FTS 10QSB/A 2006 Q2 Quarterly report (small business) (amended)

	FTS GROUP, INC.
	TABLE OF CONTENTS
PART I. FINACIAL INFORMATION		Page
Item 1. Financial Statements		1
Item 2. Management’s Discussion and analysis or Plan of Operation		19
Item 3. Controls and Procedures		27

PART II OTHER INFORMATION
Item 1. Legal Proceedings		28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3. Defaults of senior Securities		29
Item 4. Submission of Matters to a Vote of Security Holders		29
Item 5. Other Information		29
Item 6. Exhibits and Reports on Form 8-K		29

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Condensed Consolidated Financial Statements (Unaudited)	Page
Balance Sheet- June 30, 2006 and December 31, 2005	2
Statements of Operations- Three and six months ended June 30, 2006 and 2005	3
Statement of Cash Flows- Three and six months ended June 30, 2006 and 2005	4
Notes to Condensed Consolidated Financial Statements	5

FTS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 AND DECEMBER 31, 2005

Assets		2006			2005
		(restated)			(restated
Current assets:
Cash and cash equivalents	$	37,558		$	243,079
Restricted cash		500,000			560,000
Accounts receivable		128,583			12,201
Inventories		418,917			33,180
Prepaid expenses and current assets		102,307			474,683
Total current assets		1,187,365			1,323,143

Property and equipment, net of accumulated depreciation		358,767			208,210
Unamortized discount on convertible debt		315,231			380,690
Unamortized debt issuance costs		88,718			46,313
Investment in private entity		26,179			-
Goodwill		5,177,696			-
Deposits		17,182			16,139
Total assets	$	7,171,138		$	1,974,495

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expenses	$	248,470		$	468,185
Current portion of notes payable to related parties		2,389,586			80,850
Convertible debentures		1,238,321			782,961
Current installments of long-term debt-equipment loans		9,896			-
Total current liabilities		3,886,273			1,331,996

Fair value of derivative liabilities		2,506,816			1,849,366
Convertible debentures		-			430,088
Long-term debt to related parties, less current installments		1,500,000			-
Long-term debt equipment loans, less current installments		1,670			-
Total liabilities		7,894,759			3,611,450

Stockholders' equity:
10% Convertible preferred stock, Series A, $0.01 par value:
150,000 shares authorized; 0 shares issued and outstanding		-			-
Preferred stock, $0.01 par value, 4,850,000 undesignated
shares authorized, none issued		-			-
Convertible preferred stock, Series B, $0.01 par value:
1,000,000 Shares authorized, issued and outstanding at June 30,2006		10,000			-
Common stock, $.001 par value. Authorized 150,000,000 shares:
126,137,469 shares issued and outstanding at June 30, 2006,
102,098,756 shares issued and outstanding at December 31, 2005.		126,137			102,099
Additional paid-in capital		11,727,949			10,196,539
Accumulated deficit		(12,561,874	)		(11,935,593
		(697,788	)		(1,636,955
Deferred stock compensation		(25,833	)		-

Total stockholders' equity		(723,621	)		(1,636,955

Total liabilities and stockholders' equity	$	7,171,138		$	1,974,495

See accompanying notes to consolidated financial statements.		-

FTS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 AND 2005

		Three Months Ended June 30,						Six Months ended June 30,
		2006			2005			2006			2005
		(restated)			(restated)			(restated)			(restated)
REVENUES
Service Revenue-See World Satellites, Inc.	$	1,192,055		$	-		$	2,330,091		$	-
Product Retail Sales-FTS Wireless, Inc.		441,337			346,730			936,915			650,700
		1,633,392			346,730			3,267,006			650,700

COST OF GOODS SOLD
Service-See World Satellites, Inc.		124,255			-			333,463			-
Product-FTS Wireless, Inc.		348,255			259,868			722,529			395,386
		472,510			259,868			1,055,992			395,386

GROSS PROFIT
Service-See World Satellites, Inc.		1,067,800			-			1,996,628			-
Product-FTS Wireless, Inc.		93,082			86,862			214,386			255,314
		1,160,882			86,862			2,211,014			255,314

GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses		1,066,642			272,281			2,074,828			1,027,608
		1,066,642			272,281			2,074,828			1,027,608

INCOME (LOSS) FROM OPERATIONS		94,240			(185,419	)		136,186			(772,294

OTHER INCOME (EXPENSE)
Change in fair value of derivative liabilities		6,825,789			-			(652,875	)		-
Interest		(70,563	)		(5,636	)		(109,592	)		(189,748
		6,755,226			(5,636	)		(762,467	)		(189,748

NET INCOME (LOSS)	$	6,849,466		$	(191,055	)	$	(626,281	)	$	(962,042


PER SHARE INFORMATION:
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		105,776,228			56,311,628			107,195,939			52,020,779

Diluted		117,396,392			56,311,628			120,862,553			52,020,779


NET LOSS PER COMMON SHARE:
Basic	$	0.06			($0.00	)		($0.01	)		($0.02

Diluted
	$	0.06			($0.00	)	$	0.00			($0.02
See accompanying notes to consolidated financial statements.

FTS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2006 AND 2005

		2006			2005
		(restated)			(restated)
Cash flows from operating activities:
Net income (loss)	$	(626,281	)	$	(962,042
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization		193,914			18,076
Common shares issued for services		98,400			294,350
Amortization of debt discount		-			188,393
Amortization of deferred stock compensation		3,667			-
Change in fair value of derivative liabilities		652,875			-
(Increase) decrease in operating assets:
Accounts receivable		(30,624	)		(118,010
Inventories		(241,193	)		(29,877
Prepaid expenses		354,182			30,655
Other assets		(1,043	)		(1,000
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(326,475	)		98,101
Net cash used in operating activities		77,422			(481,354

Cash flows from investing activities:
Net assets 100% acquisition of See World Satellites, Inc.		(206,100	)		-
Investment in private entity		(26,179	)		-
Capital expenditures for property and equipment		(75,481	)		(107,537
Proceeds from funding restricted for investment in acquisition		(440,000	)		-
Release of restriction on funding proceeds for investment in acquisition		560,000			-
Payment to See World Satellites, Inc. acquisition		(500,000	)		-
Net cash used in investing activities		(687,760	)		(107,537

Cash flows from financing activities:
Proceeds from issuance of stock		413,964			844,460
Proceeds from convertible debentures		30,000			-
Proceeds from stock issued under equity line		-			325,078
Proceeds from note payable to Dutchess Advisors		-			500,000
Proceeds from notes payable related parties		635,002			-
Repayments of notes payable-truck loans		(9,087	)		-
Repayments of note payable to Dutchess Advisors		-			(861,022
Repayments of debenture loan		-			(26,876
Repayments of notes payable to individuals		-			(34,000
Repayment of loans from related parties		(665,062	)		(161,682
Net cash provided by financing activities		404,817			585,958

Net decrease in cash		(205,521	)		(2,933

Cash at beginning of year		243,079			7,949
Cash at end of year	$	37,558		$	5,016


Supplemental schedule of cash flow information:
Interest paid	$	4,524			93,133

Supplemental disclosure of non-cash investing and financing activities:
Stock issued in exchange for convertible debentures	$	-			51,016


Acquisition of See World Satellites, Inc.
Final negotiated purchase price of 100% of See World Satellites, Inc. stock	$	5,500,000
Amount financed through formal promissory note		(3,500,000	)
Paid in preferred stock of FTS Group, Inc.		(1,000,000	)
Due upon contact execution completion-restricted cash at 3/31/2006		(500,000	)
Cash paid for See World Satellites, Inc. acquisition	$	500,000

See accompanying notes to consolidated financial statements.

FTS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2006

(UNAUDITED)

(1) BASIS OF PRESENTATION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION, OWNERSHIP AND BUSINESS

FTS Group, Inc. (the "Company"), is a holding company incorporated under the laws of the State of Nevada. The Company is focused on developing, acquiring and investing-in cash-flow positive businesses and viable business ventures primarily those in the Internet, Wireless and Technology industries. Through its two wholly-owned subsidiaries See World Satellites, Inc. and FTS Wireless, Inc., the Company has acquired and developed a diversified wireless business engaged in the distribution of next generation wireless communications and entertainment products and services for businesses and consumers alike. The Company's wholly-owned subsidiary See World Satellites, Inc. is a leading distributor of satellite television systems and relating products and services for DISH Networks in the western Pennsylvania marketplace. The Company's wholly-owned subsidiary FTS Wireless, Inc. is an emerging retail wireless distributor operating in the gulf coast market of Florida.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: FTS Wireless, Inc and See World Satellites, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months period ended June 30, 2006 are not indicative of the results that may be expected for the year ending December 31, 2006.

As contemplated by the Securities and Exchange Commission (SEC) under Rules of Regulation S-B, the accompanying financial statements and related footnotes have been condensed and do not contain certain information that will be included in the Company's annual financial statements and footnotes thereto. For further information, refer to the Company's audited consolidated financial statements and related footnotes thereto included in the Company's annual report on Form 10-KSB/A for the year ended December 31, 2005.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all short-term debt securities with maturity of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE

Accounts receivable consist primarily of trade receivables, net of a valuation allowance for doubtful accounts.

INVENTORIES

Inventories are valued at the lower-of-cost or market on a first-in, first-out basis.

INVESTMENT SECURITIES

The Company accounts for its investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Management determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Debt securities for which the Company does not have the intent or ability to hold to maturity and equity securities not classified as trading securities are classified as available-for-sale. The cost of investments sold is determined on the specific identification or the first-in, first-out method. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings, and available-for-sale securities are also reported at fair value but unrealized gains and losses are shown in the caption "unrealized gains (losses) on shares available-for-sale" included in stockholders' equity. Management determines fair value of its investments based on quoted market prices at each balance sheet date.

PROPERTY, EQUIPMENT, AND DEPRECIATION

Property and equipment are recorded at cost less accumulated depreciation. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss included in the results of operations. Depreciation is computed over the estimated useful lives of the assets (3-20 years) using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Maintenance and repairs are charged to operations as incurred.

INTANGIBLE ASSETS

SFAS No. 142 eliminates the amortization of goodwill, and requires annual impairment testing of goodwill and introduces the concept of indefinite life intangible assets. The Company adopted SFAS No. 142 effective January 1, 2002. Goodwill and indefinite-lived intangible asset impairment is always assessed based upon a comparison of carrying value with fair value.

IMPAIRMENT OF LONG-LIVED ASSETS

Realization of long-lived assets, including goodwill, is periodically assessed by the management of the Company. Accordingly, in the event that facts and circumstances indicate that property and equipment, and intangible or other assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset's carrying amount to determine if a write-down to market value is necessary. In management's opinion, there was no impairment of such assets at June 30, 2006 or December 31, 2005.

REVENUE RECOGNITION

The Company recognizes revenue from the activation of new wireless customers and the sale of wireless handsets, airtime and accessories at the time of activation or sale.

Net revenues from wireless activations are recognized during the month the activation is performed. Allowances for charge-backs, returns, discounts and doubtful accounts are provided when sales are recorded. Shipping and handling costs are included in cost of sales.

Although the Company's post-paid activations are subject to possible charge-back of commissions if a customer deactivates service within the allowable 180-day period after signing the contract, they still recognize the activation in the period of the activation. The Company has set up a reserve for possible activation charge-backs. Based on SFAS No. 48, this is permitted if reliable estimates of the expected refunds can be made on a timely basis, the refunds are being made for a large pool of homogeneous items, there is sufficient company-specific historical basis upon which to estimate the refunds, and the amount of the commission specified in the agreement at the outset of the arrangement is fixed, other than the customer's right to request a refund.

The Company's wholly-owned subsidiary, See World Satellites, Inc. recognizes revenue when it makes a sale within the store, completes a retail satellite receiver installation at the customer's home and the customer signs a contract, or completes a retail service provider satellite receiver installation at the customer's home and signs a contract.

INCOME TAXES

The Company is a taxable entity and recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. A valuation allowance is used to reduce deferred tax assets to the amount that is more likely than not to be realized.

EARNINGS PER SHARE

The basic net earnings (loss) per common share is computed by dividing the net earnings (loss) by the weighted average number of shares outstanding during a period. Diluted net earnings (loss) per common share is computed by dividing the net earnings, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the six months ended June 30, 2006 and 2005, potential dilutive securities that had an anti-dilutive effect were not included in the calculation of diluted net earnings (loss) per common share. These securities include options to purchase shares of common stock.

ADVERTISING COSTS

The cost of advertising is expensed as incurred. Advertising expense was $74,629 and $9,091 for the six months ended June 30, 2006 and 2005 respectively.

MANAGEMENT'S ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

STOCK-BASED COMPENSATION

Effective the first quarter of fiscal 2006, we adopted SFAS 123(R) which establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, over the requisite service period. We previously applied APB 25 and related interpretations, as permitted by SFAS 123.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates.

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

·	Estimating the fair value of our complex derivative financial instruments that are required to be carried as liabilities at fair value pursuant to Statements on Financial Accounting Standards No. 133 Accounting for Derivative Financial Instruments and Hedging Activities (FAS 133)

FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

We do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, we frequently enter into certain other financial instruments and contracts, such as debt financing arrangements, preferred stock arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts or (iii) may be net-cash settled by the counterparty to a financing transaction. As required by FAS 133, these instruments are required to be carried as derivative liabilities, at fair value, in our financial statements.

We estimate fair values of derivative financial instruments using various techniques, and combinations thereof, that are considered to be consistent with the objective measuring of fair values. In selecting the appropriate technique(s), we consider, among other factors, the nature of the instrument, the market risks that such instruments embody and the expected means of settlement. For less complex derivative instruments, such as free-standing warrants, we generally use the Black Scholes option valuation technique, since it embodies all of the requisite assumptions, including trading volatility, estimated terms and risk free rates, necessary to fair value these instruments. For complex derivative instruments, such as embedded conversion options, we generally use the Flexible Monte Carlo valuation technique since it embodies all of the requisite assumptions, including credit risk, interest-rate risk and exercise/conversion behaviors, that are necessary to fair value these more complex instruments. For forward contracts that contingently require net-cash settlement as the principal means of settlement, we project and discount future cash flows applying probability-weightage to multiple possible outcomes. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in our trading market price which has high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income will reflect the volatility in these estimate and assumption changes.

NEW ACCOUNTING STANDARDS

In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Internal Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 requires retrospective application of changes in accounting principle to prior periods' financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We adopted SFAS No. 154 on January 1, 2006. Any impact on the Company's consolidated results of operations and earnings per share will be dependent on the amount of any accounting changes or corrections of errors whenever recognized.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153. This statement addresses the measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, "Accounting for Nonmonetary Transactions," is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged.

The guidance in that opinion; however, included certain exceptions to that principle. This statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for financial statements for fiscal years beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges incurred during fiscal years beginning after the date this statement was issued. Management believes the adoption of this statement will have no impact on the financial statements of the Company.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 152, which amends FASB statement No. 66, "Accounting for Sales of Real Estate," to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions." This statement also amends FASB Statement No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects," to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This statement is effective for financial statements for fiscal years beginning after June 15, 2005. Management believes the adoption of this statement will have no impact on the financial statements of the Company.

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 151, "Inventory Costs--an amendment of ARB No. 43, Chapter 4." This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges." This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not believe the adoption of this statement will have any immediate material impact on the Company.

(2) RESTATEMENT

The Company has restated its financial statements for the year ended December 31, 2005 to amend and restate the accounting for derivatives issued in connection with a financing closed December 29, 2005. These security components were originally treated as equity transactions associated with the issuance of secured, convertible promissory notes. Upon further review of accounting issues, statements and pronouncements by the APB (Accounting Principals Board), FASB (Financial Accounting Standards Board) and EITF (Emerging Issues Task Force) the Company identified the need to include fair value accounting of certain warrants, considered to be derivatives in order to be compliant with GAAP (Generally Accepted Accounting Principals) accounting in its quarterly and annual financial statements. For this reason the Company is, in addition to restating its 2005 annual report filed on form 10KSB/A, restating its form 10QSB for the period ended June 30, 2006 to include fair value derivative accounting and reclassification of certain other financial items.

The restatement will also reclassify the restricted portion of cash to a separate line item on the Balance Sheet with a corresponding correction to the Statement of Cash Flows to reflect the restriction.

There were also related adjustments to the Company’s consolidated statement of cash flows and consolidated statement of stockholder’s equity.

The effect of the restatement on specific amounts provided in the consolidated financial statements is as follows:

Restatement of previously Issued Quarterly Data (Unaudited)


					As
					previously			Restatement			As
					reported			adjustments			restated

Six months ended June 30, 2006
Interest income (expense)				$	(74,068	)	$	(35,524	)	$	(109,592	)
Change in fair value of derivative liabilities				$	-		$	(652,875	)	$	(652,875	)
Total other income (expenses)				$	(74,068	)	$	(688,399	)	$	(762,467	)
Net income (loss)				$	62,118		$	(688,399	)	$	(626,281	)


		As			2005			2006
		previously			Restatement			Restatement			As
		reported			adjustments			adjustments			restated

June 30, 2006
Investments	$	-		$	-		$	26,179		$	26,179
Prepaid expenses	$	154,319		$	-		$	(52,012	)	$	102,307
Accounts payable and accrued expenses	$	212,946		$	-		$	35,524		$	248,470
Fair value of derivative liabilities	$	-		$	-		$	2,506,816		$	2,506,816
Additional paid-in capital	$	11,952,059		$	(219,535	)	$	(4,575	)	$	11,727,949
Accumulated deficit	$	(10,243,644	)	$	(1,629,831	)	$	(688,399	)	$	(12,561,874	)
Deferred Compensation	$	-		$	-		$	25,833		$	25,833

In addition, two reclassifications are required for previously reported activity. Firstly, the Company invested funds into Elysium Internet. This investment was initially treated as prepaid expense; however, a reclassification to Investment is appropriate in each of the first three quarters. Secondly, David Rasmussen was given 1,500,000 shares of Company Stock as part of his employment contract. The value of this stock was entered as a prepaid item, and is being amortized over the term of his employment contract. However, a reclassification to Deferred Compensation is appropriate for this item. These two items have balance sheet impact only.

(3) RESTRICTED CASH

At June 30, 2006 Restricted Cash of $500,000 represented a short term note obligation due Richard Miller as part of the financing of the acquisition of See World Satellites, Inc. ("See World"). Per the purchase agreement, Mr. Miller is to receive $500,000 within 30 days of the ratification of new five year renewal contracts with Echo Star Satellites, LLC and DISH Network Services, LLC., both of these contracts were signed in June. At December 31, 2005 Restricted Cash of $560,000 represents funds held in escrow by Grushko & Mittman to be utilized at the closing of acquisition of See World in January 2006. The source of the funds was from the December 2005 issuance of promissory notes designed for the purpose of raising funds for this acquisition. The funds were contractually restricted to be remitted directly towards settlement of the acquisition January 3, 2006.

(4) CONVERTIBLE DEBT

In December 2005 and January 2006 the Company raised a total of $1,470,000 from the issuance of $1,858,622 Secured Convertible Promissory Notes with selected subscribers. The Notes were issued at an original discount of 21%. On December 29, 2005, the Company received $1,000,000 of the proceeds and a further $470,000 in January 2006. Both amounts were after discount, but before expenses. The Company agreed to issue 100 class A, and 50 class B warrants for each 100 shares on the closing date of the issuance of the Notes, assuming complete conversion. The Company also agreed to issue 36,260,486 shares of common stock to be distributed pro rata to purchasers of the Notes (the common stock was issued effective December 29, 2005 and is included in the number of shares issued and outstanding at December 31, 2005). The conversion prices of the Notes, Class A Warrants, and Class B Warrants as stated on the Notes are $0.04, $0.02868 and $0.0239 respectively.

We accounted for the issuance of stocks and warrants under the convertible notes in line with the provisions of EITR 00-27 which states that when a debt instrument includes detachable instruments such as warrants, the proceeds of the issuance should be allocated to the convertible instrument and the detachable instruments in proportion to their relative fair market values. Accordingly, the Company calculated fair value of the stock based on current market price and fair value of the warrants using the Black-Scholes pricing model. Total proceeds from the funding were then allocated among debt and equity based on their relative fair values.

As discussed in footnote #2, a restatement was necessary as the $219,535 allocated to warrants was initially classified as equity. Due to an insufficient number of authorized and unissued shares available at the date of the issue to cover complete conversion, the warrant portion if the allocation is being reclassified to liability with an adjustment each reporting date to mark the liability to market.

(5) GOING CONCERN

The Company's financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is contingent upon its ability to expand its operations and secure additional financing. The Company has warrants outstanding that if exercised will provide for additional operating capital. The Company is pursuing additional financing options in order to raise funds required to reduce outstanding debt obligations and execute its operating and expansion plans. Failure to secure financing or expand operations may result in the Company not being able to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

(6) PROPERTY AND EQUIPMENT

Major classes of property and equipment together with their estimated useful lives, consisted of the following at June 30, 2006 and December 31, 2005:

	Years	2006	2005
Leasehold Improvements	5	$189,878	$180,937
Furniture and Fixtures	5	$124,208	$54,208
Equipment	3-5	$81,942	$20,890
Vehicles	3	$303,655	$11,927

Total property and equipment		$701,164	$267,962
Less: accumulated depreciation		($342,397)	($59,752)

Net property and equipment		$358,767	$208,210

Depreciation expense for the six months ended June 30, 2006 and June 30, 2005 was $61,378 and $18,076

(7) OPERATING LEASES

The Company leases real property for its nine retail locations. Four of the locations have lease terms ranging from three months to three years while five locations are on a month-to-month basis.

Future minimum payments due on the non-cancelable leases are as follows:

Year Ending	Annual Payments
2006	$54,846
2007	$72,026
2008	$30,678
	$157,550
	========

Rent expense was $92,849 and $90,683 for the six months ended June 30, 2006 and 2005, respectively.

(8) CONCENTRATION OF CREDIT RISK

The Company's concentrations of credit risk consist principally of Accounts Receivable and Accounts Payable. The Company purchases approximately 95% of their satellite system supplies from Echostar Satellite, L.L.C. and DISH Network Service, L.L.C. The Company further purchases approximately 80% of its telephone supplies from one vendor, Metro PCS. Additionally, these three vendors are major customers of the Company who provide products that generate over 90% of revenue.

(9) STOCK

During the three months ending March 31, 2006, the Company issued 1,500,000 restricted shares of common stock to an officer of the Company relating to a two year employment agreement dated February 1, 2006.

During the three months ending March 31, 2006, the Company issued 2,250,000 restricted shares of common stock valued at $0.02 to an officer of the Company to reduce an outstanding debt obligation of $45,000.

During the three months ending March 31, 2006, the Company issued 2,500,000 restricted shares of common stock valued at $0.02 to an officer of the Company as a success bonus for 2005.

During the three months ending March 31, 2006, the Company issued 920,000 restricted shares of common stock valued at $0.02 to a consultant of the Company to reduce the $18,400 owed for consulting services relating to services rendered during 2005.

COMMON STOCK

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights. Holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Company's Board of Directors in its discretion from funds legally available therefore, subject to the rights of Preferred stockholders. Please refer to the Company's discussion below under "Preferred Stock." In the event of the Company's liquidation, dissolution or winding up, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities, subject to the rights of Preferred Stockholders. Please refer to the discussion below under "Preferred Stock."

Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. Each holder of common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Shares of common stock do not have cumulative voting rights.

PREFERRED STOCK

The Company's Articles of Incorporation, as amended, vest its Board of Directors with authority to divide our preferred stock into series and to fix and determine the relative rights and preferences of the shares of any such series so established to the full extent permitted by the laws of the State of Nevada and the Articles of Incorporation in respect to, among other things, (i) the number of shares to constitute such series and the distinctive designations thereof; (ii) the rate and preference of dividends, if any, the time of payment of dividends, whether dividends are cumulative and the date from which any dividend shall accrue; (iii) whether Preferred Stock may be redeemed and, if so, the redemption price and the terms and conditions of redemption; (iv) the liquidation preferences payable on Preferred Stock in the event of involuntary or voluntary liquidation; (v) sinking fund or other provisions, if any, for redemption or purchase of Preferred Stock; (vi) the terms and conditions by which Preferred Stock may be converted, if the preferred stock of any series are issued with the privilege of conversion; and (vii) voting rights, if any. A total of 150,000 shares were designated Series A Preferred Stock, however, none are outstanding. All Series A shares have an issue price and preference on liquidation equal to $1.00 per share. The Series A Preferred Shares accrue dividends at the rate of 10% per annum during the first two years following issuance, which dividend is payable in cash and is cumulative. During the third through fifth year in which the Series A Preferred Shares are outstanding, the holders are entitled to 3.75% of the Company's net profits, also payable in cash. The Company may redeem this preferred stock at any time following notice to the holder for an amount equal to the issue price, plus any accrued but unpaid dividends.

The Series A Preferred Shares are convertible into shares of the Company's common stock at the option of the holder on a one for one basis at any time up to the fifth anniversary of the issuance. On the fifth anniversary, the Series A Preferred Shares automatically convert into shares of the Company's common stock. The conversion rate is subject to adjustment in certain events, including stock splits and dividends. Holders of our Preferred Stock are entitled to one vote for each share held of record. Holders of the preferred stock vote with holders of the common stock as one class.

During the period ended June 30, 2006, a total of 1,000,000 shares were designated Series B Preferred Stock and all 1,000,000 shares are outstanding. Upon liquidation (voluntary or otherwise), dissolution or winding up of the Company, holders of Series B Convertible Preferred Stock will receive their prorate share of the total value of the assets and funds of the Company to be distributed, assuming the conversion of Series B Convertible Preferred Stock to Common Stock. The holders of shares of Series B Convertible Preferred Stock shall not be entitled to receive dividends and shall have no voting rights. After June 1, 2006, the shares of Series B Convertible Preferred Stock shall be redeemable at $2.00 per share solely at the Company's option.

Any shares of Series B Convertible Preferred Stock may, at any time after January 3, 2008, at the option of the holder or the Corporation, be converted into fully paid and nonassessable shares of common stock. The number of shares of common stock to which a holder of Series B Convertible Preferred Stock shall be entitled upon a conversion shall be the product obtained by multiplying the number the number of shares of Series B Convertible Preferred Stock being converted by 25.

(10) OPTIONS AND WARRANTS

OPTIONS

The Company has a Non-Qualified Stock Option and Stock Grant Plan (the Plan) adopted in July 1997. For the year ended December 31, 2005 the Company has not granted any options. Under the company's plan, the Company's board of directors has reserved 2,500,000 shares that may be granted at the board of directors' discretion. No option may be granted after July 27, 2007 and the maximum term of the options under the plan is ten years. In accordance with SFAS 123R, the Company reviewed the provisions of the plan and its related outstanding options to comply with the required fair value analysis component to SFAS 123R that took effect January 1, 2006. During this analysis the Company determined that the 598,000 options previously issued have expired and are no longer outstanding as of January 1, 2006 per plan provisions.

WARRANTS

The following details warrants outstanding as of June 30, 2006:

The Company had 3,000,000 warrants outstanding relating to a dividend declared to stockholders of record on August 27, 2004. The warrants have an exercise price of $0.25 and expire on August 7, 2007. The Company does not expect these warrants to be exercised in the near future because the exercise price exceeds the current stock price.

In accordance with the subscription agreement relating to the private placement the Company closed during the period ending March 31, 2005. The Company issued the following warrants. Investors received two classes of warrants, Series A and Series B warrants, for each share of common stock purchased. The B warrants had an initial exercise price of $0.08 and A warrants had an initial exercise price of $0.12. The Company filed the terms and conditions of the financing and registration rights in March of 2005 on Form 8-K. The funds raised in the private placement were primarily used for working capital, costs related to the opening of new locations and to reduce outstanding liabilities.

	2005	2005
	Underlying Shares	Exercise Price
Warrants issued during 2000	1,036,000	$1.50
Warrants issued during 2004 (10% Warrant Dividend)	3,000,000	$.25
Warrants issued during 2004 and 2005, A Warrants	15,431,250 --------------	.045 ----------------

On September 28, 2005, the Company reduced the exercise price of the A warrants from $0.12 to $0.10. Additionally, the Company reduced the exercise price of the B warrants from $0.08 to $0.03.

On July 7, 2006, the Company reduced the exercise price of the A warrants from $0.10 to $0.045.

During the three months ending March 31, 2006 4,670,313 "B" warrants priced at $0.03 were exercised for gross proceeds of $140,109. Expenses relating to warrant exercises were $14,048. Additionally, during the three months ended March 31, 2006, 9,499,937 "B" warrants expired.

In accordance with the subscription agreement relating to the private placement closed on December 29, 2005, the Company issued the following warrants. Investors received two classes of warrants, called Series A and Series B warrants, for each share of common stock purchased. The A warrants have an exercise price of $0.02868 and the B warrants have an exercise price of $0.0239. The Company filed the terms and conditions of the financing and registration rights in January of 2006 on Form 8-K. The funds raised in the private placement were primarily used for the acquisition of the Company's wholly-owned subsidiary See World Satellites, Inc.

As discussed in footnote #2, a restatement was necessary as the $219,535 allocated to warrants was initially classified as equity. Due to an insufficient number of authorized and unissued shares available at the date of the issue to cover complete conversion, the warrant portion of the allocation is being reclassified to liability with an adjustment each reporting date to mak the liability to market.

As discussed in footnote #4, the warrants associated with this Issue, along with the related stock, were allocated based on their relative fair values, with the fair value of the warrant component determined using the Black-Scholes pricing model considering market factors at December 29, 2005. The fair value calculation for this grouping of warrants was performed independently of any other issue. Therefore, the reduction to the exercise prices for Series A and B warrants on September 28, 2005 and July 7, 2006 did not impact the fair value measurement of the warrants associated with the December 29, 2005 financing.

	2005		2005
	Underlying		Exercise
	Shares		Price

Warrants issued in December 2005/2006
A Warrants		46,465,550	$	.02868
B Warrants		23,232,775	$	.0239

During the three months ended June 30, 2006, the Company agreed to issue 11,458,338 restricted common shares relating to warrants priced at $0.0239 that were exercised by four accredited investors for total proceeds of $273,854.28. At June 30, 2006, 1,185,350 restricted shares due to one of the investors remained unissued. 11,458,338 new warrants were issued to the investors under the same terms other than the strike price which was increased to $0.04.

(11) SEE WORLD SATELLITES, INC. ACQUISITION

Effective January 3, 2006, the Company acquired 100% of the capital stock of See World Satellites, Inc. ("See World"), for consideration, providing for (i) $1,000,000 in cash to the shareholder of See World, (ii) a promissory note in the amount of $3,500,000, and (iii) $1,000,000 in convertible preferred stock of the Company.

As required by SFAS No. 141, the Company has recorded the acquisition using the purchase method of accounting with the purchase price allocated to the acquired assets and liabilities based on their respective estimated fair values at the acquisition date. The purchase price of $5,500,000 had been allocated at follows:

Current assets	$185,850
Property and Equipment, net	$136,454
Goodwill	$5,177,696
	$5,500,000
	===========

Goodwill recorded as a result of the acquisition is assignable to the See World Satellites, Inc. segment and is tax deductible over a period of fifteen years. Revenues and expenses are included in the Company's statement of operations from January 3, 2006 through March 30, 2006.

Unaudited pro forma data (included in the Company 8-K/A filing on March 3, 2006) summarizes the results of operations of the Company for the years ended December 31, 2005 and 2004 as if the acquisition had been completed on January 1, 2004. The pro forma data gives effect to the actual operating results prior to acquisition. The pro forma results do not purport to be indicative of the results that would have actually been achieved if the acquisition had occurred on January 1, 2004 or may be achieved in the future.

SFAS 141 also requires in the year of the acquisition, proforma information displaying the results of operations for the current period as if the combination had been completed at the beginning of the period, unless the acquisition was at or near the beginning of the period. Since See World Satellites, Inc. was acquired on January 3, 2006, the first business day of the year, and the Company determined that transactions between January 1, 2006 through January 2, 2006 to be immaterial, proforma presentation is deemed unnecessary.

At June 30, 2006, the Company had the following debt obligations and made the following payments to Mr. Richard Miller a director and President of the Company's wholly-owned subsidiary See World. The Company paid Mr. Miller $500,000 on January 3, 2006 relating to the acquisition of See World. The Company currently has a short term note obligation in the amount of $500,000 due to Mr. Miller. This note is due within 30 days of the effective date of a new five year contract between Echo Star Satellites, L.L.C., DISH Network Services, L.L.C. and See World. Additionally, the Company issued 1,000,000 shares of its Series B Convertible Preferred stock to Mr. Miller during the three months ended March 31, 2006. The conversion rate for the Series B stock is 25 shares of common stock for each share of Series B Convertible Preferred Stock. The shares of Series B Convertible Preferred Stock may be converted into common stock at any time after January 3, 2008, at the Company's option or that of the holder. The Series B stock has no voting rights. Each share is worth $1.00. On April 3, 2006, the Company made a $250,000 payment to Mr. Miller reducing the outstanding note amount to $3.25 million as of June 30, 2006. On July 5, 2006, the Company made a $250,000 payment to Mr. Miller reducing the outstanding note amount to $3 million as of August 14, 2006. The Company filed an 8-K with the terms and conditions of this note on January 5, 2006. Mr. Miller also extended a short-term note in the amount of $518,798 to the Company, of which $375,000 was paid back January 13, 2006. The Company expects to repay the remaining balance of $143,798 during 2006.

(13) SUBSEQUENT EVENTS

On July 17, 2006 the Company reduced the exercise price of the A warrants included in its SB-2 filing declared effective on August 3, 2005 from $0.10 to $0.045. As of August 4, 2006, 5,437,500 warrants have been exercised for proceeds of $244,687. The Company paid the additional $500,000 owed to Mr. Miller relating to the new five year contract with EchoStar and DISH Network Services.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The following discussion and analysis contains a comparison of the results of operations for the three months ended June 30, 2006 and the same period in 2005. This discussion and analysis should be read in conjunction with the un-audited interim consolidated financial statements and the notes thereto included in this report, and the audited financial statements in our Annual Report on Form 10-KSB/A for the year ended December 31, 2005.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This report on Form 10-QSB/A contains forward-looking statements that involve risks and uncertainties. We generally use words such as "believe," "may," "could," "will," "intend," "expect," "anticipate," "plan," and similar expressions to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report and in our annual report on Form 10-KSB filed with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.

OVERVIEW

We focus on developing, acquiring and investing in cash-flow positive businesses and viable business projects primarily in the Internet, Wireless and Technology industries. We operate a diversified wireless business through our two wholly-owned subsidiaries See World Satellites, Inc. and FTS Wireless, Inc. See World is a Regional Service Provider, or RSP, and retail distributor for DISH Network Services satellite television systems primarily to business and retail customers in the western Pennsylvania market and nationally through our retail channel. FTS Wireless is an emerging distributor of next generation wireless communications devices and related products and services. FTS Wireless operates a chain of nine retail wireless locations in the Gulf Coast market of Florida. All of the retail locations are leased properties.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make judgments and estimates.

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

·	Estimating the fair value of our complex derivative financial instruments that are required to be carried as liabilities at fair value pursuant to Statements on Financial Accounting Standards No. 133 Accounting for Derivative Financial Instruments and Hedging Activities (FAS 133)

FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries: FTS Wireless, Inc and See World Satellites, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

ACCOUNTS RECEIVABLE

Accounts receivable consist primarily of trade receivables, net of a valuation allowance for doubtful accounts.

INVENTORIES

Inventories are valued at the lower-of-cost or market on a first-in, first-out basis.

INVESTMENT SECURITIES

We account for our investments in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." We determine the appropriate classification of our investments in marketable securities at the time of purchase and reevaluate such determination at each balance sheet date. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Debt securities for which we do not have the intent or ability to hold to maturity, and equity securities not classified as trading securities, are classified as available-for-sale. The cost of investments sold is determined on the specific identification or the first-in, first-out method. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings, and available-for-sale securities are also reported at fair value but unrealized gains and losses are shown in the caption "unrealized gains (losses) on shares available-for-sale" included in stockholders' equity. We determine fair value of our investments based on quoted market prices at each balance sheet date.

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment are recorded at cost less accumulated depreciation. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss being recognized as a component of other income or expense. Depreciation is computed over the estimated useful lives of the assets (5-20 years) using the straight-line method for financial reporting purposes and accelerated methods for income tax purposes. Maintenance and repairs are charged to operations as incurred.

INTANGIBLE ASSETS

SFAS No. 142 eliminates the amortization of goodwill, and requires annual impairment testing of goodwill and introduces the concept of indefinite life intangible assets. We adopted SFAS No. 142 effective January 1, 2002. Goodwill and indefinite-lived intangible asset impairment is always assessed based upon a comparison of carrying value with fair value.

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically assess realization of long-lived assets, including goodwill. Accordingly, in the event that facts and circumstances indicate that property and equipment, and intangible or other assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, we compare the estimated future undiscounted cash flows associated with the asset to the asset's carrying amount to determine if a write-down to market value is necessary. We believe that there was no impairment of such assets at December 31, 2005. When we completed our impairment testing for the year ended December 31, 2004, we determined that the value of assets acquired related to certain store locations were impaired in the amount of $107,000.

REVENUE RECOGNITION

We recognize revenue from the activation of new wireless customers and the sale of wireless handsets, airtime and accessories at the time of activation or sale.

Although our post-paid activations are subject to possible charge-back of commissions if a customer deactivates service within the allowable 180-day period after signing the contract, we still recognize the activation in the period of the activation. We have set up a reserve for possible activation charge-backs. Based on SFAS No. 48, this is permitted if reliable estimates of the expected refunds can be made on a timely basis, the refunds are being made for a large pool of homogeneous items, there is sufficient company-specific historical basis upon which to estimate the refunds, and the amount of the commission specified in the agreement at the outset of the arrangement is fixed, other than the customer's right to request a refund.

Net revenues from product sales are recognized upon the transfer of title and risk of ownership to customers. Allowances for estimated returns, discounts and doubtful accounts are provided when sales are recorded. Shipping and handling costs are included in cost of sales.

We recognize revenue from the sale and activation of wireless handsets and related accessories.

INCOME TAXES

We are a taxable entity and recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to be in effect when the temporary differences reverse. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the year that includes the enactment date of the rate change. We use a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

EARNINGS PER SHARE

We compute the basic net earnings (loss) per common share by dividing the net earnings (loss) by the weighted average number of shares outstanding during a period. We compute diluted net earnings (loss) per common share by dividing the net earnings, adjusted on an as if converted basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the six months ended June 30, 2006 and 2005, we did not include potential dilutive securities that had an anti-dilutive effect in the calculation of diluted net earnings (loss) per common share. These securities include options to purchase shares of common stock.

ADVERTISING COSTS

The cost of advertising is expensed as incurred.

MANAGEMENT'S ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses. Actual results could differ from these estimates.

STOCK-BASED COMPENSATION

THREE MONTH PERIOD ENDED JUNE 30, 2006 AS COMPARED TO THREE MONTHS

ENDED JUNE 30, 2005 RESULTS OF OPERATIONS

SEGMENT RESULTS FOR THE THREE AND SIX MONTH PERIOD ENDED JUNE 30, 2006


Three Months Ended June 30, 2006													Six Months Ended June 30,2006
		FTS			FTS			See						FTS			FTS			See
		Group			Wireless			World						Group			Wireless			World
		Inc.			Inc.			Satellites			Total			Inc.			Inc.			Satellites			Total
External Revenues	$	-		$	441,337		$	1,192,055		$	1,633,392		$	-		$	936,915		$	2,330,091		$	3,267,006
Internal Revenues		375,000			-			-			375,000			750,000									750,000
Segment Revenues		375,000			441,337			1,192,055			2,008,392			750,000			936,915			2,330,091			4,017,006
		-			-			-			-
Cost of Goods Sold		-			348,255			124,255			472,510			-			722,529			333,463			1,055,992

Gross Profit		375,000			93,082			1,067,800			1,535,882			750,000			214,386			1,996,628			2,961,014
		-			-			-			-
Selling, General,		-			-			-			-
and Administrative		208,768			205,429			965,785			1,379,982			352,134			406,584			1,945,588			2,704,306

Subtotal		166,232			(112,347	)		102,015			155,900			397,866			(192,198	)		51,040			256,708

Change in fair value derivatives		6,825,789			-			-			6,825,789			(652,874	)		-			-			(652,874	)
Depreciation		(7,307	)		(10,169	)		(15,000	)		(32,476	)		(11,113	)		(20,265	)		(30,000	)		(61,378	)
Amortization		(29,572	)		-			-			(29,572	)		(59,145	)		-			-			(59,145	)
Interest		(69,887	)		-			(288	)		(70,175	)		(108,915	)		-			(677	)		(109,592	)

Net Income (Loss)		6,885,255			(122,516	)		86,727			6,849,466			(434,181	)		(212,463	)		20,363			(626,281	)
		-			-			-			-
Intersegment Adjustments		(375,000	)		75,000			300,000			-			(750,000	)		150,000			600,000			-

	$	6,510,255		$	(47,516	)	$	386,727			6,849,466		$	(1,184,181	)	$	(62,463	)	$	620,363		$	(626,281	)