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

FORM 10-QSB

[X]       
          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
          OF 1934

FOR THE QUARTERLY
PERIOD ENDED OCTOBER 31, 2004

[    ]       
     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 0-9922

_________________

CATHAY MERCHANT GROUP,
INC.(Name of Small Business
Issuer in Its Charter)

|                                                             |                                       
|------------------------------------------------------------ | --------------------------------------
|DELAWARE                                                     | 04-2608713                            
|(State or Other Jurisdiction of
Employer Identification No.) | (I.R.S. Incorporation or Organization)

|                                                                                 |           
|-------------------------------------------------------------------------------- | ----------
|3604 Tower 1, Kerry Everbright City, 218 Tian Mu Road West, Shanghai, P.R. China | 200070    
|(Address of office)                                                              | (Zip Code)

Issuers
telephone number, including area code: (86) 21-6353-0012

Check whether the issuer: (1) filed
all reports required to be filed by Section 13 or 15(d) of the Securities 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 for the past 90
days. [X] YES [ ] NO

The number of shares outstanding of
the Companys common stock as at December 9, 2004 was 18,796,829.

Transitional Small Business
Disclosure Format (check one): [     ] YES   [X] NO

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2

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES QUARTERLY REPORT 
FORM 10-QSB THREE MONTHS ENDED
OCTOBER 31, 2004

TABLE OF CONTENTS

|                                                                     |     
|-------------------------------------------------------------------- | ----
|PART I                                                               | Page
|Item 1.    Consolidated Financial Statements                         | 3-7 
|Item 2.    Management's Discussion and Analysis or Plan of Operation | 8-10
|Item 3.    Controls and Procedures                                   | 10  
|PART II                                                             
|Item 1.    Legal Proceedings                                         | 11  
|Item 2.    Changes in Securities and Use of Proceeds                 | 11  
|Item 3.    Defaults Upon Senior Securities                           | 11  
|Item 4.    Submission of Matters to a Vote of Security Holders       | 11  
|Item 5.    Other Information                                         | 11  
|Item 6.    Exhibits and Reports on Form 8-K                          | 12  
|Signatures                                                           | 12  

FORWARD LOOKING STATEMENTS

Certain
statements contained in this Quarterly Report and other written material and oral
statements made from time to time by us do not relate strictly to historical or current
facts. As such, they are considered forward-looking statements that provide
current expectations or forecasts of future events. Such statements are typically
characterized by terminology such as believe, anticipate,
should, intend, plan, expect,
estimate, project, strategy and similar expressions.
Our forward-looking statements generally relate to the prospects for our ability to
identify new business opportunities, develop new business strategies and execute such
business strategies, as well our plan to develop a new wind energy project in China, the
Twin Dragons Wind Farm, which is initially a 160-megawatt project in the Heibei Province
in China. These statements are based upon assumptions and assessments made by our
management in light of its experience and its perception of historical trends, current
conditions, expected future developments and other factors our management believes to be
appropriate. These forward-looking statements are subject to a number of risks and
uncertainties, including the following: our ability to identify and evaluate business
opportunities that will achieve profitable operations while maintaining sufficient cash to
operate our business and meet our liquidity requirements; our ability to obtain financing,
if required, on terms acceptable to us, if at all; our ability to successfully attract
strategic partners and to market both new and existing products and services domestically
and internationally; exposure to lawsuits and regulatory proceedings; governmental laws
and regulations affecting domestic and foreign operations; our ability to identify and
complete diversification opportunities; and the impact of acquisitions, divestitures,
restructurings, product withdrawals and other unusual items. Except as required by
applicable law, the Company undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or otherwise.

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3

PART I  -  FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL
STATEMENTS

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (DOLLARS IN THOUSANDS)

|                                           | OCTOBER 31,
2004 | JULY 31,
2004
|------------------------------------------ | ---------------- | -------------
|
|ASSETS                                     |                  |              
|Current Assets:                            |                  |              
|Cash and cash equivalents                  |                  |              
|Refundable income taxes                    |                  |              
|Prepaid expenses and other                 |                  |              
|                                           |                  |              
|Total current assets                       |                  |              
|Fixed assets, net                          |                  |              
|                                           |                  |              
|Deferred credit facility costs             |                  |              
|                                           |                  |              
|Total assets                               |                  |              
|                                           |                  |              
|LIABILITIES & STOCKHOLDERS' EQUITY         |                  |              
|Current Liabilities:                       |                  |              
|Accounts payable                           |                  |              
|Accrued expenses                           |                  |              
|Accrued income taxes                       |                  |              
|Due to related parties                     |                  |              
|                                           |                  |              
|Total current liabilities                  |                  |              
|Stockholders' Equity:                      |                  |              
|Common stock                               |                  |              
|Additional paid-in capital                 |                  |              
|Accumulated deficit                        |                  |              
|Treasury stock, at cost                    |                  |              
|                                           |                  |              
|Total stockholders' equity                 |                  |              
|                                           |                  |              
|Total liabilities and stockholders' equity |                  |              
|                                           |                  |              

See accompanying notes.

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4

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS
OF OPERATIONS (IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)

|                                             | THREE MONTHS ENDED
OCTOBER 31,
|-------------------------------------------- | ------------------------------
|
|Net sales                                    |                               
|Cost of goods sold                           |                               
|                                             |                               
|Gross loss                                   |                               
|Selling, general and administrative expenses |                               
|                                             |                               
|Operating loss                               |                               
|                                             |                               
|Other income (expense):                      |                               
|Interest and financing charges, net          |                               
|Loss on sale of property and equipment       |                               
|                                             |                               
|                                             |                               
|                                             |                               
|Net loss                                     |                               
|                                             |                               
|Net loss per common share, basic and diluted |                               
|                                             |                               

See accompanying notes.

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5

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS
OF CASH FLOWS (IN THOUSANDS)

|                                                 | THREE MONTHS ENDED
OCTOBER 31,
|------------------------------------------------ | ------------------------------
|
|OPERATING ACTIVITIES:                            |                               
|Net loss                                         |                               
|Adjustments to reconcile net loss to net cash    |                               
|provided by (used in) operating activities:      |                               
|Depreciation and amortization                    |                               
|Loss on sale of property and equipment           |                               
|Changes in operating assets and liabilities:     |                               
|Accounts receivable                              |                               
|Refundable income taxes                          |                               
|Inventories                                      |                               
|Prepaid expenses and other                       |                               
|Due to related parties                           |                               
|Accounts payable and other current liabilities   |                               
|                                                 |                               
|Net cash provided by (used in) operating         |                               
|activities                                       |                               
|INVESTING ACTIVITIES:                            |                               
|Proceeds from sale of property and equipment     |                               
|Purchase of fixed assets                         |                               
|                                                 |                               
|Net cash provided by (used in) investing         |                               
|activities                                       |                               
|FINANCING ACTIVITIES:                            |                               
|Proceeds from exercise of stock options          |                               
|Borrowing from a credit facility                 |                               
|                                                 |                               
|Net cash provided by financing activities        |                               
|                                                 |                               
|Increase (decrease) in cash and cash equivalents |                               
|Cash and cash equivalents, beginning of period   |                               
|                                                 |                               
|Cash and cash equivalents, end of period         |                               
|                                                 |                               
|SUPPLEMENTAL CASH FLOW INFORMATION:              |                               
|Income taxes paid                                |                               
|Interest expenses paid                           |                               

See accompanying notes.

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6

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2004

1.    
          DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

We
are a financial holding company whose business is conducted primarily through our indirect
wholly owned operating subsidiary, CMG Shanghai Ltd., a company organized under the laws
of the Peoples Republic of China. In April 2004, we acquired CMG Shanghai Ltd. and
its immediate parent, Cathay Merchant Group Ltd., a company organized under the laws of
Samoa. CMG Shanghai Ltd. is an international merchant banking company. Merchant banking
encompasses a broad spectrum of activities related to the integrated combination of
merchant banking, trading, financing commercial trade and proprietary investing. CMG
Shanghai Ltd.s merchant banking activities may provide specialized corporate finance
services and advise clients on corporate strategy and structure, including mergers and
acquisitions and capital raising. These activities may also include proprietary trading in
commodities and natural resources and proprietary investing of our own capital in
enterprises to realize long-term or trading gains.

We
were formed in January 1977 as American Electromedics Corp. and changed our name to
Equidyne Corporation in December 1999. In October 2004, we changed our name to Cathay
Merchant Group, Inc. Since our formation, we had invested in various medical device
companies and technologies. From January 1999 until January 2004, we had principally
focused on the development of patented, needle-free drug delivery systems, principally the
reusable INJEX System. In early 2002, our executive management evaluated our
technologies, markets and production capabilities and concluded that a change in our
strategic focus was necessary as our production capabilities were not cost effective nor
were our sales and marketing programs generating satisfactory results. We evaluated
strategic alternatives both within and outside of the medical products industry. On
January 6, 2004, Equidyne Systems, Inc., our wholly owned subsidiary, sold all its right,
title and interest in and to its needle-free technologies to HNS International Inc.

From
January 2004 to April 2004, we pursued the opportunity to enter into the international
merchant and investment banking industry, culminating in our acquisition of Cathay
Merchant Group Ltd. and CMG Shanghai Ltd. in April 2004. In December 2004, all the rights
under a memorandum of understanding dated September 16, 2004 among MFC Bancorp Ltd. and
three Chinese county governments, Weichang Manchu Mongolia Autonomous County Government of
Hebei Province, Yudaokou County Government and Laowopu County Government, relating to the
development a new 160-megawatt wind energy project in Hebei Province, China, were assigned
to our subsidiary Cathay Merchant Group Ltd. at no cost. The generation of electricity by
the planned project will depend, in part, upon satisfactory wind speeds at the site, and
upon the number of wind turbines. Accordingly, two meteorological masts were installed at
the site for wind-measurement purposes.

Basis of Presentation

The
interim period consolidated financial statements have been prepared by the Company
pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the
SEC). Certain information and footnote disclosure normally included in
financial statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such SEC rules and
regulations. The interim period consolidated financial statements should be read together
with the audited consolidated financial statements and accompanying notes included in the
Companys latest annual report on Form 10-KSB for the fiscal year ended July 31,
2004. In the opinion of the Company, the unaudited consolidated financial statements
contained herein contain all adjustments necessary to present a fair statement of the
results of the interim periods presented. The results for the periods presented herein may
not be indicative of the results for any subsequent period or the entire year.

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7

CATHAY MERCHANT GROUP,
INC. AND SUBSIDIARIES NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2004

2.    
          LOSS PER SHARE

Basic
loss per share is based upon the weighted average number of common shares outstanding
during the period. Diluted loss per share reflects the effect of dilutive securities, if
any, principally stock options and warrants. Dilutive securities were not included in the
calculation of diluted weighted average shares for the three months ended October 31, 2004
and 2003, due to their anti-dilutive effect.

The
following table sets forth the computation of basic and diluted loss per share (in
thousands, except per share amounts):

|                                       | THREE MONTHS ENDED
OCTOBER 31,
|-------------------------------------- | ------------------------------
|
|Net loss                               |                               
|                                       |                               
|Weighted-average shares                |                               
|                                       |                               
|Net loss per share (basic and diluted) |                               
|                                       |                               

3.    
          STOCK-BASED COMPENSATION

In
accordance with Statement No. 123, Accounting for Stock-Based Compensation
(FAS 123), the Company accounts for its two stock option plans and other
stock-based employee compensation using the intrinsic value method prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations, as described more fully in the
Companys annual report on Form 10-KSB for the year ended July 31, 2004. Accordingly,
compensation expense is recorded on the date of grant only to the extent the current
market price of the underlying stock exceeds the option exercise price. The Company did
not record any stock-based compensation expense in the three months ended October 31, 2004
and 2003.

Had
compensation expense been determined based on the fair values at dates of grant for its
stock options under FAS 123, as amended by FAS 148, net loss and net loss per share would
have been reported as indicated in the pro forma results below (in thousands, except per
share amounts):

|                                                                             | THREE MONTHS ENDED
OCTOBER 31,
|---------------------------------------------------------------------------- | ------------------------------
|
|Net loss, as reported                                                        |                               
|Deduct:  Stock-based  employee  compensation  expense  determined under fair |                               
|value based method                                                           |                               
|                                                                             |                               
|Pro forma net loss                                                           |                               
|                                                                             |                               
|Net loss per share, basic and diluted, as reported                           |                               
|                                                                             |                               
|Net loss per share, basic and diluted, pro forma                             |                               
|                                                                             |                               

For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options vesting period.

The
fair values under FAS 123 for options granted were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average assumptions:

|                      | 2003
|--------------------- | ----
|Expected life (years) | 3   
|Interest rate         | 4.0%
|Volatility            | 0.95
|Dividend yield        | 0.0%

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8

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

OVERVIEW

We
are a financial holding company whose business is conducted primarily through our indirect
wholly owned operating subsidiary, CMG Shanghai Ltd., a company organized under the laws
of the Peoples Republic of China. In April 2004, we acquired CMG Shanghai Ltd. and
its immediate parent, Cathay Merchant Group Ltd., a company organized under the laws of
Samoa. CMG Shanghai Ltd. is an international merchant banking company. Merchant banking
encompasses a broad spectrum of activities related to the integrated combination of
merchant banking, trading, financing commercial trade and proprietary investing. CMG
Shanghai Ltd.s merchant banking activities may provide specialized corporate finance
services and advise clients on corporate strategy and structure, including mergers and
acquisitions and capital raising. These activities may also include proprietary trading in
commodities and natural resources and proprietary investing of our own capital in
enterprises to realize long-term or trading gains.

We
were formed in January 1977 as American Electromedics Corp. and changed our name to
Equidyne Corporation in December 1999. In October 2004, we changed our name to Cathay
Merchant Group, Inc. Since our formation, we had invested in various medical device
companies and technologies. From January 1999 until January 2004, we had principally
focused on the development of patented, needle-free drug delivery systems, principally the
reusable INJEX System. In early 2002, our executive management evaluated our
technologies, markets and production capabilities and concluded that a change in our
strategic focus was necessary as our production capabilities were not cost effective nor
were our sales and marketing programs generating satisfactory results. We evaluated
strategic alternatives both within and outside of the medical products industry. On
January 6, 2004, Equidyne Systems, Inc., our wholly owned subsidiary, sold all its right,
title and interest in and to its needle-free technologies to HNS International Inc.

From
January 2004 to April 2004, we pursued the opportunity to enter into the international
merchant and investment banking industry, culminating in our acquisition of Cathay
Merchant Group Ltd. and CMG Shanghai Ltd. in April 2004. In December 2004, all the rights
under a memorandum of understanding dated September 16, 2004 among MFC Bancorp Ltd. and
three Chinese county governments, Weichang Manchu Mongolia Autonomous County Government of
Hebei Province, Yudaokou County Government and Laowopu County Government, relating to the
development a new 160-megawatt wind energy project in Hebei Province, China, were assigned
to our subsidiary Cathay Merchant Group Ltd. at no cost. The generation of electricity by
the planned project will depend, in part, upon satisfactory wind speeds at the site, and
upon the number of wind turbines. Accordingly, two meteorological masts were installed at
the site for wind-measurement purposes.

The
following discussion and analysis of the results of operations and financial condition of
the Company for the three months ended October 31, 2004 should be read in conjunction with
the consolidated financial statements and related notes included in this quarterly report,
as well as the Companys most recent annual report on Form 10-KSB for the fiscal year
ended July 31, 2004 filed with the U.S. Securities and Exchange Commission.

RESULTS OF OPERATIONS
 THREE MONTHS ENDED OCTOBER 31, 2004

Net
product sales were $nil for the three months ended October 31, 2004, compared to $2,000
for the same period in 2003. The decrease in sales through the Companys distribution
partners reflected our change in strategic focus and the effect of the cessation of most
sales and marketing activities for the needle-free business. On January 6, 2004, we sold
all of our remaining inventories to HNS International Inc. As a result of our acquisition
of Cathay Merchant Group Ltd. and CMG Shanghai Ltd., we refocused our business to pursue
merchant banking business in Asia. We are in the early stages of developing our planned
Twin Dragons Wind Farm project in China, and are currently exploring other business
opportunities in Asia. We do not expect to generate significant revenue from these
activities in the near term.

Cost
of sales for the three months ended October 31, 2004 were $nil, compared to $19,000 for
the same period in 2003.

Selling,
general and administrative expenses for the three months ended October 31, 2004 were $0.4
million compared to $1.6 million for the same period in 2003. The Company paid or accrued
$0.3 million for reimbursement of expenses and administrative and management fees to MFC
Bancorp Ltd. and its subsidiaries which have common directors with the Company for the
three months ended October 31, 2004.

---

9

Loss
on sale of patents, property and equipment were $nil for the three months ended October
31, 2004, compared to $20,000 in the same period in 2003.

We
reported net loss of $0.2 million, or $0.01 per common share for the three months ended
October 31, 2004, compared to $1.7 million, or $0.11 per common share, in the same period
in 2003.

LIQUIDITY AND CAPITAL
RESOURCES

At
October 31, 2004, the Company had working capital of $11.5 million, compared to working
capital of $10.2 million at July 31, 2004.

We
entered into a five-year $20 million revolving credit facility with MFC Merchant Bank
dated April 26, 2004 which is to mature in March 2009. MFC Merchant Bank has converted
$1,575,000 of the principal that we have drawn under the credit facility into 3,150,000
shares of our common stock at the exercise price of $0.50 per share. As of October 31,
2004, we have an unused portion of a credit facility of $18,425,000. We are required to
pay interest on any outstanding principal amount that we have drawn down under the credit
facility on the first banking day of each calendar month, at an annual rate of Libor
(being the one month London Inter-Bank Offered Rate fixed daily by the British Bankers
Association) plus 3.5%, based on a 360 day year. The credit facility is secured by a first
fixed and specific charge and security interest on all of our property, assets and
undertakings imposed under our promissory note in the aggregate principal amount of
$20,000,000, and a floating charge on all of our companys other property, assets and
undertakings not specifically mortgaged and charged under the promissory note, including
after-acquired assets or the proceeds of any and all assets. Our obligations under the
credit facility are also secured by a pledge agreement in the aggregate principal amount
of $20,000,000, pursuant to which we have pledged to MFC Merchant Bank all or our existing
and future pecuniary claims against third parties.

As
discussed below under the heading, Planned Future Operations  The Twin Dragons
Wind Farm Project, Hebei Province, China, we believe that we have sufficient working
capital to meet operating expenses in respect of the Twin Dragons Wind Farm Project during
the next twelve months. However, we are also seeking investments in or acquisitions of
companies, technologies or products in connection with our international merchant banking
activities. We may need additional capital if we pursue other opportunities that we may
identify through such activities. Should the need arise, we will consider financing
alternatives in addition to the possibility of further draws under our credit facility
with MFC Merchant Bank, including the possibility of effecting private placements of our
securities.

There
is no assurance that management will find suitable opportunities or effect the necessary
financial arrangements for such investments or provide the working capital needed for the
acquired activities.

Operating Activities

Operating
activities provided cash of $3.4 million for three months ended October 31, 2004, compared
to cash of $1.9 million used in the same period in 2003, primarily as a result of
collection of refundable income taxes in 2004. The tax refund resulted from the
utilization by our company of net operating loss carry-backs to reduce our taxable income
for the fiscal year ended July 31, 2001. Apart from a further tax refund of $146,000 that
we received during the quarter ending January 31, 2005, we do not anticipate to receive
any additional tax refunds in the future.

Investing Activities

Investing
activities used cash of $46,000 for the three months ended October 31, 2004, compared to
$10,000 cash provided in the same period in 2003, primarily due to purchase of fixed
assets in 2004.

Financing Activities

Financing
activities provided cash of $1.6 million for the three months ended October 31, 2004,
compared to $0.2 million in the same period in 2003, primarily due to borrowing under our
credit facility with MFC Merchant Bank in 2004.

---

10

PLANNED FUTURE OPERATIONS - THE TWIN
DRAGONS WIND FARM PROJECT, HEBEI PROVINCE, CHINA

On
December 3, 2004, our wholly-owned subsidiary, Cathay Merchant Group Ltd., was assigned
all of MFC Bancorp Ltd.s rights and interest under a memorandum of understanding
dated September 16, 2004, and a subsequent addendum, among MFC Bancorp Ltd. and three
Chinese county governments, Weichang Manchu Mongolia Autonomous County Government of Hebei
Province, Yudaokou County Government and Laowopu County Government, relating to an initial
development a new 160-megawatt wind energy project in Hebei Province, China, to be known
as the Twin Dragons Wind Farm.

Cathay
Merchant Group Ltd. has the exclusive right to develop a wind power project on 50 square
kilometers of land in Hebei Province, for a minimum of three years. Cathay Merchant Group
Ltd. is in the process of establishing a Shanghai-based wholly-owned foreign enterprise
under the laws of China, to be called Cathay Merchant Group Wind Energy Company.

The
generation of electricity by the planned project will depend, in part, upon satisfactory
wind speeds at the site, and upon the number of turbines that we erect on the site. Our
company has commenced testing to determine the viability of the Twin Dragons Wind
Farm. One of the most important factors that will determine whether or not our company
will proceed with the development and construction of the project will be the wind speed
on the property. For these purposes, the phrase wind speed refers to the wind
speeds for a location, which is a common wind industry standard. The wind speed is also
qualified by the height of the wind measuring equipment, with the default height normally
being 10 meters from the ground.

The
wind measurement and analysis phase of the project is anticipated to take one year. If,
after this phase, our company elects to proceed with the development and construction of
the Twin Dragons Wind Farm, we will secure power purchase agreements with prospective
purchasers of electrical energy. A power purchase agreement is an agreement with a utility
company that enables a supplier to sell electricity. The development of our wind farm is
dependent upon us entering into power purchase agreements with utility companies. The
ultimate development and size of our proposed wind farm will be dependent upon the
requirements and demands of the utility company or companies, as applicable. Once our
company enters into power purchase agreements, our company must raise money and commence
the development, construction and operation of the wind farm to produce electricity and
fulfill the terms of the power purchase agreements.

Under
the memorandum of understanding with the three Chinese county governments, we must install
at least one wind power turbine no later than September 26, 2007, failing which the Chinese county governments will be
entitled to take over the project and transfer it to a third party without penalty or
compensation to our company. Our current plan for the first phase of the development over
the initial three-year period, assuming satisfactory wind measurements, is to construct a
100-megawatt wind farm (between 50 to 70 wind turbines), at an estimated cost of
approximately $125 million.

Our
estimated operating expenses for the project over the next twelve months total $0.4.
We may install a third meteorolgoical mast on the property, which will require us to incur an additional
$50,000 in expenses, some of which will be absorbed by the current budget.

Our
estimates of our operating expenses over the next twelve months may be significantly
impacted by legislative changes that are anticipated to be introduced in China within the
next 12 months, in part in connection with a review of Chinese energy policy and
regulation that the Chinese government will be undertaking in connection with the
formulation of its 11th Five-Year Plan which will cover the period from 2006 to 2010.

We
anticipate that we will have sufficient working capital available to us to meet these
estimated costs and expenses over the next twelve months.

---

11

ITEM 3.    
CONTROLS AND PROCEDURES

We
maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Exchange Act reports is recorded, processed, summarized
and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, to allow for timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and procedures,
our management recognizes that any controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

As
of October 31, 2004, the end of the quarter covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on the foregoing,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by this report
at the reasonable assurance level.

There
has been no change in our internal controls over financial reporting that has materially
affected, or is reasonably likely to materially affect, our internal controls over
financial reporting subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed his evaluation.

PART II  OTHER
INFORMATION

ITEM 1.    
 LEGAL PROCEEDINGS

In
the ordinary course of conducting its business, the Company may become subject to
litigation and claims regarding various matters. There was no outstanding litigation as of
October 31, 2004.

ITEM 2.    
 CHANGES IN SECURITIES AND USE OF PROCEEDS

On
August 24, 2004, we issued 3,150,000 shares of our common stock upon exercise by MFC
Merchant Bank of its right to convert $1,575,000 of principal that we had drawn down under
our $20,000,000 credit facility dated April 26, 2004. In issuing these shares to MFC
Merchant Bank, we relied on section 3(a)(9) of the Securities Act of 1933.

ITEM 3.    
 DEFAULTS UPON SENIOR SECURITIES

None.

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

On
September 16, 2004, at a special meeting of our stockholders, our stockholders approved
the change of our name from Equidyne Corporation to Cathay Merchant Group, Inc. In
addition, our stockholders approved an increase in the number of authorized shares of our
common stock from 35,000,000 to 100,000,000, and they approved the issuance of such number
of shares of common stock to MFC Merchant Bank as may be required by the terms of our
$20,000,000 credit facility.

ITEM 5.    
OTHER INFORMATION

None.

---

12

ITEM 6.    
 EXHIBITS AND REPORTS ON FORMS 8-K

| | (a)    
Exhibits
| | ----------------

| | Exhibit
31.1  Certification of the Chief Executive Officer and Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | --------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
32.1  Certification of the Principal Executive Officer and Principal Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
10.1  Memorandum of understanding dated September 26, 2004 among MFC Bancorp Ltd.,
Weichang Manchu Mongolia Autonomous County Government of Hebei Province, Yudaokou County
Government and Laowopu County Government, relating to the development of the Twin Dragons
Wind Farm.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
10.2  Addendum to the memorandum of understanding dated September 26, 2004 adding an
additional 10 square kiliometers of land to the property that will form part of the Twin
Dragons Wind Farm.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Exhibit
10.3  Notice of Transfer and Assignment Agreement among MFC Bancorp Ltd., the
Company, Cathay Merchant Group Ltd., Weichang Manchu Mongolia Autonomous County Government
of Hebei Province, Yudaokou County Government and Laowopu County Government.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)             Reports
on Form 8-K:
| | ------------------------------------

| | On
October 4, 2004, the Company filed a Report on Form 8-K to disclose the change in
directors.
| | -----------------------------------------------------------------------------------------------

| | On
October 26, 2004, the Company filed a Report on Form 8-K to disclose appointment of a new
director.
| | ------------------------------------------------------------------------------------------------------

| | On
December 9, 2004, the Company filed a Report on Form 8-K to disclose the assignment by MFC
Bancorp Ltd. to Cathay Merchant Group Ltd. of the memorandum of understanding with
Weichang Manchu Mongolia Autonomous County Government of Hebei Province, Yudaokou County
Government and Laowopu County Government, relating to the development of the Twin Dragons
Wind Farm.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

In
accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|       |                   |                                                                                                                                                                        
|------ | ----------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                   | CATHAY MERCHANT GROUP, INC.                                                                                                                                            
|Dated: | December 15, 2004 | By: /s/ Michael J. Smith
Michael J. Smith, Chief Executive Officer,
President and Chief Financial Officer
(Principal Executive Officer and
Principal Financial Officer)