Institute have
      exclusive rights .
      To
      date, we have 31 issued or pending patents worldwide relating to the live tissue
      bonding equipment. In addition, in June 2007, the Company filed a 510(K)
      submission with the U.S. Food and Drug Administration for the duct and vessel
      sealer and two instruments, and received notification on July 30, 2008 that
      the
      510(K) submission was cleared by the U.S. Food and Drug Administration. In
      December 2007, Stellartech Research Corporation, with whom we have contracted
      to
      manufacture the electrosurgery generator, obtained the European Conformité
Européne (“CE”) Mark on the electrosurgery generator .
      In
      February 2008, the Company’s majority owned subsidiary, Live Tissue Connect,
      Inc. opened an office in Goleta, California, hired a worldwide sales manager,
      software engineer, and three instrument engineers. In June 2008, we entered
      into
      a contract with the IAW for continued research and development of new procedures *as
      described in note 1 of the financial section* .




In
      May
      2008, Live Tissue Connect, Inc. entered into a development agreement with a
      major multi-national medical device company to jointly develop a prototype
      “bread board” proof of concept level working instrument, RF generator and
      software system that can perform meniscus-to-meniscus welding (“M-M Weld”) where
      each item is a “product”. The agreement is for a one-year period. *See
      note 1 and 3 for financial details.*




In
      June
      2008 we acquired 100% ownership of Carbon Capture Technologies, Inc., a wholly
      owned subsidiary of UTEK, in a stock transaction.  Carbon
      Capture Technologies, Inc. holds a worldwide exclusive license to a composition
      and method for use of a novel Carbon Dioxide (CO 2 )
      adsorbent. Researchers at the University of Ottawa have developed recyclable
      CO 2 adsorbents based on surface modified nanoporous silicas. The materials show
      high
      adsorption capacity that is both fast and reversible, allowing it to be reused
      repeatedly in a high throughput periodic cyclic adsorption process. The
      adsorbents can be used in both wet and dry environments, potentially eliminating
      significant engineering challenges. The potential uses for the technology
      include capturing the bulk of C0 2 emissions from coal-fired power plants in order that these greenhouse gasses
      could be sequestered and thus reduce the carbon footprint of such facilities,
      as
      well as surgical and mine rescue applications. *See
      note 1 for financial details.*


37




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




The
      carbon dioxide separator equipment has been installed at the Chastang landfill
      in Mobile, Alabama since 2002, which landfill is owned by the city of Mobile
      but
      operated by Waste Management Inc. and Transamerican Waste Industries Inc. An
      agreement between Transamerican Waste Industries Inc. and Resource Technology
      Corporation (RTC) gave RTC the sole and exclusive right to collect, extract
      and
      remove landfill gas from the property. At this time, RTC contracted with the
      Company to extract the methane gas. Accordingly, the Company installed the
      carbon dioxide separator at the landfill in 2002 and 2003. Waste Management
      Inc.
      asserted that the carbon dioxide equipment produced methane gas that failed
      to
      meet Mobile Gas quality specifications. As a result and as noted in Note 9,
      Litigation, a legal dispute ensued as well as RTC filing bankruptcy.




On
      February 14, 2006, we signed a contract with DuPont to provide up to 500,000
      MMbtu commercial quality gas to their plant outside Mobile, Alabama. There
      is no
      requirement in this contract for gas quality specifications, however, we believe
      that based on current raw gas analysis, the gas produced will exceed current
      specifications. Because of the inability for the landfill to produce enough
      raw
      gas the equipment has been removed from the site and put in temporary
      storage.




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




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




Additionally
      we will be focusing on the CCTI technology for processing utility coal fired
      stack gas.




**Results
      of Operations and Financial Condition**




**Six
      Months Ended June 30, 2008 versus June 30, 2007**




*Total
      Operating Revenues*




We
      recognized $0 in revenue during the three months ended June 30, 2008 and for
      the
      three months ended June 30, 2007. Revenues are anticipated to commence upon
      FDA
      approval as well as global acceptance of the products that are being
      manufactured.




*Total
      Operating Expenses*




Total
      operating expenses for the six months ended June 30, 2008 were $3,292,176,
      as
      compared to $2,233,991 for the six months June 30, 2007. This represented an
      increase of $1,058,185, or approximately 33%. Operating expenses included
      research and development costs, payroll, professional fees, and related
      expenses, rent expense, and other general and administrative expenses. The
      increase from 2007 to 2008 is a result of reduced financing fees, commercial
      development of the VAD.400 electrosurgery generator and the duct and vessel
      sealing instruments, hiring a staff of design engineers, accounting, executives,
      research and development, and charges for stock issued for services and stock
      issued for interest in the second quarter of 2008.


38




We
      depreciate fixed assets. This resulted in an expense of $9,645 and $322 for
      the
      six months ended June 30, 2008 and 2007, respectively. We determine the fair
      value of the undiscounted cash flows annually, and sooner if circumstances
      change and determination is required, to value any impairment on our intangible
      assets and long-lived assets. As of June 30, 2008 and 2007, we determined that
      there was no impairment charge.




*Other
      Income (Expense)*




Included
      in other income (expense) is interest expense, net of interest income, of
      $(1,014,370) and $(1,272,601) for the six months ended June 30, 2008 and 2007,
      respectively. Included in the 2008 interest expense is $103,060 in discounts
      on
      the conversion of notes payable to common stock.




*Net
      Income (Loss)*




We
      reported a net (loss) from operations of $(4,306,546), or $(0.11) per share
      on a
      basic and diluted basis, for the six months ended June 30, 2008 versus
      $(3,618,664), or $(0.10) per share on a basic and diluted basis, for the six
      months ended June 30, 2007. The increase in the net loss is attributable to
      the
      expanded research and development efforts in Kiev, the U.S. operations of Live
      Tissue Connect, establishing offices for Live Tissue Connect in Goleta,
      California, and commercial development of the VAD.400 electrionsurgical
      generator and the duct and vessel sealing instruments, as well as the interest
      expense.




*Provision
      for Income Taxes*




There
      was
      no provision for income taxes for the six months ended June 30, 2008 and 2007,
      respectively. There was no provision due to the carry forward of approximately
      $22,113,677 of net operating losses as of June 30, 2008 that we reserved in
      valuation allowances against this deferred tax asset.




**Liquidity
      and Capital Resources**




During
      the six months ended June 30, 2008, the balance in cash and cash equivalents
      decreased by $866,518 compared to a decrease of $868,217 for the six months
      ended June 30, 2007. This decrease is primarily attributable to cash used in
      operating activities, which was attributable to a net loss from operations
      of
      $(4,306,546) for the six months ended June 30, 2008 partially offset by the
      discount on conversion of notes payable of $279,681 and an increase in accounts
      payable and accrued expenses of $1,603,644. This compares to a decrease in
      cash
      from operating activities for the six months ended June 30, 2007 of
      $(1,438,737), which was attributable to a net loss from operations of
      $(3,618,664). Net cash from financing activities totaled $1,528,204 and $292,020
      for the six months ended June 30 2008 and 2007, respectively.




As
      of
      June 30, 2008, we had current assets of $230,916, consisting of $137,858 in
      cash
      and $93,058 in inventory.




As
      of
      June 30, 2008, we had $12,545,651 in current liabilities, primarily consisting
      of $1,604,606 in accounts payable and accrued expenses, $2,289,862 in accrued
      interest payable, $6,994,000 of convertible notes payable and $1,437,604 of
      notes payable.




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


39




**Critical
      Accounting Policies**




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




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




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




*Principles
      of Consolidation*




The
      condensed consolidated financial statements include those of us and our
      majority-owned subsidiary. All intercompany accounts and transactions have
      been
      eliminated in consolidation. Minority interests have been reflected in the
      consolidated financial statements for the percentage of the subsidiary not
      owned
      by us.




*Research
      and Development*




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




*Revenue
      Recognition*




We
      have
      not generated revenue in many years. We anticipate that we will record revenue
      in accordance with Staff Accounting Bulletin 104. The criteria for recognition
      are as follows:




1)
            Persuasive
                evidence of an arrangement exists;




2)
            Delivery
                has occurred or services have been
                rendered;




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




4)
            Collectability
                is reasonably assured.




*Comprehensive
      Income*




We
      adopted Statement of Financial Accounting Standards No, 130, “Reporting
      Comprehensive Income,” (SFAS No. 130). SFAS No. 130 requires the reporting of
      comprehensive income in addition to net income from operations.




Comprehensive
      income is a more inclusive financial reporting methodology that includes
      disclosure of information that historically has not been recognized in the
      calculation of net income.




*Currency
      Risk*




We
      transact business in currencies other than the U.S. Dollar. All currency
      transactions occur in the spot foreign exchange market, and we do not use
      currency forward contracts, currency options, currency borrowings interest
      rate
      swaps or any other derivative hedging strategy at this point in
      time.


40




We
      have
      determined that based on the cash flow, sales price, sales market, expense,
      financing, and inter-company transactions and arrangements indicators set forth
      in FASB 52, Foreign Currency Translation, that our functional currency is that
      of the U.S. Dollar.




*Inventory*




Inventory
      is recorded at the lower of cost and net realizable value and is accounted
      for
      on the first-in first-


out
      basis
      (FIFO).





*Stock-Based
      Compensation*




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




On
      January 1, 2006, we adopted the provisions of FAS No. 123R “Share-Based Payment”
(“FAS 123R”) which requires recognition of stock-based compensation expense for
      all share-based payments based on fair value. Prior to January 1, 2006, we
      measured compensation expense for all of our share-based compensation using
      the
      intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion
      No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related
      interpretations. The notes to our condensed consolidated financial statements
      include pro forma disclosure amounts in accordance with FAS No. 148, “Accounting
      for Stock-Based Compensation – Transition and Disclosure – an Amendment of FASB
      Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No.
      123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to
      its stock-based compensation.




We
      have
      elected to use the modified–prospective approach method. Under that transition
      method, the calculated expense in 2006 is equivalent to compensation expense
      for
      all awards granted prior to, but not yet vested as of January 1, 2006, based
      on
      the grant-date fair values estimated in accordance with the original provisions
      of FAS 123. Stock-based compensation expense for all awards granted after
      January 1, 2006 is based on the grant-date fair values estimated in accordance
      with the provisions of FAS 123R. We recognize these compensation costs, net
      of
      an estimated forfeiture rate, on a pro rata basis over the requisite service
      period of each vesting tranche of each award. We consider voluntary termination
      behavior as well as trends of actual option forfeitures when estimating the
      forfeiture rate.




We
      measure compensation expense for non-employee stock-based compensation under
      the
      Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF)
      Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other
      Than Employees for Acquiring, or in Conjunction with Selling, Goods or
      Services”. The fair value of the option issued is used to measure the
      transaction, as this is more reliable than the fair value of the services
      received. The fair value is measured at the value of our common stock on the
      date that the commitment for performance by the counterparty has been reached
      or
      the counterparty’s performance is complete. The fair value of the equity
      instrument is charged directly to compensation expense and additional paid-in
      capital.




Our
      warrants issued in May 2007 were not stock based compensation and were recorded
      in accordance with EITF 96-18. We recognized $186,092 in expense for the year
      ended December 31, 2007.




Our
      options issued in 2007 were valued in accordance with FAS 123R. We recognized
      $96,322 in expense for the year ended December 31, 2007. The options issued
      in
      Live Tissue Connect, Inc. to the board were valued at $1,588,478 and $82,498
      for
      the years ended December 31, 2007 and 2006, respectively, and $99,307 for the
      three months ended March 31, 2008 and are considered stock based compensation
      and reflected as such in the condensed consolidated statements of
      operations.


41




*Segment
      Reporting*




We
      follow
      the provisions of SFAS 131, “Disclosures about Segments of an Enterprise and
      Related Information.” This standard requires that companies disclose operating
      segments based on the manner in which management disaggregates the company
      in
      making internal operating decisions. We believe that there is only one operating
      segment at this time, as our CO2 separator business is inactive.




*Fair
      Value of Financial Instruments*




The
      carrying amounts reported in the condensed consolidated balance sheets for
      cash
      and cash equivalents, and accounts payable approximate fair value because of
      the
      immediate or short-term maturity of these financial instruments. For the notes
      payable, the carrying amount reported is based upon the incremental borrowing
      rates otherwise available to the Company for similar borrowings.




*Income
      Taxes*




Under
      Financial Accounting Standards Board Statement No. 109, “Accounting for Income
      Taxes,” the liability method is used in accounting for income taxes. Under this
      method, deferred tax assets and liabilities are determined based on differences
      between financial reporting and tax bases of assets and liabilities, and are
      measured using the enacted tax rates and laws that will be in effect when the
      differences are expected to reverse.




*Uncertainty
      in Income Taxes*




In
      July
      2006, the FASB issued Interpretation No. 48 (FIN No. 48), “Accounting for
      Uncertainty in Income Taxes.” This interpretation requires recognition and
      measurement of uncertain income tax positions using a “more-likely-than-not”
approach. FIN No. 48 is effective for fiscal years beginning after December
      15,
      2006. Management has adopted FIN 48 for 2007, and they evaluate their tax
      positions on an annual basis, and has determined that as of March 31, 2008,
      no
      additional accrual for income taxes is necessary.




*(Loss)
      Per Share of Common Stock*




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




All
      options and warrants to purchase shares of common stock and convertible notes
      were not included as they would be considered anti-dilutive as we had a loss
      for
      both periods.




**Recent
      Issued Accounting Standards**




In
      September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosure about fair
      value measurements. This statement is effective for financial statements issued
      for fiscal years beginning after November 15, 2007. Early adoption is
      encouraged. The adoption of SFAS 157 is not expected to have a material impact
      on the condensed consolidated financial statements.




In
      February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
      Assets and Financial Liabilities – Including an amendment of FASB Statement No.
      115”, (“FAS 159”) which permits entities to choose to measure many financial
      instruments and certain other items at fair value at specified election dates.
      A
      business entity is required to report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. This statement is expected to expand the use of fair value
      measurement. FAS 159 is effective for financial statements issued for fiscal
      years beginning after November 15, 2007, and interim periods within those fiscal
      years.




In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements, an amendment of Accounting Research Bulletin
      No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for
      ownership interests in subsidiaries held by parties other than the parent,
      changes in a parent’s ownership of a noncontrolling interest, calculation and
      disclosure of the consolidated net income attributable to the parent and the
      noncontrolling interest, changes in a parent’s ownership interest while the
      parent retains its controlling financial interest and fair value measurement
      of
      any retained noncontrolling equity investment. SFAS 160 is effective for
      financial statements issued for fiscal years beginning after December 15, 2008,
      and interim periods within those fiscal years. Early adoption is prohibited.
      Management is determining the impact that the adoption of SFAS No. 160 will
      have
      on our condensed consolidated financial position, results of operations or
      cash
      flows.


42




In
      December 2007, the FASB issued SFAS 141R, Business Combinations (“SFAS 141R”),
      which replaces FASB SFAS 141, Business Combinations. This Statement retains
      the
      fundamental requirements in SFAS 141 that the acquisition method of accounting
      be used for all business combinations and for an acquirer to be identified
      for
      each business combination. SFAS 141R defines the acquirer as the entity that
      obtains control of one or more businesses in the business combination and
      establishes the acquisition date as the date that the acquirer achieves control.
      SFAS 141R will require an entity to record separately from the business
      combination the direct costs, where previously these costs were included in
      the
      total allocated cost of the acquisition. SFAS 141R will require an entity to
      recognize the assets acquired, liabilities assumed, and any non-controlling
      interest in the acquired at the acquisition date, at their fair values as of that
      date. This compares to the cost allocation method previously required by SFAS
      No. 141. SFAS 141R will require an entity to recognize as an asset or liability
      at fair value for certain contingencies, either contractual or non-contractual,
      if certain criteria are met. Finally, SFAS 141R will require an entity to
      recognize contingent consideration at the date of acquisition, based on the
      fair
      value at that date. This Statement will be effective for business combinations
      completed on or after the first annual reporting period beginning on or after
      December 15, 2008. Early adoption of this standard is not permitted and the
      standards are to be applied prospectively only. Upon adoption of this standard,
      there would be no impact to our results of operations and financial condition
      for acquisitions previously completed. The adoption of SFAS No. 141R is not
      expected to have a material effect on our condensed consolidated financial
      position, results of operations or cash flows.




In
      December 2007, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 110, “Use of a Simplified Method in Developing Expected Term of
      Share Options” (“SAB 110”). SAB 110 expenses the current view of the staff that
      it will accept a company’s election to use the simplified method discussed in
      Staff Accounting Bulletin No. 107, “Share Based Payment”, (“SAB 107”), for
      estimating the expected term of “plain vanilla” share options regardless of
      whether the company has sufficient information to make more refined estimates.
      SAB 110 became effective for us on January 1, 2008. The adoption of SAB 110
      is
      not expected to have a material impact on our financial position.




In
      March
      2008, the FASB issued SFAS No. 161, “ Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133.” Constituents have expressed concerns that the existing
      disclosure requirements in FASB Statement No. 133, Accounting for Derivative
      Instruments and Hedging Activities, do not provide adequate information about
      how derivative and hedging activities affect an entity’s financial position,
      financial performance, and cash flows. SFAS No. 161 requires enhanced
      disclosures about an entity’s derivative and hedging activities and thereby
      improves the transparency of financial reporting. This Statement is effective
      for financial statements issued for fiscal years and interim periods beginning
      after November 15, 2008, with early application encouraged. This Statement
      encourages, but does not require, comparative disclosures for earlier periods
      at
      initial adoption. The adoption of FASB 161 is not expected to have a material
      impact on the Company’s condensed consolidated financial
      position.




In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles.” The
      current GAAP hierarchy, as set forth in the American Institute of Certified
      Public Accountants (AICPA) Statement on Auditing Standards No. 69, The Meaning
      of Present Fairly in Conformity With Generally Accepted Accounting Principles,
      has been criticized because (1) it is directed to the auditor rather than the
      entity, (2) it is complex, and (3) it ranks FASB Statements of Financial
      Accounting Concepts. The FASB believes that the GAAP hierarchy should be
      directed to entities because it is the entity (not its auditor) that is
      responsible for selecting accounting principles for financial statements that
      are presented in conformity with GAAP. Accordingly, the FASB concluded that
      the
      GAAP hierarchy should reside in the accounting literature established by the
      FASB and is issuing this Statement to achieve that result. This Statement is
      effective 60 days following the SEC’s approval of the Public Company Accounting
      Oversight Board amendments to AU Section 411, The Meaning of Present Fairly
      in
      Conformity With Generally Accepted Accounting Principles. The
      adoption of FASB 162 is not expected to have a material impact on the Company’s
      condensed consolidated financial position.




In
      May
      2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
      Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity
      exists in practice in accounting for financial guarantee insurance contracts
      by
      insurance enterprises under FASB Statement No. 60, Accounting and Reporting
      by
      Insurance Enterprises. This results in inconsistencies in the recognition and
      measurement of claim liabilities. This
      Statement requires that an insurance enterprise recognize a claim liability
      prior to an event of default (insured event) when there is evidence that credit
      deterioration has occurred in an insured financial obligation.  This
      Statement requires expanded disclosures about financial guarantee insurance
      contracts. The accounting and disclosure requirements of the Statement will
      improve the quality of information provided to users of financial
      statements. The
      adoption of FASB 163 is not expected to have a material impact on the Company’s
      condensed consolidated financial position.




**Item
          3.** **Quantitative
          and Qualitative Disclosures About Market Risk**




Not
      applicable.




**Item
          4T.** **Controls
          and Procedures**




**Evaluation
      of disclosure controls and procedures.**




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, has evaluated the effectiveness of our disclosure controls
      and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
      the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of
      March 31, 2008. Based on this evaluation, our Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      effective.




**Changes
      in internal control over financial reporting.**




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




43




**PART
      II**


**OTHER
      INFORMATION**




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




Banco
      Panamericano v. Consortium Service Management Group. Inc. and CSMG Gastech
      LLC ,
      Case
      No. 1:07-cv-00015 now pending in the Northern District of Illinois District
      Court as Case No. 06 C 7195.




We
      were
      sued on February 9, 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 we entered into a short-term promissory note dated February 15, 2002 (the
      “Note”) by which we borrowed from Banco Panamericano $203,800 at 12% interest,
      the Note being due April 1, 2002. The complaint alleged that the Note was
      secured by all of our equipment, inventory, accounts, general intangibles and
      other properties. The complaint alleged that the Note is in default and that
      we
      owe Banco Panamericano $514,920 as of February 9, 2005, together with accrued
      interest and costs.




In
      our
      answer to the complaint, we alleged as follows with regard to the allegations
      of
      Banco Panamericano:




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




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




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




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




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




We
      believe that we, 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. We filed
      a
      motion to have the proceeding referred to the United States Bankruptcy Court
      for
      the Northern District of Illinois where the bankruptcy proceeding of RTC is
      pending. The Federal District Court referred the proceeding to the United States
      Bankruptcy Court on December 6, 2005. On January 9, 2007, the Bankruptcy Court
      ruled that we did not have standing to remove the case to its jurisdiction
      and
      the case was removed from the Bankruptcy Court back to the Federal District
      Court for the Northern District of Illinois. We have filed an answer in the
      proceedings setting forth several affirmative defenses and counterclaims focused
      on the affiliation of the plaintiff with one of our customers and based on
      certain misrepresentations. Discovery has been completed and plaintiff has
      submitted a contested motion for summary judgment that is under consideration
      by
      the Court. A trial date of December 10, 2007, has been continued pending the
      outcome of this motion.


44




Nature
      Coast Collections, Inc. v. Consortium Service Management Group, Inc., Donald
      S.
      Robbins and Gordon W. Allison ,
      Case
      No. 2:06-cv-273 originally pending in the Federal District Court for the
      Southern District of Texas and recently ordered transferred to the Federal
      District Court for the Northern District of Illinois.




On
      June
      30, 2006, we were served with a complaint from Nature Coast Collections, Inc.
      in
      proceeding in the Federal District Court for the Southern District of Texas.
      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 us and Donald S. Robbins, our Chairman of the
      Board, President and Chief Executive Officer, and Gordon W. Allison, each as
      a
      guarantor. The amount claimed in the suit is the aggregate principal sum of
      $630,000, with interest, costs and attorney fees. We have answered the complaint
      and filed a counterclaim alleging, among other matters, that Nature Coast
      Collections, Inc. is an affiliate of the debtor in the bankruptcy proceeding
      in
      the Northern District of Illinois referred to above, RTC, and that we should
      be
      authorized to offset its losses caused by its contractual relationship with
      RTC
      against the claims of Nature Coast Collections, Inc. Our answer also asserted
      several affirmative defenses and counterclaims focused on the affiliation of
      the
      plaintiff with an offshore affiliate of one of our customers and based on
      certain misrepresentations. Discovery has been completed and the Company has
      filed a motion for summary judgment with respect to the Plaintiff’s claims, the
      briefing of which by the parties has yet to be fully completed. No trial date
      has been set.




CSMG
      Technologies, Inc. v. Gordon W. Allison ,
      Case
      No. 4:07-cv-00715 in the Southern District of Texas District Court.




We
      have
      filed a complaint against Gordon Allison, our former executive vice president,
      seeking unspecified damages in connection with claims based upon fraudulent
      statements, breach of fiduciary duty and promissory estoppel with respect to
      our
      investments in certain projects in which we were involved through actions of
      Mr.
      Allison. Mr. Allison has filed a counterclaim seeking damages of approximately
      $328,041 principal and interest for amounts allegedly due under the terms of
      a
      November 5, 2003 promissory note issued to him by us, unpaid salary of $150,000,
      unspecified payment for services rendered, reimbursement of expenses estimated
      at $23,000 and punitive damages in an unspecified amount. The litigation is
      in
      the discovery stage, and we believe the counterclaim is without merit and we
      are
      vigorously defending the counterclaim.




**Item
          1A.** **Risk
          Factors**




Not
      applicable.




**Item
          2.** **Unregistered
          Sales of Equity Securities and Use of Proceeds**




During
      the six months ended June 30, 2008, we made the following unregistered sales
      of
      our equity securities. All of the equity securities issued in unregistered
      sales
      were exempt from registration pursuant to Section 4(2) of the Securities Act
      of
      1933, as amended, on the basis that all purchasers were accredited
      investors.




On
      January 18, 2007, the Company increased the authorized shares of common stock
      to
      80,000,000.




As
      of
      June 30, 2008 and December 31, 2007, the Company had 39,919,375 and 38,018,544
      shares issued and outstanding.




For
      the
      six months ended June 30, 2008, the Company had issued the following
      stock:




-
      530,688
      shares issued in conversion of notes payable, accrued interest and discount
      on
      conversion in the amount of $331,680.




-
      819,150
      shares issued for cash in the amount of $740,400.


45




-
      51,155
      shares issued for conversion of warrants in the amount of $93,655 which were
      expensed in the six months ended June 30, 2008.




-
      114,916
      shares issued to a former owner of a subsidiary of the company for their
      investment of $60,000 plus interest that was accrued for $43,350 (total
      investment $103,350).




-
      13,902
      shares were issued for $17,099 for services.




-
      371,020
      shares were issued for the purchase of CCTI valued at $434,093.




**Item
          3.** **Defaults
          Upon Senior Securities**




None.




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




None.




**Item
          5.** **Other
          Information**




None.




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




31.1
            Certification
                of the Chief Executive Officer required by Rule 13a-14(a) or Rule
                15d-14(a)




31.2
            Certification
                of the Chief Financial Officer required by Rule 13a-14(a) or Rule
                15d-14(a)




32
            Certification
                of the Chief Executive Officer and the Chief Financial Officer required
                by
                Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
                1350


46


**SIGNATURES**




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




**CSMG
                Technologies, Inc.**Date:
                August 19, 2008
            By:
            /s/
                Donald S. RobbinsDonald
                S. RobbinsChief
                Executive OfficerDate:
                August 19, 2008
            By:
            /s/
                K. Bruce JonesK.
                Bruce JonesChief
                Financial Officer(Principal
                Financial andAccounting
                Officer)




47