---

# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

# FORM 10-KSB

---

|[X] | ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------

For the
Fiscal Year Ended: May 31,  2004

OR

---

|[   ] | TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|----- | ----------------------------------------------------------------------------------

For
    the transition period from _______________ to ______________.

Commission File Number: 0-17284

Mercari Communications
Group, Ltd.
(Exact name of small business issuer in its charter)

Colorado   
              
              
    
              
              
        84-1085935
              
  
    (State or other jurisdiction of    
              
    
             
   (I.R.S. employer identification number)
              
  
     incorporation or organization)

1005 East
Cobblestone  Drive, Highlands Ranch, Colorado 80126 (Address
of principal executive offices)  zip
code)

Issuers
telephone number:      
(303) 791-3888

Securities registered
pursuant to section 12 (b) of the Act:      None

Securities registered
pursuant to section 12 (g) of the Act:

Common
stock, $0.00001 Par Value(Title of class)

Check whether the issuer
(1) 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 for the past 90 days.
Yes      [   ]          
NO  [X]

Check if there is no
disclosure of delinquent filers in response to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.       [X]

State
issuers revenues for its most recent fiscal year. The Issuer had no
revenue during its most recent fiscal year.

State
the aggregate market value of voting and non-voting common equity held by
non-affiliates computed with reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days: the aggregate value of the voting and
non-voting common stock held by non-affiliates as of May 31, 2004 is not
possible to determine, as there is no reported public market for the common
stock or other common equity of the Issuer.

State
the number of shares outstanding for each of registrants classes of common
equity, as of the latest practicable date: As of August 27, 2004, there were
1,055,555 shares of Issuers common stock outstanding. No other class of
equity securities are issued or outstanding.

Transition
Small Business Disclosure Format:  Yes    [   ]   No   [X}

# DOCUMENTS
INCORPORATED BY REFERENCE

List hereunder the
documents incorporated by reference and the Part of this Form 10-KSB into which
the document is incorporated:   None

---

## Part I

---

ITEM 1
DESCRIPTION OF BUSINESS

---

Mercari
Communications Group, Ltd. (the Company) was incorporated in December 1987 to be a
multi-faceted  producer and distributor of relevant life management products and services
designed to enhance personal  development and professional effectiveness.

The
Company completed an Initial Public Offering (IPO) of its securities in
September 1988 and sold 86,263 units at $0.01 per unit, generating $776,370
in gross proceeds. Each unit consisted of one common share and one Series A
Warrant to purchase one common share. Following the offering and after paying
outstanding debt and offering expenses, net proceeds to the Company were
$539,213. The Company registered its common stock under the Securities Exchange
Act of 1934, as amended, in 1988.

On
April 20, 1989 the Company called all 96,819 outstanding Series A Warrants
for redemption on June 16, 1989. There were 3,150 Series A Warrants
exercised at an exercise price of $0.01 per share for gross proceeds of $28,326
and 336 Series A Warrants exercised at $0.0125 for gross proceeds of $3,775,
or total gross proceeds of $32,101. All remaining Series A Warrants expired
following the warrant call.

The
Company ceased all operations in mid-year 1990 and was dormant until 2001.

On
December 10, 2000 one person who had been a director in 1990 (the other
directors had resigned) and two unaffiliated businessmen created a new business
plan for the Company and appointed new officers and two new directors for the
purpose of implementing the new plan. The new business plan primarily provided
for the clean up of the Company and for filing of all delinquent
reports with the Colorado Secretary of State, the United States Securities and
Exchange Commission and the Internal Revenue Service and restructuring the
balance sheet and the capital structure. The purpose of these actions is to
allow the Company to then acquire an operating privately owned business, through
a reverse merger or other transaction, with assets, revenues and earnings and
that intends to become a publicly owned corporation.

On
December 17, 2001 the three directors approved the cancellation of 225,833
shares previously issued to twenty-one people who in 1988 had each entered into
an agreement with the Company, and with the underwriter for the Company, which
required them to each cancel seventy-five percent (75%) of the stock they held
if the Company did not meet certain revenue levels within three years from the
date of the initial public offering. The Company did not meet those revenue
levels before the Company ceased operations and the shares were therefore
subject to cancellation. The Board of Directors also authorized the issuance of
843,305 restricted common shares at par value ($0.0001 per share) to the
three directors for $7,589.75 in cash and services. Following the cancellation
of the 225,833 and the purchase of 843,305, there were 1,055,555
common shares issued or committed and deemed to be outstanding. The directors
then proceeded to cause the Company to become current in its reporting
obligations under the Securities Exchange Act of 1934, and to complete other
delinquent filings.

Beginning
in 2002, the Company, acting through its president, began to seek a
privately-owned business which would be interested in an acquisition by or of
the Company. Through May 31, 2004, the end of its most recent fiscal year, the
Company had not found any acceptable acquisition candidate.

2

---

In
March 2004 the Company entered into a consulting agreement with an unrelated
consulting firm under which the Company engaged the consultant to serve as the
Companys exclusive placement agent and investment banker (i) to assist the
Company to seek and evaluate potential acquisition or merger target businesses;
and (ii) to advise the Company in evaluating and revising its capital structure
in connection with any acquisition transaction. In the agreement the Company
agreed to compensate the consultant by paying a cash financing fee equal to
seven percent (7%) of the gross proceeds from each transaction completed or
commenced during the term of the agreement. A transaction for
purposes of the agreement includes a merger, business combination or
reorganization, acquisition and/or purchase of all or substantially all of the
securities or stock or assets of another company or any similar transaction or
combination thereof. The financing fee and the consultants out-of-pocket
expenses are payable only upon completion of such a transaction. In the
Consulting Agreement, the Company agreed to promptly make all filings necessary
to become current under the Securities Exchange Act of 1934, as amended, and to
call a meeting of the Companys shareholders for the purpose of approving a
reverse stock split.

The
Companys president, Robert W. Marsik, then borrowed $50,000 from an
unrelated third party introduced by the consultant. Mr. Marsik contributed the
funds to the Company as additional capital. The Company has used a portion of
the proceeds of the loan to pay amounts owed by the Company to its auditors and
legal counsel and to pay all costs of the Company incurred in connection with
preparing and filing all required reports under the Securities Exchange Act of
1934, as amended, and to bring the Company current in its filing obligations
under that Act, and expenses incurred in connection with holding a special
meeting of shareholders to approve a reverse share split and other
matters.

Mr.
Marsiks note to the lender is due March 9, 2006. As security for
payment of the note, Mr. Marsik and the other two directors of the Company a
total of 533,083 shares of Company common stock owned by them to an affiliate of
the lender as an accommodation pledge.

At
a special meeting of shareholders of the Company held August 3, 2004, the
shareholders of the Company approved a Plan of Recapitalization pursuant to
which a 900-into-1 reverse stock split of all the Companys outstanding
common stock was effected. As a result of the reverse stock split, the number of
outstanding common shares was reduced from 950,000,000 to 1,055,555. All
references to the Companys common stock have been restated to reflect the
reverse stock split. At the shareholders meeting, the shareholders also
authorized the Board of Directors to change the name of the corporation by
amending the Articles of Incorporation at such time as the Company completes an
acquisition transaction with another business entity. Finally, shareholders also
approved a quasi-reorganization pursuant to which the balance sheet
of the Company will be adjusted, effective March 1, 2004, the first day of the
fourth quarter, to eliminate accumulated deficit incurred through 1990 and to
reduce additional paid-in capital and adjust shareholder equity to more
accurately reflect that the financial condition of the Company following its
reactivation in 2001.

---

ITEM  2
DESCRIPTION OF PROPERTY

---

The
principal executive offices of the Company are currently located at the
home of the Companys chairman, Thomas A. Higgins, 1005 East Cobblestone
Drive, Highlands Ranch, Colorado 80126. The telephone number at this address is
303- 791-3888. The Company is receiving the use of this space free of charge
from Mr. Higgins.

---

# ITEM
3 LEGAL PROCEEDINGS

---

No
material legal proceedings to which the Company is a party or to which the
Companies property is subject is pending and no such material proceeding is
known by management to be contemplated.

3

---

---

# ITEM 4
SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS

---

There
were no meetings of security holders during the period covered by this report.
At a special meeting of shareholders held August 3, 2004, in the first quarter
of the Companys current fiscal year, shareholders approved the following
matters:

| | (a)
Adoption of a Plan of Recapitalization pursuant to which a reverse share split
of 900 shares into one share was effected. As a result of the approval of the
reverse stock split, the Companys 950,000,000 outstanding shares of common
stock were reduced to 1,055,555 shares, plus shares issued in rounding of
fractional shares. There was no change in the number of authorized shares which
the Company may issue.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b)
Approval of an amendment to the Articles of Incorporation of the Company to
change the name of the Company to a name to be selected in the future by the
Board of Directors at such time as the Company completes an acquisition
transaction with another business entity.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c)
The approval of a quasi-reorganization effective March 1, 2004,
pursuant to which the balance sheet of the Company was adjusted to eliminate
accumulated deficit incurred through 1990 and to reduce additional paid-in
capital and adjust shareholder equity to more accurately reflect that the
financial condition of the Company following its reactivation in 2001.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Each
of the above matters were approved by the affirmative vote of holders in excess
of 860,250 shares. No shareholders voted in opposition to approval of the
above matters.

# PART
II

---

# ITEM 5
MARKET FOR COMMON EQUITY ANDRELATED STOCKHOLDER MATTERS

---

(a)
Market Information.

No
public market for the common stock of the Company existed as of the date of this
report, nor for the last five years. Any public market which previously existed
for the common stock ceased when the business operations were discontinued in
August 1990.

Outstanding
shares and shareholders

(b)
Holders.

Shareholders
of the Company adopted a 900-into-1 reverse stock split on August 3, 2004, effective
immediately.  All information relating to outstanding common stock in this  report have
been adjusted to reflect the effect of this reverse stock split.

As
of May 31, 2002, the transfer ledgers maintained by the Companys
stock transfer agent indicated that there were 438,083 shares of common stock
issued and outstanding held by approximately 300 shareholders of record on that
date. There were no shares of preferred stock outstanding on that date. The
Board of Directors previously, in December 2001, had authorized cancellation of
225,833 common shares as described in Item 1 above, and issuance of 843,305
common shares. As a result of such actions, there were authorized and
outstanding a total of 1,055,555 shares. During the fiscal year ended May 31,
2003, the transfer agent received a bond from a bank which had previously held
certificates representing the 225,833 common shares in escrow pending a
determination whether cancellation was required, and the transfer agent formally
canceled such shares. Certificates representing the 843,305 common shares
authorized for issuance in 2001 were not issued by the transfer agent until
2004. However, as of the end of each of the last two fiscal years, the Company
had outstanding, or committed for issuance, 1,055,555 shares. Following adoption
of the reverse stock split on August 3, 2004, there are now approximately
1,055,555 shares issued and outstanding as fractional shares after the reverse
stock split were rounded up to the next higher whole number of shares, and
holders of fewer than 100 shares were each rounded up to 100
shares.

4

---

(c)
Dividends.

The
Company has not declared or paid any dividends on the common stock from
inception to the date of this report, although there are no restrictions on the
payment of dividends. Further, no dividends are contemplated at any time in the
foreseeable future.

(d)
Securities Authorized for Issuance Under Equity Compensation Plans.

There
are no securities of the Company authorized or committed for issuance under any
equity or other compensation plan.

---

# ITEM
6 MANAGEMENTS DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

---

The
following should be reviewed in connection with the financial statements and
managements comments thereon set forth under this section and Item 7
below.

Plan of
Operations

The
Company had no operations from 1990 through 2004. The Company is a development
stage business, which intends to acquire a United States or foreign based
business which is privately owned and wishes to become a publicly owned
business. The Company is now current in its state and federal filing
obligations, and is current in its reporting obligations under the Securities
Exchange Act of 1934, as amended. The Company is now actively seeking one or
more acquisition candidates.

During
each of the years since the Company was reactivated, the Company has had no
revenue and has had losses approximately equal to the expenditures made to
reactivate and meet filing and reporting obligations. We funded these
expenditures using capital contributions and proceeds of loans from our
directors. We do not expect any revenue unless and until a business acquisition
transaction is completed. Our expenses have been paid from capital contributions
and advances from the three directors.

Liquidity
and Capital Resources

The
Company requires working capital principally to fund its current operations.
There are no commitments from banks or other lending sources for lines of credit
or similar short-term borrowing, but the Company has been able to obtain
additional capital required from its directors. From time to time in the past,
required short-term borrowing have been obtained from a principal shareholder or
other related entities.

In
order to complete any acquisition, the Company may be required to supplement its
available cash and other liquid assets with proceeds from borrowings, the sale
of additional securities, including the private placement of restricted stock
and/or a public offering, or other sources. There can be no assurance that any
such required additional funding will be available or favorable to the Company.

The
Companys business plan requires substantial funding from a public or private
offering of its common stock in connection with a business acquisition, for which the
Company has no commitments. The Company intends to actively pursue other
financing or funding opportunities.

---

# ITEM
7 FINANCIAL STATEMENTS

---

The
financial statements of the Company and supplementary data are included
beginning immediately following the signature page to this report. See Item 13
for a list of the financial statements and financial statement schedules
included.

---

# ITEM 8
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE

---

The
Company has had no disagreement with its accountant on any matter of
accounting principal or practice, financial statement disclosure or auditing
scope or procedure which would have caused the accountant to make reference in
its report upon the subject matter of the disagreement.

5

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# PART  III

---

ITEM
9 DIRECTORS EXECUTIVE OFFICERS OF THE COMPANY

---

The
following table sets forth the names and ages of all directors and executive officers of
the Company as of the date of this report:

|Directors Name   | Age | Position
|----------------- | --- | --------
|Thomas A. Higgins |     | 55      
|Robert W. Marsik  |     | 58      
|Allan Bergenfield |     | 62      

* No
current director has any arrangement or understanding whereby they are or will
be selected as a director or nominee past the current term of office.

Officers
will hold office until the next annual meeting of shareholders and until their
successors have been duly elected and qualified. The officers are elected by the
Board of Directors at its annual meeting immediately following the
shareholders annual meeting and hold office until their death or until
they earlier resign or are removed from office. There are no written or other
contracts providing for the election of directors or term of employment of
executive officers, all of whom serve on an at will basis.

The
Company does not have any standing audit, nominating or compensation committees,
or any committees performing similar functions. The Company has no such
committees because of its relative inactivity and limited financial resources.
The Board will meet periodically throughout the year as necessity dictates.
During the years of 1990 through 1999 the Board held no meetings and there were
no actions taken by unanimous consent. During each fiscal year from 2001 through
May 31, 2004 there was one meeting of the Board of Directors, by telephone.

Executive
Profiles

Robert
W. Marsik; Chairman, Chief Executive Officer, President and Secretary
For the past one year he has been employed as a car salesman for Cush Honda in
Escondido California. For the five years prior, he was an independent business
broker with a merger and acquisition firm in Irvine California and was Chief
Executive Officer, President, Vice President and Director for numerous public
companies over the last twenty years. Presently, he is a director and officer of
the Company only. He successfully assisted with several IPO, secondary and
warrant exercise offerings for the companies he was involved in and has merger
and acquisition experience with several public companies.

Allan
Bergenfield Mr. Bergenfield has been a director since 2000. He is the
President and principal owner of Bergenfield and Associates, which is a regional
sales and marketing company servicing primarily the Eastern Seaboard portion of
the United States and provides sales, broker and marketing services for numerous
personal care manufacturing companies. He established this business in 1985
after resigning a position as Senior Vice President of Marketing for Minnetonka
Inc. a manufacturer of health and beauty aids. Mr. Bergenfield has also served
as a member of the Board of Directors for other public and private companies and
brings considerable management experience to the Company.

6

---

Thomas
A. Higgins  Mr. Higgins has been a director since inception. Mr.
Higgins received a Bachelor of Arts degree from Drake University in 1971 and a
Masters of Public Administration degree from the University of Colorado in 1974.
Mr. Higgins has served as an Officer and Director for several companies that
successfully completed IPO offerings, secondary and warrant exercise offerings
and brings many management skills and experience to the Company. For the past
five years he has been self employed in the home improvement industry and in
2002 started Superior Products Company, which sells home improvement products in
the Denver Colorado market area. Mr. Higgins received a Bachelor of Arts degree
from Drake University in 1971 and a Masters of Public Administration degree from
the University of Colorado in 1974. Mr. Higgins has served as an Officer and
Director for several companies that successfully completed IPO offerings,
secondary and warrant exercise offerings prior to 1990.

---

# ITEM 10
EXECUTIVE COMPENSATION

---

No
compensation was paid to the Board of Directors or to Executive Officers of the
Company in their capacities as such, or for any other purpose between December
2000, and the date of this report, and no cash compensation is anticipated to be
paid at any time in the immediate future to any member of the Board, or to any
executive officer.

Employment
Agreements or Other Compensation Arrangements:   None.

---

# ITEM 11
SECURITY OWNERSHIP OF BENEFICIAL OWNERSAND MANAGEMENT

---

Based
upon information provided to the Company by its transfer agent, the following
table sets forth, as of August 27, 2004, the shares of common stock owned by each
current director, by directors and executive officers as a group and by each
person known by the Company to own more than 5 % of the outstanding common
stock.

|Name and Addressof Beneficial OwnersDirectors | # ofSharesOwned(1) | Percent
|--------------------------------------------- | ------------------ | -------
|Thomas A. Higgins                             |                    | 263,888
|1005 East Cobblestone Dr.                     |                   
|Highland Ranch, CO 80126                      |                   
|Robert W. Marsik                              |                    | 551,917
|1960 White Birch Drive                        |                   
|Vista, CA 92083                               |                   
|Allan Bergenfield                             |                    | 44,445 
|548 Longhorn Crescent                         |                   
|Rockville, MD 20850                           |                   
|All Executive Officers and                    |                   
|Directors as a Group                          |                   
|(3 persons)                                   |                    | 860,250

|(1) |  | Based
upon 1,055,555 shares of common stock issued and outstanding as of August
27, 2004. Reflects a 900-into-one reverse stock split adopted by shareholders
August 3, 2004.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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---

# ITEM  12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

---

The
office space, telephone and office supplies consumed by the Company are provided
without cost by Thomas Higgins, Chairman, and Robert W. Marsik, President.

---

# ITEM
13. EXHIBITS, AND REPORTS ON FORM 8-K

---

(a)
The following documents are filed as part of this report.

1.   Financial
Statements

|                                                                        | Page
|----------------------------------------------------------------------- | ----
|Report of Robison, Hill & Co., Independent Certified Public Accountants |     
|Balance Sheets as of May 31, 2004 and 2003                              |     
|Statement of Operations for the years ended May 31, 2004 and 2003       |     
|Statement of Stockholders Equity for the                               |     
|Period from December 30, 1987 (inception) to May 31, 2004               |     
|Statement of Cash Flows for the years ended May 31, 2004 and 2003       |     
|Notes to Financial Statements                                           |     

2.   
Financial Statement Schedules

None.

3.   Exhibits

The
following exhibits are included as part of this report:

|ExhibitNumber | Title of Document
|------------- | -----------------
|10            |                  
|31            |                  
|32            |                  

There were
no reports filed on Form 8-K during the year ended May 31, 2004.

8

---

---

ITEM
14. CONTROLS AND PROCEDURES

---

The
Companys Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this annual report on Form 10-KSB, that the Companys disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:

| | (i)
this annual report on Form 10-KSB contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this annual report on Form 10-KSB, and
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)
the financial statements, and other financial information included in this annual report
on Form 10-KSB, fairly present in all material respects the financial condition, results
of operations and cash flows of the Company as of, and for, the periods presented in this
annual report on Form 10-KSB.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

There
have been no significant changes in the Companys internal controls or in
other factors since the date of the Chief Executive Officers and Chief
Financial Officers evaluation that could significantly affect these
internal controls, including any corrective actions with regards to significant
deficiencies and material weaknesses.

9

---

---

ITEM
15. PRINCIPAL ACCOUNTANT FEES & SERVICES

---

The
firm of Robison Hill & Company has acted as independent auditor for the
Company for the fiscal years ended May 31, 2001 through 2004. The Independent
Auditors Report on the financial statements of the Company for each of the
last four fiscal years each raised substantial doubt about the Companys
ability to be a going concern and each report indicated that the financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The Company has had no disagreements with its auditors on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the accountants
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports.

The
aggregate fees billed for each of the last three fiscal years for professional
services rendered by our auditors for the audit of the Companys annual
financial statements and review of financial statements included in the
Companys quarterly financial statements, including services normally
provided by accountants in connection with statutory and regulatory filings or
engagements is as follows:

|               | Year EndedMay 31, 2004 | Year EndedMay 31, 2003
|-------------- | ---------------------- | ----------------------
|               |                        | $-0-                  
|Audit Fees     |                        | -0-                   
|Tax Fees       |                        | -0-                   
|All Other Fees |                       

Audit
Fees. Consists of fees billed for professional services rendered for the
audits of our consolidated financial statements, reviews of our interim
consolidated financial statements included in quarterly reports, services
performed in connection with filings with the Securities and Exchange Commission
and other services that are normally provided by Robison, Hill & Company in
connection with statutory and regulatory filings or engagements.

Tax
Fees. Consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding
federal, state and local tax compliance and consultation in connection with
various transactions and acquisitions.

Other
Fees. Except as set forth above, none of the amounts the Company paid to its
independent auditors represented charges for tax advice or tax planning
services. Likewise, none of the fees paid to the auditors presented charges for
financial information assistance design, implementation or similar services, or
for any other services.

Audit
Committee Pre-Approval of Audit and Permissible Non-Audit Services of  Independent
Auditors

The
Audit Committee, consisting of all directors, is to pre-approve all audit
and non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services
as allowed by law or regulation. Pre-approval is generally provided for up to
one year and any pre-approval is detailed as to the particular service or
category of services and is generally subject to a specifically approved amount.
The independent auditors and management are required to periodically report to
the Audit Committee regarding the extent of services provided by the independent
auditors in accordance with this pre-approval and the fees incurred to date. The
Audit Committee may also pre-approve particular services on a case-by-case
basis.

The
Board of Directors, acting as the Audit Committee, pre-approved 100% of the
Companys 2004 audit fees, audit-related fees, tax fees, and all other fees
to the extent the services occurred after May 6, 2003, the effective date of the
Securities and Exchange Commissions final pre-approval
rules.

10

---

---

SIGNATURES

---

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

| | MERCARI
COMMUNICATIONS GROUP, LTD.
By  /s/  Robert W. Marsik
           Robert W. Marsik, President
           (Principal Executive and Financial Officer)
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: September 13,
2004

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 13th day of September 2004.

|           | 
|---------- | 
|Signatures | 

|                                        | 
|--------------------------------------- | 
|/s/  Thomas A. HigginsThomas A. Higgins | 

|                                      | 
|------------------------------------- | 
|/s/  Robert W. MarsikRobert W. Marsik | 

|                                        | 
|--------------------------------------- | 
|/s/  Allan BergenfieldAllan Bergenfield | 

11

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MERCARI
COMMUNICATIONS GROUP, LTD.

(A
Development Stage Company)

_________________

INDEPENDENT
AUDITORS REPORT

MAY
31, 2004 AND 2003

CONTENTS

|                                                                  | Page
|----------------------------------------------------------------- | ----
|Independent Auditors Repor                                       |     
|Balance Sheets May 31, 2004 and 2003                              |     
|Statement of Operations For the Years Ended May 31, 2004 and 2003 |     
|Statement of Stockholders Equity for the                         |     
|Period from December 30, 1987 (Inception) to May 31, 2004         |     
|Statement of Cash Flows For the Years Ended May 31, 2004 and 2003 |     
|Notes to Financial Statements                                     |     

12

---

INDEPENDENT
AUDITORS REPORT

Mercari
Communications Group, Ltd.(A Development Stage Company)

We
have audited the accompanying balance sheets of Mercari Communications Group,
Ltd. (a development stage company) as of May 31, 2004 and 2003, and the related
statements of operations and cash flows for the two years ended May 31, 2004,
and the cumulative period from August 31, 2001 (inception of development stage)
to May 31, 2004, and the statement of stockholders equity for the period
from December 30, 1987 (inception) to May 31, 2004. These financial statements
are the responsibility of the Companys management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Mercari Communications Group, Ltd.
(a development stage company) as of May 31, 2004 and 2003, and the results of
its operations and its cash flows for the two years ended May 31, 2004, and the
cumulative period from August 31, 2001 (inception of development stage) to May
31, 2004 in conformity with accounting principles generally accepted in the
United States of America.

| | Respectfully
submitted,/s/ Robison, Hill & Co.
Certified Public Accountants
| | ---------------------------------------------------------------------------

Salt Lake City,
UtahAugust 27, 2004

F - 1

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)BALANCE SHEETS

|                                                  | May 31, |           
|------------------------------------------------- | ------- | ----------
|
|Current Assets                                    |         |           
|Cash                                              |         | $      710
|Cash in Escrow                                    |         | 16,681    
|Prepaid Expense                                   |         | 3,500     
|                                                  |         |           
|Total Assets                                      |         | $ 20,891  
|                                                  |         |           
|                                                  |         |           
|Current Liabilities:                              |        
|Accounts Payable & Accrued Liabilities            |         | $   1,628 
|Shareholder Loans                                 |         | 550       
|                                                  |         |           
|Total Liabilities                                 |         | 2,178     
|                                                  |         |           
|Stockholders Equity:                             |        
|Common Stock, Par value $.00001                   |        
|Authorized 950,000,000 shares,                    |        
|Issued 1,055,555 shares at May 31, 2004 and 2003  |         | 10        
|Paid-In Capital                                   |         | 31,134    
|Retained deficit (prior to quasi reorganization)  |         | --        
|Deficit accumulated during the                    |        
|development stage (prior to quasi reorganization) |         | --        
|Deficit accumulated during the                    |        
|development stage since March 1, 2004             |        
|in connection with quasi reorganization           |         | (12,431   
|                                                  |         |           
|Total Stockholders Equity                        |         | 18,713    
|                                                  |         |           
|Total Liabilities and                             |        
|Stockholders Equity                              |         | $ 20,891  
|                                                  |         |           
|                                                  |         |           

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

F - 2

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENTS OF OPERATIONS

|                                   | For the year endedMay 31, | Cumulative               since           March 1,               2004         Inception of         development |  
|---------------------------------- | ------------------------- | ------------------------------------------------------------------------------------------------------------- | -
|
|Revenues:                          |                           | $         --                                                                                                  |  
|Expenses:                          |                           | 21,401                                                                                                        |  
|                                   |                           |                                                                                                               |  
|Net Income                         |                           | $(21,401                                                                                                      | )
|                                   |                           |                                                                                                               |  
|                                   |                           |                                                                                                               |  
|Basic & Diluted Earnings per share |                           | $    (0.02                                                                                                    | )
|                                   |                           |                                                                                                               |  
|                                   |                           |                                                                                                               |  

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

F - 3

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2004

|                                   | Common Stock                               Par | Common                Stock | Paid-In | Retained    | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi |  |              
|---------------------------------- | ---------------------------------------------- | --------------------------- | ------- | ----------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- |  | -------------
|
|Balance at December 30, 1987       |                                                |                             |         |             |                                                                                   |                                                                              |  |              
|(inception)                        |                                                | --                          |         | $        -- |                                                                                   | $        --                                                                  |  | $          --
|Stock issued for cash - $.00001/sh |                                                | 301,111                     |         | 3           |                                                                                   | --                                                                           |  | 2,707        
|Stock issued for cash - $.0001/sh  |                                                | 8,889                       |         | --          |                                                                                   | --                                                                           |  | 800          
|Stock issued for cash - $.0025/sh  |                                                | 8,889                       |         | --          |                                                                                   | --                                                                           |  | 20,000       
|Offering costs                     |                                                | --                          |         | --          |                                                                                   | --                                                                           |  | (500         
|Net loss                           |                                                | --                          |         | --          |                                                                                   | --                                                                           |  | --           
|                                   |                                                |                             |         |             |                                                                                   |                                                                              |  |              
|Balance at May 31, 1988            |                                                | 318,889                     |         | 3           |                                                                                   | --                                                                           |  | 23,007       
|Stock issued for cash - $.0001/sh  |                                                | 1,667                       |         | --          |                                                                                   | --                                                                           |  | 150          
|Stock issued for cash - $.01/sh    |                                                | 86,263                      |         | 1           |                                                                                   | --                                                                           |  | 776,370      
|Offering costs                     |                                                | --                          |         | --          |                                                                                   | --                                                                           |  | (126,353     
|Stock issued for cash - $.01/sh    |                                                | 3,150                       |         | --          |                                                                                   | --                                                                           |  | 28,354       
|Net loss                           |                                                | --                          |         | --          |                                                                                   | --                                                                           |  | --           
|                                   |                                                |                             |         |             |                                                                                   |                                                                              |  |              
|Balance at May 31, 1989            |                                                | 409,969                     |         | 4           |                                                                                   | --                                                                           |  | 701,528      

F - 4

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2004

|                         | Common Stock                               Par | Common                Stock | Paid-In | Retained | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi |   |          
|------------------------ | ---------------------------------------------- | --------------------------- | ------- | -------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | - | ---------
|
|Balance at May 31, 1989  |                                                | 409,969                     |         | $   4    |                                                                                   | $ --                                                                         |   | $ 701,528
|Stock issued for cash -  |                                               
|$.0125/share             |                                                | 336                         |         | --       |                                                                                   | --                                                                           |   | 3,778    
|Stock issued for debt -  |                                               
|$.004/share              |                                                | 27,778                      |         | --       |                                                                                   | --                                                                           |   | 103,355  
|Net loss                 |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --       
|Write-off of assets      |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --       
|                         |                                                |                             |         |          |                                                                                   |                                                                              |   |          
|Balance at May 31, 1990  |                                                | 438,083                     |         | 4        |                                                                                   | --                                                                           |   | 808,661  
|                         |                                                |                             |         |          |                                                                                   |                                                                              |   |          
|Balance at May 31, 2001  |                                                | 438,083                     |         | 4        |                                                                                   | --                                                                           |   | 808,661  
|December 17, 2001 shares |                                               
|to be cancelled          |                                                | (225,833                    | )       | --       |                                                                                   | (2                                                                           | ) | 2        
|December 17, 2001 shares |                                               
|to be issued             |                                                | 843,305                     |         | --       |                                                                                   | 8                                                                            |   | 7,582    
|Capital contributed by   |                                               
|shareholders             |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | 7,677    
|Net loss                 |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --       
|                         |                                                |                             |         |          |                                                                                   |                                                                              |   |          
|Balance at May 31, 2002  |                                                | 1,055,555                   |         | 4        |                                                                                   | 6                                                                            |   | 823,922  

F - 5

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2004

|                                    | Common Stock                               Par | Common                Stock | Paid-In | Retained | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi |   |           
|----------------------------------- | ---------------------------------------------- | --------------------------- | ------- | -------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | - | ----------
|
|Balance at May 31, 2002             |                                                | 1,055,555                   |         | $   4    |                                                                                   | $ 6                                                                          |   | $ 823,922 
|Cancellation of shares previously   |                                               
|authorized                          |                                                | --                          |         | (2       | )                                                                                 | 2                                                                            |   | --        
|Issuance of shares previously       |                                               
|authorized                          |                                                | --                          |         | 8        |                                                                                   | (8                                                                           | ) | --        
|Net loss                            |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --        
|                                    |                                                |                             |         |          |                                                                                   |                                                                              |   |           
|Balance at May 31, 2003             |                                                | 1,055,555                   |         | 10       |                                                                                   | --                                                                           |   | 823,922   
|Expired accounts payable            |                                               
|reclassified to paid-in capital     |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | 110,435   
|Capital contributed by shareholder  |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | 50,000    
|Net loss (prior to quasi            |                                               
|reorganization)                     |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --        
|Quasi-reorganization effective      |                                               
|March 1, 2004                       |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | (953,223  
|Net loss (since quasi organization) |                                                | --                          |         | --       |                                                                                   | --                                                                           |   | --        
|                                    |                                                |                             |         |          |                                                                                   |                                                                              |   |           
|Balance at May 31, 2004             |                                                | 1,055,555                   |         | $ 10     |                                                                                   | $ --                                                                         |   | $   31,134
|                                    |                                                |                             |         |          |                                                                                   |                                                                              |   |           
|                                    |                                                |                             |         |          |                                                                                   |                                                                              |   |           

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

F - 6

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MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENTS OF CASH FLOWS

|                                                  | For the years endedMay 31, | Cumulative            Since         March 31,               2004       Inception of      Development |  
|------------------------------------------------- | -------------------------- | ---------------------------------------------------------------------------------------------------- | -
|
|CASH FLOWS FROM OPERATING                         |                            |                                                                                                      |  
|ACTIVITIES:                                       |                           
|Net Loss                                          |                            | $(21,401                                                                                             | )
|(Increase) Decrease in Prepaid Expenses           |                            | (3,500                                                                                               | )
|Increase (Decrease) in Accounts Payable           |                            | (8,408                                                                                               | )
|                                                  |                            |                                                                                                      |  
|Net Cash Used in operating activities             |                            | (33,309                                                                                              | )
|                                                  |                            |                                                                                                      |  
|CASH FLOWS FROM INVESTING                         |                           
|ACTIVITIES:                                       |                           
|Net cash provided by investing activities         |                            | --                                                                                                   |  
|                                                  |                            |                                                                                                      |  
|CASH FLOWS FROM FINANCING                         |                           
|ACTIVITIES:                                       |                           
|Proceeds from shareholder loans                   |                            | 550                                                                                                  |  
|Cash contributed by shareholders                  |                            | 50,000                                                                                               |  
|                                                  |                            |                                                                                                      |  
|Net Cash Provided by financing activities         |                            | 50,550                                                                                               |  
|                                                  |                            |                                                                                                      |  
|Net (Decrease) Increase in                        |                           
|Cash and Cash Equivalents                         |                            | 17,241                                                                                               |  
|Cash and Cash Equivalents                         |                           
|at Beginning of Period                            |                            | 150                                                                                                  |  
|                                                  |                            |                                                                                                      |  
|Cash and Cash Equivalents                         |                           
|at End of Period                                  |                            | $ 17,391                                                                                             |  
|                                                  |                            |                                                                                                      |  
|                                                  |                            |                                                                                                      |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |                           
|Cash paid during the year for:                    |                           
|Interest                                          |                            | $        --                                                                                          |  
|Franchise and income taxes                        |                            | $        --                                                                                          |  

SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:None

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

F - 7

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MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2004 AND 2003

NOTE 1
 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This
summary of accounting policies for Mercari Communications Group, Ltd. (a
development stage company) is presented to assist in understanding the
Companys financial statements. The accounting policies conform to
generally accepted accounting principles and have been consistently applied in
the preparation of the financial statements.

Organization
and Basis of Presentation

The
Company was incorporated under the laws of the State of Colorado on December 30,
1987. The Company ceased all operating activities during the period from June 1,
1990 to August 31, 2001 and was considered dormant. From August 31, 2001 to
March 1, 2004, the Company was in the development stage. On August 3, 2004, the
stockholders of the Company approved a plan of quasi reorganization which called
for a restatement of accounts to eliminate the accumulated deficit and related
capital accounts on the Companys balance sheet. The quasi reorganization
was effective March 1, 2004. Since March 1, 2004, the Company is in the
development stage, and has not commenced planned principal operations.

Nature of
Business

The
Company has no products or services as of May 31, 2004. The Company was
organized as a vehicle to seek merger or acquisition candidates. The Company
intends to acquire interests in various business opportunities, which in the
opinion of management will provide a profit to the Company.

Cash and
Cash Equivalents

For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents to the extent the funds are not being held for investment purposes.

Pervasiveness
of Estimates

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

F - 8

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MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2004 AND 2003

NOTE 1
 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)

Loss per
Share

The
reconciliations of the numerators and denominators of the basic loss per share
computations are as follows:

|                                | Income | Shares        | Per ShareAmount
|------------------------------- | ------ | ------------- | ---------------
|
|
|Basic Earnings (Loss) per Share |        |               |                
|Loss to common shareholders     |        | $     (21,401 | )              
|                                |        |               |                
|                                |        |               |                

|                                | For the year ended May 31, 2003 |           |  
|------------------------------- | ------------------------------- | --------- | -
|Basic Earnings (Loss) per Share |                                 |           |  
|Loss to common shareholders     |                                 | $  (6,478 | )
|                                |                                 |           |  
|                                |                                 |           |  

There
are no outstanding common stock equivalents for May 31, 2004 and 2003 and are
thus not considered.

Concentration
of Credit Risk

The
Company has no significant off-balance-sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements.

NOTE 2
 INCOME TAXES

As
of May 31, 2004, the Company had a net operating loss carryforward for income
tax reporting purposes of approximately $903,015 that may be offset against
future taxable income through 2024. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Therefore, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.

F - 9

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2004 AND 2003

NOTE 3
 DEVELOPMENT STAGE COMPANY

The
Company has not begun principal operations and as is common with a development
stage company, the Company has had recurring losses during its development
stage. The Companys financial statements are prepared using generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. In the
interim, shareholders of the Company have committed to meeting its minimal
operating expenses.

NOTE 4
 COMMITMENTS

As
of May 31, 2004 all activities of the Company have been conducted by corporate
officers from either their homes or business offices. Currently, there are no
outstanding debts owed by the company for the use of these facilities and there
are no commitments for future use of the facilities.

NOTE 5
 COMMON STOCK TRANSACTIONS

On
December 17, 2001, the Board of Directors approved the cancellation of 225,833
shares of common stock. As of May 31, 2002, these shares had not been cancelled.
During the year ended May 31, 2003, these shares were cancelled.

On
December 17, 2001, the Board of Directors authorized the sale of 843,305
restricted common shares at par value by the three current Directors. The
Directors paid $7,590 in cash consideration for those shares. As of May 31,
2002, these shares had not been issued. During the year ended May 31, 2003,
these shares were issued.

NOTE 6
 CONTINGENT LIABILITIES

At
May 31, 2003, the Company had $120,471 in current liabilities. The Company
believes that $110,435 of these liabilities were unpaid obligations of the
Company when operations ceased in August of 1990. The Company believes none of
such claims would be collectible by creditors, as the statute of limitations
applicable to collection of such commercial debt has expired under the Colorado
Revised Statute 13-80-101, which limits the collection of commercial debt to six
years from the date the last payment was made. During the year ended May 31,
2004, the Company reclassified the $110,435 of expired liabilities to paid-in
capital.

F - 10

---

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2004 AND 2003

NOTE 7
 RELATED PARTY TRANSACTIONS

During
the year ended May 31, 2004, an officer loaned the Company $550 to pay general
and administrative expenses. Amounts due to the officer are non-interest
bearing, unsecured and payable at anytime the shareholder desires.

NOTE 8
 QUASI REORGANIZATION

On
August 3, 2004, the Company approved and authorized a plan of quasi
reorganization and restatement of accounts to eliminate the accumulated deficit
and related capital accounts on the Companys balance sheet. The
quasi-reorganization became effective March 1, 2004. The quasi reorganization
resulted in the elimination of $919,100 of retained deficit at the effective
date of the reorganization, the elimination of $34,123 of deficit accumulated
since the August 31, 2001 inception of development stage, and a decrease in
additional paid-in capital of $953,223.

NOTE 9
 SUBSEQUENT EVENTS

On
August 3, 2004, the Company authorized a 1 for 900 reverse stock split of the
Companys common stock. The reverse stock split reduced the number of
outstanding common shares from 950,000,000 to 1,055,555. All references to the
Companys common stock in the financial statements have been restated to
reflect the reverse stock split.

F - 11

---