UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

(MARK ONE)

|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

|_| 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 000-24829

FTS GROUP, INC.
---------------
(exact name of small business issuer as specified in its charter)

Nevada 84-1416864
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

7610 West Hillsborough Ave., Tampa, Florida 33615
-------------------------------------------------
(Address of principal executive offices)

(215) 688-2355
---------------
(issuer's telephone number)

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

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

As of June 30, 2006 we had 126,137,469 shares of common stock, par value $0.001,
outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

FTS GROUP, INC.
TABLE OF CONTENTS

PART I. FINANCIAL 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 Upon 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
Statements of Cash Flows - Six months ended June 30,
2006 and 2005 4
Notes to Consolidated Financial Statements 5

FTS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2006 and December 31, 2005

Assets 2006 2005
------ ------------ ------------
(Unaudited) (Audited)

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 154,319 474,683
Total current assets 1,239,377 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
Excess of cost over the net assets of business acquired 5,177,696 --
Deposits 17,182 16,139
------------ ------------
Total assets $ 7,196,971 $ 1,974,495
============ ============

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
Accounts payable and accrued expenses $ 212,946 $ 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 3,850,749 1,331,996
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 5,352,419 1,762,084

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, $0.001 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 11,952,059 10,416,074
Accumulated deficit (10,243,644) (10,305,762)
------------ ------------
Total stockholders' equity 1,844,552 212,411
------------ ------------

Commitments and contingent liabilities -- --
------------ ------------
Total liabilities and stockholders' equity $ 7,196,971 $ 1,974,495
============ ============

See accompanying notes to condensed consolidated financial statements.

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

Three Months Ended June 30, Six Months ended June 30,
2006 2005 2006 2005
------------- ------------- ------------- -------------
REVENUES

Satellite television activation,installation and service $ 1,192,055 $ - $ 2,330,091 $ -
Retail wireless activation, installation and service 441,337 346,730 936,915 650,700
------------- ------------- ------------- -------------
1,633,392 346,730 3,267,006 650,700
------------- ------------- ------------- -------------

COST OF GOODS SOLD 472,510 259,868 1,055,992 395,386
------------- ------------- ------------- -------------

GROSS PROFIT 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)
Interest (37,373) (5,636) (74,068) (189,748)
------------- ------------- ------------- -------------
(37,373) (5,636) (74,068) (189,748)
------------- ------------- ------------- -------------

NET INCOME (LOSS) $ 56,867 $ (191,055) $ 62,118 $ (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 $ 0.00 $ (0.00) $ 0.00 $ (0.02)
============= ============= ============= =============
Diluted $ 0.00 $ (0.00) $ 0.00 $ (0.02)
============= ============= ============= =============

See accompanying notes to condensed consolidated financial statements.

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

2006 2005
----------- -----------
Cash flows from operating activities:

Net income (loss) $ 62,118 $ (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
(Increase) decrease in operating assets:
Accounts receivable (116,382) (118,010)
Inventories (385,737) (29,877)
Prepaid expenses 320,364 30,655
Other assets (1,043) (1,000)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (255,234) 98,101
----------- -----------
Net cash used in operating activities (83,600) (481,354)
----------- -----------

Cash flows from investing activities:
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 500,000 --
Payment to See World Satellites, Inc. acquisition (500,000) --
----------- -----------
Net cash used in investing activities (515,481) (107,537)
----------- -----------

Cash flows from financing activities:
Proceeds from issuance of stock 413,964 844,460
Proceeds from convertible debentures 134,947 --
Proceeds from stock issued under equity line -- 325,078
Proceeds from note payable to Dutchess Advisors -- 500,000
Proceeds from notes payable related parties 518,798 --
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 393,560 585,958
----------- -----------

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 $ 6,018,798
Amount financed through formal promissory note (3,500,000)
Paid in preferred stock of FTS Group, Inc. (1,000,000)
Amount representing contract addendums financed through short term advance (518,798)
Due upon contract execution completion-restricted cash at 6/30/2006 (500,000)
-----------
Cash paid for See World Satellites, Inc. acquisition $ 500,000
===========

See accompanying notes to condensed consolidated financial statements.

FTS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2006
(UNAUDITED)

(1) 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 for the year ended December 31, 2005.

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.

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 being recognized as a component of other income or expense. 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 December 31, 2005. When the Company
completed its impairment testing for the year ended December 31, 2004, it
determined that the value of assets acquired related to certain store locations
were impaired in the amount of $107,000.

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.

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.

Fair Value of Financial Instruments

The Company estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the Company estimates of fair value are
not necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumption and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. The interest rates payable by the Company on its notes payable
approximate market rates. The Company believes that the fair value of its
financial instruments comprising accounts receivable, notes receivable, accounts
payable, and notes payable approximate their carrying amounts.

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) Restricted Cash

At June 30, 2006 Restricted Cash of $500,000 represents 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
which were signed in June, 2006.

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.

(3) 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 & fixtures 5 125,689 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

(4) 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.

(5) 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.

(6) Income Taxes

The Company accounts for income taxes under SFAS 109, "Accounting for Income
Taxes", which requires use of the liability method. SFAS 109 provides that
deferred tax assets and liabilities are recorded based on the differences
between the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes, referred to as temporary differences. Deferred tax
assets and liabilities at the end of each period are determined using the
currently enacted tax rates, and liabilities are expected to be settled or
realized.

Reconciliation of the Federal statutory income tax rate of 34% to the effective
rate is as follows:

December 31
-----------
2005 2004
-------- --------
Federal statutory income tax rate (659,000) (792,000)
659,000 792,000
-------- --------
-- --
======== ========

The tax effects of temporary differences and net operating losses that give rise
to significant portions of deferred tax assets and liabilities consisted of the
following:

December 31
-----------------------------
Reconciling items: 2005 2004
----------- -----------
Net operating loss carry forward: $ 3,244,000 $ 2,585,000
Less valuation allowance (3,244,000) (2,585,000)

Net deferred tax asset $ -- $ --
=========== ===========

The net operating loss carry forward of $10,243,644 will expire through 2024.

At June 30, 2006, the Company provided a 100% valuation allowance for the
deferred tax asset because given the volatility of the current economic climate,
it could not be determined whether it was more likely than not that the deferred
tax asset/(liability) would be realized.

(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 Annual
Ending 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.

Additionally, the Company issued 1,000,000 shares of its Series B Convertible
Preferred stock to Mr. Richard Miller, President of See World 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 option of the Company or that of
the holder. The Series B stock has no voting rights. Each share is worth $1.00.

(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 granted under the Plan is ten years. The effect of applying SFAS 123
on a pro forma basis was $0 for the year ended December 31, 2005 and 2004
because all of the options were granted and fully vested prior to 2003. Changes
in options outstanding under the plan are summarized as follows:

Weighted Weighted
Average Average
Number of Exercise
shares Price
--------- ---------

Outstanding at December 31, 2005 598,000 $ 1.50
--------- ---------
Granted -- --
Exercised -- --
Forfeited -- --

Outstanding at December 31, 2005 598,000 $ 1.50
--------- ---------

The exercise price for all options is at or above the market value of the common
stock as of the date of grant.

The following table summarizes information about fixed price stock options:

OUTSTANDING AND EXERCISABLE

Weighted Weighted Weighted Weighted
Average Average Average Average
Exercise Number Contractual Exercise
Price Outstanding Life Price
- -------- ----------- -------- --------
0.81-1.38 4,000 6.1 years $1.14
1.50-2.75 594,000 6.7 years $1.50

Warrants

The following details warrants outstanding as of December 31, 2005:

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 Exercise
Shares Price
--------- -----------
Warrants issued during 2000 1,036,000 $ 1.50
--------- -----------
Warrants issued during 2004
(10% Warrant Div) 3,000,000 $ 0.25

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. The table below summarizes the A and B warrants
outstanding as of June 30, 2006 relating to the financing closed on December 29,
2005.

2005 2005
Underlying Exercise
Shares Price
---------- ----------
Warrants issued in December 2005
A Warrants 36,260,486 $ 0.02868
B Warrants 6,671,905 $ 0.0239
New B Warrants 11,458,338 $ 0.04
---------- ----------

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 $6,018,798 had been allocated at
follows:

Current assets $906,610
Property and equipment, net 136,454
Current liabilities -197,876
Long-term debt -4,086
Goodwill 5,177,696
--------------

$6,018,798
==============

Revenues and expenses are included in the Company's statement of operations from
January 3, 2006 through June 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.

(12) Related Party Transactions (See World Acquisition)

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 17th, 2006 the Company reduced the exercise price of the A warrants
included in our 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
for the year ended December 31, 2005.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This report on Form 10-QSB 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

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

Fair Value of Financial Instruments

We estimate the fair value of our financial instruments using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, our estimates of fair value are not necessarily
indicative of the amounts that we could realize in a current market exchange.
The use of different market assumption and/or estimation methodologies may have
a material effect on the estimated fair value amounts. The interest rates
payable by us on our notes payable approximate market rates. We believe that the
fair value of our financial instruments comprising accounts receivable, notes
receivable, accounts payable, and notes payable approximate our carrying
amounts.

THREE MONTH PERIOD ENDED JUNE 30, 2006 AS COMPARED TO THREE MONTHS
ENDED JUNE 30, 2005 RESULTS OF OPERATIONS

SALES REVENUE

For the three months ended June 30, 2006, overall sales increased $1,286,662 or
371.1%, to $1,633,392, as compared to $346,730 for the three months ended June
30, 2005. For the six months ended June 30, 2006 sales increased to $3,267,006
from $650,700 during the same period in 2005. For the six months ended June 30,
2006 our wholly-owned subsidiary See World Satellites, Inc. generated revenue of
$2,330,091. See World generated 73.0% of our total sales for the three months
ended June 30, 2006 or $1,192,055. We have no comparable figures for the three
months ended June 30, 2005. Our sales revenue for See World is primarily
generated from the sale, service and installations of DISH satellite television
systems. For our wholly-owned subsidiary FTS Wireless, revenue increased
$286,215 or 44.0% to $936,915 compared to revenue of $650,700 for the six months
ended June 30, 2005. FTS Wireless generated 27.0% of our total sales or $441,337
for the three months ended June 30, 2006, compared to revenue of $346,730 for an
increase of 27.3%. Our sales revenue for FTS Wireless is generated from the sale
of wireless handsets and related products and services. We believe the increase
in sales revenue at FTS Wireless is related to the introduction of Metro PCS
products and services into our core market. During the three months ended June
30, 2005 Metro PCS did not operate in the Tampa, Florida market. The overall
increase in total sales revenue for the three and six month period was primarily
related to the acquisition of See World Satellites, Inc. completed in the first
quarter of this year.

COST OF GOODS SOLD

For the three months ended June 30, 2006, cost of goods sold increased by
$212,642 to $472,510, as compared to $259,868 for the three months ended June
30, 2005. The increase in cost of goods sold is primarily related to increased
product purchases of DISH satellite television systems for See World and an
increase in wireless handset purchasing at FTS Wireless.

GROSS PROFITS

For the three months ended June 30, 2006, gross profits increased by $1,074,020
from $86,862 in 2005 to $1,160,882 in 2006. The increase in gross profits is
attributed to the increase in service and sales revenue of DISH satellite
systems relating to our wholly-owned subsidiary See World not offered during the
comparable period. Gross profits as a percentage of sales increased to 71.1% in
2006 compared to 25.1% in 2005. The increase in gross profits as a percentage of
sales is related to the introduction of new business related to the sales,
service and installation of satellite television systems for DISH networks at
our wholly-owned subsidiary See World.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, General and Administrative Expenses for the three months ended June 30,
2006, increased $794,361 or 291.7% to $1,066,642, as compared to $272,281 for
the three months ended June 30, 2005. The increase in Selling, General and
Administrative expenses was primarily related to increased operating costs
related to our newly-acquired operations at See World not included in the three
months ended June 30,2005.

OPERATING INCOME

Operating income increased to $94,240 during the three months ended June 30,
2006, compared to an operating loss of ($185,419) for the three months ended
June 30, 2005 for a net improvement of $279,659. Operating income increased to
$136,186 during the six months ended June 30, 2006, compared to an operating
loss of ($772,294) for a net improvement of $908,480.

NET INCOME

Net income increased $247,922 to $56,867 for the three months ended June 30,
2006 compared to a net loss of ($191,055) during the three months ending June
30, 2005. The increase in net income was primarily related to an increase in
revenue of $1,192,055 from our new wholly-owned subsidiary See World. Net income
for the six month ended June 30, 2006 increased to $62,118 compared to a net
loss of ($962,042) for a net improvement of $1,024,160. The increase in net
income was primarily related to an increase in revenue of $2,330,091 from our
new wholly-owned subsidiary See World.

INTEREST EXPENSE

Interest expense increased $31,737 to $37,373 for the three months ended June
30, 2006, as compared to $5,636 for the three months ended June 30, 2005. The
increase in interest expense is related to an increase in interest expenses from
a private placement closed on December 29, 2005.

LIQUIDITY AND CAPITAL RESOURCES

Our requirements for capital are to:

o pay down debt,

o fund possible acquisitions, and

o provide working capital and funds to expand our current business.

Our primary source of financing during the three months ended June 30, 2006
includes cash received from the issuance of common stock and cash generated from
operations.

As of June 30, 2006, our Current Assets were $1,239,377 consisting of $537,558
in cash, $418,917 in inventories, $128,583 of accounts receivables and $154,319
of prepaid expenses and current assets. Current Liabilities were $3,850,749,
consisting of $1,238,321 of convertible debentures, $2,389,586 of notes payable
related parties, $212,946 in accounts payable and accrued expenses and $9,896 of
long term debt-equipment loans.

At June 30, 2006, we had total assets of $7,196,971 consisting of, in addition
to the assets described above, excess of cost over the net assets of business
acquired $5,177,696, property and equipment, net of accumulated depreciation of
$358,767, Unamortized discount of convertible debt of $315,231, unamortized debt
issuance costs $88,718 and deposits of $17,182.

GOING CONCERN OPINION

We believe that our continued existence is dependent upon our ability to grow
the profits of our satellite television operations and make our retail wireless
operations profitable, and our ability to raise additional capital to reduce
debt. Accordingly, the notes to our un-audited, interim financial statements
express substantial doubt about our ability to continue as a going concern.

FINANCING ACTIVITIES

During the three months ended June 30, 2006, we issued 11,458,338 shares of
restricted common stock upon the exercise of warrants priced at $0.0239. The
warrants were exercised by four accredited investors for total proceeds of
$273,854.28. At June 30, 2006, we had not issued 1,185,350 restricted shares
that we owed to one of the investors. On April 5, 2006, we issued 11,458,338 new
warrants to accredited investors under substantially the same terms as the
warrants that were exercised except that the exercise price on the new warrants
was increased to $0.04.

SUBSIDIARIES

As of June 30, 2006, we had two wholly-owned subsidiaries, FTS Wireless, Inc.
and See World Satellites, Inc.

ITEM 3. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-QSB. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective to ensure that information we are required to disclose in reports that
we file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and our
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. Our disclosure controls and procedures are designed to
provide reasonable assurance that such information is accumulated and
communicated to our management. Our disclosure controls and procedures include
components of our internal control over financial reporting. Management's
assessment of the effectiveness of our internal control over financial reporting
is expressed at the level of reasonable assurance that the control system, no
matter how well designed and operated, can provide only reasonable, but not
absolute, assurance that the control system's objectives will be met.

There was no change in our internal control over financial reporting that
occurred during our last fiscal quarter that materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not aware of any litigation or potential litigation that could have a
material impact on our business.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On April 5, 2006 we issued 11,458,338 restricted common shares related to
warrants priced at $0.04 to accredited investors.

These issuances of securities were undertaken pursuant to Rule 506 of Regulation
D and Section 4(2) under the Securities Act of 1933, as amended, by the fact
that:

- - the sale was made to a sophisticated or accredited investor, as defined in
Rule 502;

- - we gave the purchaser the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering and to obtain any additional
information which we possessed or could acquire without unreasonable effort or
expense that is necessary to verify the accuracy of information furnished;

- - at a reasonable time prior to the sale of securities, we advised the purchaser
of the limitations on resale in the manner contained in Rule 502(d)2;

- - neither we nor any person acting on our behalf sold the securities by any form
of general solicitation or general advertising; and

- - we exercised reasonable care to assure that the purchaser of the securities is
not an underwriter within the meaning of Section 2(11) of the Securities Act of
1933 in compliance with Rule 502(d).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

We have filed a Registration Statement on Form SB-2. The purpose of the
Registration Statement is to register the resale of certain securities we issued
as part of a private placement completed in January 2006.Until the SB-2 is
declared effective by the Securities and Exchange Commission we are accruing
liquidated damages that we anticipate paying either in cash or by issuing shares
of common stock.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

None.

Number Description of Exhibit
- ------ ----------------------

2.1 Agreement and Plan of Merger between the Company and FTS Apparel, Inc.,
dated December 23, 2003 (included as Attachment A to the Definitive Proxy on
Form DEF 14A filed January 9, 2004, and incorporated herein by reference).

3.1 Articles of Incorporation dated December 23, 2003 (included as Attachment B
to the Definitive Proxy on Form DEF 14A filed January 9, 2004, and incorporated
herein by reference).

3.2 Bylaws (included as Attachment C to the Definitive Proxy on Form DEF 14A
filed January 9, 2004, and incorporated herein by reference).

4.1 Form of Certificate for Common Shares (included as exhibit 4.1 to the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended December 31,
1998 and incorporated herein by this reference).

4.2 Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
February 24, 2003, and incorporated herein by reference).

4.3 Debenture Agreement between the Company and Dutchess Private Equities Fund,
L.P., dated February 14, 2003 (included as exhibit 10.2 to the Form 8-K filed
February 24, 2003, and incorporated herein by reference).

4.4 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, L.P., dated February 14, 2003 (included as exhibit 10.3 to the
Form 8-K filed February 24, 2003, and incorporated herein by reference).

4.5 Debenture Exchange Agreement between the Company and Dutchess Private
Equities Fund, L.P., dated February 14, 2003 (included as exhibit 10.5 to the
Form 8-K filed February 24, 2003, and incorporated herein by reference).

4.6 Addendum to the Subscription Agreement, dated July 21, 2003 (included as
Exhibit 10.1 to the Form 8-K filed July 22, 2003, and incorporated herein by
reference).

4.7 Amended Debenture between the Company and Dutchess Private Equities Fund,
L.P., dated February 14, 2003 (included as Exhibit 10.2 to the Form 8-K filed
July 22, 2003, and incorporated herein by reference).

4.8 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, L.P., dated January 9, 2004 (filed as Exhibit 10.16 to the Form
SB-2 filed January 28, 2004, and incorporated herein by reference).

4.9 Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
March 24, 2005, and incorporated herein by reference).

4.10 A Warrant Form (included as exhibit 4.1 to the Form 8-K filed March 24,
2005, and incorporated herein by reference).

4.11 B Warrant Form (included as exhibit 4.2 to the Form 8-K filed March 24,
2005, and incorporated herein by reference).

4.12 Promissory Note between the Company and Dutchess Private Equities Fund, II,
L.P., dated October 27, 2004 (included as exhibit 4.11 to the Form SB-2 filed
June 17, 2005, and incorporated herein by reference).

4.13 Promissory Note between the Company and Dutchess Private Equities Fund, II,
L.P., dated January 10, 2005 (included as exhibit 4.12 to the Form SB-2 filed
June 17, 2005, and incorporated herein by reference).

4.14 Form of Common Stock Purchase Warrant between the Company and Olympus
Securities, (included as exhibit 4.16 to the Form SB-2/A filed July 5, 2006, and
incorporated herein by reference).

10.1 Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K filed
February 24, 2003, and incorporated herein by reference).

10.2 Debenture Agreement between the Company and Dutchess Private Equities Fund,
LP, dated February 14, 2003 (included as exhibit 10.2 to the Form 8-K filed
February 24, 2003, and incorporated herein by reference).

10.3 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, LP, dated February 14, 2003 (included as exhibit 10.3 to the Form
8-K filed February 24, 2003, and incorporated herein by reference).

10.4 Escrow Agreement between the Company and Dutchess Private Equities Fund,
LP, dated February 14, 2003 (included as exhibit 10.4 to the Form 8-K filed
February 24, 2003, and incorporated herein by reference).

10.5 Debenture Exchange Agreement between the Company and Dutchess Private
Equities Fund, LP, dated February 14, 2003 (included as exhibit 10.5 to the Form
8-K filed February 24, 2003, and incorporated herein by reference).

10.6 Addendum to the Subscription Agreement, dated July 21, 2003 (included as
Exhibit 10.1 to the Form 8-K filed July 22, 2003, and incorporated herein by
reference).

10.7 Amended Debenture between the Company and Dutchess Private Equities Fund,
LP, dated February 14, 2003 (included as Exhibit 10.2 to the Form 8-K filed July
22, 2003, and incorporated herein by reference).

10.8 Memorandum of Understanding between the Company and Malsha Imports, Inc.,
dated February 28, 2003 (included as Exhibit 10.11 to the Form SB-2/A filed
September 15, 2003, and incorporated herein by reference).

10.12 Investment Agreement between the Company and Dutchess Private Equities
Fund, LP, dated January 9, 2004 (included as exhibit 10.15 to the Form SB-2
filed January 28, 2004, and incorporated herein by reference).

10.13 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, LP, dated January 9, 2004 (included as Exhibit 10.16 to the Form
SB-2 filed January 28, 2004, and incorporated herein by reference).

10.14 Placement Agent Agreement between the Company, Dutchess Private Equities
Fund, LP, and Charleston Capital Securities, dated January 9, 2004 (included as
Exhibit 10.17 to the Form SB-2 filed January 28, 2004, and incorporated herein
by reference).

10.23 Lease Agreement between the Company and Investments Limited, dated August
25, 2004 (included as exhibit 10.1 to the Form 8-K filed September 9, 2004, and
incorporated herein by reference).

10.25 Corporate Consulting Agreement between the Company and Theodore J. Smith,
Jr., dated October 26, 2004 (included as exhibit 99.2 to the Form S-8 filed
January 11, 2005, and incorporated herein by reference).

10.26 Subscription Agreement Form (included as exhibit 10.1 to the Form 8-K
filed March 24, 2005, and incorporated herein by reference).

10.27 Employment Agreement between the Company and Scott Gallagher, dated
November 15, 2005 (filed herewith).

10.28 Employment Agreement between the Company and David Rasmussen, dated
February 1, 2006 (filed herewith).

14.1 Corporate Code of Conduct and Ethics (included as exhibit 14.1 to the Form
10-KSB filed April 14, 2004, and incorporated herein by reference).

31.1 Certification of the Chief Executive Officer and Interim Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

FTS GROUP, INC.

/s/ Scott Gallagher
- -------------------
Scott Gallagher
Chief Executive Officer and
Interim Chief Financial Officer
(Principal Accounting Officer)
August 16, 2006