Interview with: K. Bruce Jones, CFO - featuring: their green energy renewable resource technology for capturing methane gas off of landfills and their technology that uses a radio frequency bonding technique to repair essentially any internal surgical wound.

CSMG Technologies, Inc. (CTUM-OTC: BB)

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CSMG Technologies is a technology holding company with an operating renewable energy system for recovering methane gas in landfills and a tissue bonding medical device used to close internal and cosmetic surgical wounds.  All of CSMG’s technologies were developed in Ukraine, and are protected by US and international patents.

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Services
Business Services
(CTUM-OTC: BB)

CSMG Technologies, Inc.

500 North Shoreline Drive
Suite 701
North
Corpus Christi
, TX 78471

Phone: 512-887-7546


K. Bruce Jones
Chief Financial Officer

Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
April 6, 2006

BIO:
K. Bruce Jones has been employed since 1994 as the owner of K. Bruce Jones & Associates, Inc. of Marietta, Ga., an investment banking and consulting company for startup and early-stage companies.  From 1987 until 1992 he was employed by Gateway Investment Advisers of Cincinnati, Ohio as senior vice president of marketing and sales with additional duties in product design. Prior to that he was a Vice President with Merrill Lynch Capital Markets in Atlanta, Georgia. Mr. Jones holds a BA and an MBA from Emory University, Atlanta.

CEOCFO: Mr. Jones, could you share some of your background with CSMG?
Mr. Jones: “I’ve been associated with the company for the better part of 4 years. My primary work has been investment banking for early stage and start-up companies, and have been doing so for the better part of 12 years. I came aboard as CFO of CSMG in February of 2005.”

CEOCFO: What attracted you to take that role at CSMG?
Mr. Jones: “One thing was that the company needed some help. Like most early stage companies, it is a tremendous struggle until you reach the point where you can become viable from a cash flow standpoint, and the company wasn’t quite there. Secondly, I had a lot of confidence both in the two world- class technologies that the company owns the rights to, and I like the company’s president and CEO, Mr. Donald S. Robbins, who I think is very  qualified.”

CEOCFO: Tell us about the company’s ties to Ukraine, how that has developed and what exactly it is that you do?
Mr. Jones: “Our founders went over to the Ukraine in the early 1990’s on an agricultural mission and from those early trips they established good contacts at some very high levels of the Ukraine government, such as the ministry of science and ministry of health. From those contacts they have been able to acquire several world class technologies that were developed in Ukraine, and have used these as a platform to develop a technology management company. We took the technologies that we acquired and brought them to the United States for development.”

CEOCFO: Why are you looking in Ukraine for technologies; is there something about that area that fosters the development of technology?
Mr. Jones: “If you look at the history or the Soviet Union, the rocket science and most of the high technology did come out of the Ukraine area. It is just the way that it has been and I don’t know if there was any grand design in the early years, but I think the founders of the company saw some great opportunities and tried to capitalize on them.”

CEOCFO: Tell us about the technologies that you own and where you are in developing them.
Mr. Jones: “We have 2 technologies, one is a green energy renewable resource, and that is capturing methane gas off of landfills. Landfill gas is required by the EPA (U.S. Environmental Protection Agency) to be collected and flared off because methane is a very virulent global warming gas. The raw methane gas that is derived from landfills is usually comprised of about 50% pure methane that is high BTU gas and about 50% CO-2, and that mix is called medium BTU gas. You can use the raw gas if you essentially take the water out of it, and what you are trying to do is power a reciprocating engine to make electricity or simply to fire a boiler. However, the value of the gas is obviously much higher if you can get the gas up to pipeline quality, which is generally considered to be purity levels of 95% or better. That is what our system does. There are about 200 methane gas purification systems already installed on landfills here in the United States and the best that they have been able to do purity wise is about 70 or 75% pure. The technology that our competitors use is primarily a membrane filtration technology and it works, but is just hasn’t been as commercially successful as people had hoped. However, our technology is more of a straight refining technology; it is an absorption-desorption process and we use a dry chemical purification medium as well. Our process has been used for several decades in the oil and gas fields in Eastern Europe, because many times you also have impurities that come out with deep well gasses that will have to addressed before the gas is pipeline ready. We got the technology from a company called, ‘Sumy-Frunze Machine-Building Science and Production Association of the Ukraine’, which is a 100 year old company, with 20,000 employees. They make high quality oil and gas refining equipment and ship it all over the world. They have all of the certifications needed to serve businesses in the U.S. and anywhere else in the world. Frunze has designed, engineered and developed our product and they are the fabricator of the plant that we have ready to go in Alabama. Our plant is finished and about to be commissioned on a landfill site just north of Mobile.”

CEOCFO: You recently signed a contract with DuPont.
Mr. Jones: “We recently announced  that we’ve signed a 10 year purchase contract for the gas that we will purify out of the Alabama landfill. We have not publicly discussed the terms of the contract, but are very pleased and  know that we will save DuPont (NYSE: DD) a good bit of money on their energy requirements for that particular plant. DuPont is very conscious about trying to use green energy or renewable resources and they are also quite pleased, because it will help them, both financially and in being good corporate citizens.”

CEOCFO: Will this contract with DuPont cause people to pay more attention to you?
Mr. Jones: “Absolutely! There are a number of firms that we are in contact with, although I can’t name names, who have expressed interest in our plant, simply because of the ability to achieve a high BTU gas. It is not unreasonable that they would want to see it in operation before they would grant any contracts, but we are very confident that there will be a number of opportunities behind this one.”

CEOCFO: Please tell us about your other technology.
Mr. Jones: “Our second technology is a medical device, also from  Ukraine, and we have a privately owned company called Live Tissue Connect, LLC, which is the holding company for this technology. This is a surgical repair instrument, using low radio frequency and it is designed to repair essentially any internal surgical wound. Our technology uses a radio frequency bonding technique, which is far superior to anything that is on the market today in the U.S. or anywhere else in the world. There are other RF or electrical surgical devices that are being used commonly today and lots of procedures, but the problem with those devices is that they use a very high intensity heat, and while they will seal off a blood vessel or close a surgical wound,  they also cause necrosis or scarring of the tissue. Therefore, they take care of one problem, but then they are also creating another wound that has to heal, whereas our technology in my terms, “plasmatises” the tissue, such that if you were closing a stomach incision that was 4 or 5 inches; it is almost like slowly closing a zip lock bag in that the closure turns the tissue opaque, but it doesn’t char or burn it. Additionally, it delivers an airtight seal. In Ukraine, there are 5 hospitals currently using the technology on a daily basis. The ministry of health just ordered 10 more machines, and there have been over 5,000 human surgeries to date in the Ukraine and to our knowledge there have been no failures. Therefore, the advantages are multiple; it will close any surgical wound and I’m talking Dura matter, lung tissue, spleen tissue, fallopian tubes and colon resection, with no charring of the tissue, almost no blood loss, and little to no scarring.  It most recently is also being used for cosmetic surgeries, where any scarring is typically undetectable after several months.”

CEOCFO: So there are no stitches!
Mr. Jones: “There are no stitches, no staples and no glues. Therefore, there is no foreign matter introduced into the body and because it is so much more friendly to the body, the patient heals much faster. For example, for a colon resection operation, in the United States, it is usually a week or so, before a patient can take soft foods orally. With this technology in Ukraine, they have the patients eating soft foods within 2 or 3 days. The surgery itself is almost bloodless, because you can seal as you go, so you will need less in the way of transfusion. Another major advantage of this technology is that unlike the electrical surgical equipment in this country, it is smoke-free. We didn’t realize how important this was until a live pig demonstration was performed for a number of surgeons present and they were so impressed with that feature. If you go into an operating room where the traditional electrical surgical equipment is being used, there are thick plumes of smoke all over the room. This creates a bad situation if the patient that you are operating on happens to have AIDS or hepatitis - it is very dangerous for the OR people. Therefore, our technology offers numerous improvements over the current electrical surgical technology that is currently being used and we think that it is going to be a block buster product in the right hands.”

CEOCFO: How do you get people to take notice and where is it in the process of being out to the market?
Mr. Jones: “We have several patents that have already been issued here in the U.S. and worldwide on the tissue bonding technology, and I might mention that the methane gas purification system is also patented, but as far as an operating company, we consider ourselves to be a renewable resources company and we will manage that end of the business. With regard to our tissue bonding technology, we will find a qualified partner that has both the financial wherewithal to get it through the FDA approval process and also has the marketing clout and the outlets in the various medical channels in the U.S. to partner with us.”

CEOCFO: Could you tell us about the current financial picture of CSMG?
Mr. Jones: “As an early state company that has not had any revenues for the last 3 or 4 years, the balance sheet is not a pretty picture. However, given the fact that the company has been in existence since 1993, we are really not in that bad of a financial condition; we have about $6 million plus in liabilities and about $2 million in assets, given our intellectual property and equipment at the facility in Alabama, the landfill gas plant. However, out of that $6 million plus, about $4 million is notes to shareholders and another 1 million is interest attached with those notes. Therefore, a good bit of that we think will be converted into equity in the next year or so. We have also maintained a fairly reasonable share count; a lot of young companies in our position would now have several hundred million shares outstanding and $25 to $50 million in debt, but as I said earlier that we have something over $6 million there. Last count, we had about 27 million shares issued and outstanding.”

CEOCFO: Is reaching potential investors a focus for you?
Mr. Jones: “Sure. Like any company, your share price is in a sense your capital and we haven’t had the time or financial where-with-all to do much promoting of our company. Quite frankly, we haven’t wanted to do much promoting of our company until we had some more substance to show people and I think the DuPont contract is a good example. Therefore, we would hope to increase that in the future. Our stock was about .25 cents on the close yesterday, so that gives us a market cap of well under $10 million and we think that is to low, given the value of the technologies and the future earning potential that we have.”

CEOCFO: Address potential investors, what should they know and what do people often miss about CSMG?
Mr. Jones: “Some people are a little confused because we are a technology holding company and they look at our renewable energy, or green energy technology for methane gas and then they look at the medical equipment side and the have a hard time getting their arms around what we are. However, there is a good answer, because as an operating company we are concentrating on renewable energy, but for other technologies we will seek to find partners under licensing agreements. I think there are a couple of reasons that investors are overlooking us, but shouldn’t; one is that you get two for one, because we have two world class technologies and I think that if either of these reach anywhere near their potential, then I don’t see any reason why we couldn’t have a $5 or $10 stock in the next several years. I can’t get into too much detail, but if you look at the methane gas situation alone, there area about 18,000 landfills here in the United States, of which we think about 20% of them are size enough that would be good fits for our technology. Therefore, 3,500 or 3,600 prospects for our methane gas technology alone and we think that we will come to dominate that industry. We think renewable energy is here to stay, natural gas production in the domestic lower 48 states has peeked, so it is flat at best.

Demand for natural gas here is growing at about 4% per year and many industries such as the utilities use natural gas for generating electricity. Most homes use natural gas for heating and we don’t see that stopping, and thus think that the demand and price situation for natural gas is going to be very good for a long time. Unlike traditional gas wells, when we build a plant on a landfill site, we know exactly what the output is of the raw gas, how much of that is pure methane, and we know exactly how long that landfill is going to stay in existence. In addition, how long it is going to grow and what the reserve picture is going to be from day one. Whereas if you drill a deep gas well, you really don’t know if you are going to hit gas or not and even the ones that hit, after the second day of pumping, you are going to have fewer reserves than the day before. On a landfill, if you choose wisely, those reserves will continue to grow. The landfill that we are on in Alabama, for example, is not supposed to close until about 2080, when the gas flow will be about 3 times what it is today. Therefore, I think that there is enormous potential for both technologies. The tissue bonding technology is at least a billion dollar annual market in the U.S. There are no guarantees, and our stock is by definition high risk; but  the potential returns are also very high, if we can develop either or both of our proprietary technologies to their full potential.”

CEOCFO: In closing, tell us about the manufacturing of your systems?
Mr. Jones:Frunze designs and builds our systems on a modular basis and ships them from Ukraine. The dollar in Ukraine enjoys a very favorable exchange rate. Therefore, our capital cost is considerably less than that of our U.S. competitors.”


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“We have several patents that have already been issued here in the U.S. and worldwide on the tissue bonding technology, and I might mention that the methane gas purification system is also patented, but as far as an operating company, we consider ourselves to be a renewable resources company and we will manage that end of the business. With regard to our tissue bonding technology, we will find a qualified partner that has both the financial wherewithal to get it through the FDA approval process and also has the marketing clout and the outlets in the various medical channels in the U.S. to partner with us.” - K. Bruce Jones

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