---

# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

# FORM 10-KSB

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

For the
Fiscal Year Ended: May 31,  2003

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. There is no market in the shares and
it is not possible to determine what, if any, market value the voting stock held
by non-affiliates may have.

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 March 1, 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 March 1, 2004, there were
950,000,000 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 intended to provide education and communication
services, training, counseling and personal development programs for adults,
primarily in the 30 to 55 age range. The Company intended to concentrate on
three primary areas: (i) acquiring or producing and distributing informational
and instructional materials, (ii) producing and conducting conferences and
seminars, and (iii) acquiring new products which feature novel means for
addressing the information and education needs of adult Americans.

The
Company completed an Initial Public Offering (IPO) of its securities in
September 1988 having sold 77,637,000 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 debt incurred and offering expenses, net proceeds to the Company were
$539,213.

On
April 20, 1989 the Company called all 87,137,000 outstanding Series A Warrants
for redemption on June 16, 1989. There were 2,835,440 Series A Warrants
exercised @ $0.01 for gross proceeds of $28,326 and 302,280 Series A Warrants
exercised @ $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 mid-year 1990 and was considered to be dormant
until 2002.

On
December 10, 2000 one former Board member and two unaffiliated businessmen
created a new business plan for the Company and appointed new Officers and Board
of Directors for the purpose of implementing the new plan. The new business plan
primarily provided for the clean up of the Company so as to provide
for the 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, that has assets,
revenues and earnings and wishes to become a publicly owned corporation. The
Company currently has no prospective acquisition candidates and has not
discussed this plan with any potential acquisition candidate.

2

---

On
December 17, 2001 the three current Directors held a Board of Director meeting
and approved the cancellation of 203,250,000 shares previously issued to
twenty-one people who 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 (IPO). The Company did not meet those revenue levels before the Company
ceased operations and the shares are therefore subject to cancellation. The
Board of Directors also authorized the issuance of 758,975,280 restricted common
shares at par value ($0.0001 per share) to the three Directors for cash and
services. The Directors did pay $7,589.75 in cash consideration for those
shares. Following the cancellation of the 203,250,000 and the purchase of
758,975,280, there are 950,000,000 common shares issued and outstanding. The
directors then proceeded to cause the Company the Company to again 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 being acquired by, or an
acquiring company. Through May 31, 2003, the end of its most recent fiscal year,
the Company had not found any acceptable acquisition candidate.

---

ITEM  2
DESCRIPTION OF PROPERTY

---

The principal
executive offices of the Company are currently located at 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.
However, management intends to seek shareholder approval for several issues at
the next shareholder meeting. These issues could include a reverse stock split,
elimination of the accumulated deficit and shareholder equity through a
quasi-reorganization to more accurately reflect the present financial condition
of the Company, a change in the Par Value of the common stock, the number of
common shares authorized and shareholder approval to change the name of the
corporation at the time a reverse merger occurs.

# 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 discontinue in
August 1990.

Outstanding
shares and shareholders

(b)
Holders.

As of
May 31, 2002, the transfer ledgers maintained by the Companys stock
transfer agent indicated that there were 394,274,720 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
203,250,000 common shares as described in Item 1 above, and issuance of
758,975,280 common shares. As a result of such actions, there were authorized
and outstanding a total of 950,000,000 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 203,250,000 common shares in escrow pending a
determination whether cancellation was required, and the transfer agent formally
canceled such shares. Certificates representing the 758,975,280 common shares
authorized for issuance in 2001 were not issued by the transfer agent until
2004. However, as of the end of the last two fiscal years, the Company had
authorized and outstanding, or committed for issuance, 950,000,000 shares.

(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.

4

---

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

There
are not 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.

|                                                 | Years ended May 31, |             
|------------------------------------------------ | ------------------- | ------------
|
|Statement of Operations:                         |                    
|Revenues                                         |                     | $         --
|Operating Expenses                               |                     | 6,478       
|Net Profit (Loss)                                |                     | (6,478      
|Profit (Loss) Per Share                          |                     | -           
|Balance Sheet Data:                              |                    
|Assets                                           |                     | $        150
|Liabilities(1)                                   |                     | 120,471     
|Stockholders Equity                             |                     | (120,321    
|Retained Deficit(2)                              |                     | (919,100    
|Deficit Accumulated During the Development State |                     | (25,153     

(1)
Management for the Company believes that there were approximately $110,000 of
unpaid obligations of the Company when operations ceased in August 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.

5

---

(2)
These deficit amounts were carried forward from the past operations of the
Company and management intends to seek shareholder approval for a
quasi-reorganization to zero out these amounts to more accurately reflect the
present financial condition of the Company.

Liquidity

The
Company has not generated any cash flows from operating or investing activities
since August 1990. No operating capital was required through the fiscal period
covered by this report. The Company is presently unable to satisfy its
obligations from current assets. Operating capital required subsequent to this
report is expected to be provided by one of the newly appointed Directors, or
from proceeds of stock sold to the three current Board of Director members.

Results
of Operations

The
Company had no operations from 1990 through May 31, 2003. In December 2000 the
Company adopted the business plan set forth in Item 1 above.

---

# 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 its 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.

6

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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 May 31, 2003:

|Directors Name   | Age | Position
|----------------- | --- | --------
|Thomas A. Higgins |     | 54      
|Robert W. Marsik  |     | 57      
|Allan Bergenfield |     | 61      

* 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, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999
the Board held no meetings and there was no acting by consent. During each
fiscal year from 2001 through May 31, 2003 there was one meeting of the Board of
Directors.

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.

7

---

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
four years he has been employed in the home improvement industry and one year
ago 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 and brings many management skills and
experience to the Company. For the past four years he has been employed in the
home improvement industry and one year ago started Superior Products Company,
which sells home improvement products in the Denver Colorado market area.

---

# 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: 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 May 31, 2003, 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 | Percent    
|--------------------------------------------- | --------------- | -----------
|Thomas A. Higgins                             |                 | 237,500,000
|1005 East Cobblestone Dr.                     |                
|Highland Ranch, CO 80126                      |                
|Robert W. Marsik                              |                 | 496,725,280
|1960 White Birch Drive                        |                
|Vista, CA 92083                               |                
|Allan Bergenfield                             |                 | 40,000,000 
|548 Longhorn Crescent                         |                
|Rockville, MD 20850                           |                
|All Executive Officers and                    |                
|Directors as a Group                          |                
|(4 persons)                                   |                 | 774,225,280

(1)
Based upon 950,000,000 shares of common stock issued and outstanding as of May
31, 2003.

8

---

---

# 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, or 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, 2003 and 2002                              |     
|Statement of Operations for the years ended May 31, 2003 and 2002       |     
|Statement of Stockholders Equity for the                               |     
|Period from December 30, 1987 (inception) to May 31, 2003               |     
|Statement of Cash Flows for the years ended May 31, 2003 and 2002       |     
|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
|------------- | -----------------
|31            |                  
|32            |                  

There were
no reports filed on Form 8-K during the year ended May 31, 2003.

9

---

---

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.

10

---

---

ITEM
15. PRINCIPAL ACCOUNTANT FEES & SERVICES

---

The
following is a summary of the fees billed to us by Robison, Hill & Company
for professional services rendered for the years ended May 31, 2003 and 2002:

| | Service | 2003               | 2002
| | ------- | ------------------ | ----
| |         | Audit Fees         |     
| |         | Audit-Related Fees |     
| |         | Tax Fees           |     
| |         | All Other Fees     |     
| |         |                    |     
| |         | Total              |     
| |         |                    |     
| |         |                    |     

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 & Exchange
Commission and related comfort letters 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.

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
Audit Committee pre-approved 100% of the Companys 2003 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.

11

---

---

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: June 17,
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 17th day of June 2004.

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

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

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

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

12

---

MERCARI
COMMUNICATIONS GROUP, LTD.

(A
Development Stage Company)

_________________

INDEPENDENT
AUDITORS REPORT

MAY
31, 2003 AND 2002

CONTENTS

|                                                                  | Page
|----------------------------------------------------------------- | ----
|Independent Auditors Repor                                       |     
|Balance Sheets May 31, 2003 and 2002                              |     
|Statement of Operations For the years ended May 31, 2003 and 2002 |     
|Statement of Stockholders Equity for the                         |     
|Period from December 30, 1987 (inception) to May 31, 2003         |     
|Statement of Cash Flows For the years ended May 31, 2003 and 2002 |     
|Notes to Financial Statements                                     |     

13

---

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, 2003 and 2002, and the related
statements of operations and cash flows for the two years ended May 31, 2003,
and the cumulative period from August 31, 2001 (inception of development stage)
to May 31, 2003, and the statement of stockholders equity for the period
from December 30, 1987 (inception) to May 31, 2003. 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 auditing standards generally accepted in
the United States of America. 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, 2003 and 2002, and the results of
its operations and its cash flows for the two years ended May 31, 2003 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,
UtahJune 17, 2004

F - 1

---

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

|                                                      | May 31, |             
|----------------------------------------------------- | ------- | ------------
|
|Assets - Cash:                                        |         | $        150
|                                                      |         |             
|                                                      |         |             
|Current Liabilities:                                  |        
|Accounts Payable & Accrued Liabilities                |         | $ 120,471   
|                                                      |         |             
|Total Liabilities                                     |         | 120,471     
|                                                      |         |             
|Stockholders Equity:                                 |        
|Common Stock, Par value $.00001                       |        
|Authorized 950,000,000 shares,                        |        
|Issued 950,000,000 shares at May 31, 2003             |        
|and 394,274,720 shares at May 31, 2002                |         | 9,500       
|Common Stock to be Issued, -0- shares at May 31, 2003 |        
|and 555,725,280 shares at May 31, 2002                |         | --          
|Paid-In Capital                                       |         | 814,432     
|Retained Deficit                                      |         | (919,100    
|Deficit Accumulated During the                        |        
|Development Stage                                     |         | (25,153     
|                                                      |         |             
|Total Stockholders Equity                            |         | (120,321    
|                                                      |         |             
|Total Liabilities and                                 |        
|Stockholders Equity                                  |         | $        150
|                                                      |         |             
|                                                      |         |             

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         August 31,               2001         Inception of         development |  
|---------------------------------- | ------------------------- | ------------------------------------------------------------------------------------------------------------- | -
|
|Revenues:                          |                           | $      --                                                                                                     |  
|Expenses:                          |                           | 6,478                                                                                                         |  
|                                   |                           |                                                                                                               |  
|Net Income                         |                           | $(6,478                                                                                                       | )
|                                   |                           |                                                                                                               |  
|                                   |                           |                                                                                                               |  
|Basic & Diluted Earnings per share |                           | $      --                                                                                                     |  
|                                   |                           |                                                                                                               |  
|                                   |                           |                                                                                                               |  

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, 2003

|                                         | Common Stock | CommonStock | Paid-In | Retained | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopment |        
|---------------------------------------- | ------------ | ----------- | ------- | -------- | ------------------------------------------------------------- | -------
|
|Balance at December 30, 1987 (inception) |              | --          |         | $     -- |                                                               | $    --
|Stock Issued for Cash - $.00001/sh       |              | 271,000,000 |         | 2,710    |                                                               | --     
|Stock Issued for Cash - $.0001/sh        |              | 8,000,000   |         | 80       |                                                               | --     
|Stock Issued for Cash - $.0025/sh        |              | 8,000,000   |         | 80       |                                                               | --     
|Offering Costs                           |              | --          |         | --       |                                                               | --     
|Net Loss                                 |              | --          |         | --       |                                                               | --     
|                                         |              |             |         |          |                                                               |        
|Balance at May 31, 1988                  |              | 287,000,000 |         | 2,870    |                                                               | --     
|Stock Issued for Cash - $.0001/sh        |              | 1,500,000   |         | 15       |                                                               | --     
|Stock Issued for Cash - $.01/sh          |              | 77,637,000  |         | 777      |                                                               | --     
|Offering Costs                           |              | --          |         | --       |                                                               | --     
|Stock Issued for Cash - $.01/sh          |              | 2,835,440   |         | 28       |                                                               | --     
|Net Loss                                 |              | --          |         | --       |                                                               | --     
|                                         |              |             |         |          |                                                               |        
|Balance at May 31, 1989                  |              | 368,972,440 |         | $3,690   |                                                               | $   -- 

F - 4

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MERCARI
COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY
31, 2003

|                                    | Common Stock | Common            Stock | Paid-In | Retained | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopment |          
|----------------------------------- | ------------ | ----------------------- | ------- | -------- | ------------------------------------------------------------- | ---------
|
|Balance at May 31, 1989             |              | 368,972,440             |         | $ 3,690  |                                                               | $      --
|Stock Issued for Cash - $.0125/sh   |              | 302,280                 |         | 3        |                                                               | --       
|Stock Issued for Debt - $.004/sh    |              | 25,000,000              |         | 250      |                                                               | --       
|Net Loss                            |              | --                      |         | --       |                                                               | --       
|Write-off of Assets                 |              | --                      |         | --       |                                                               | --       
|                                    |              |                         |         |          |                                                               |          
|Balance at May 31, 1990             |              | 394,274,720             |         | 3,943    |                                                               | --       
|                                    |              |                         |         |          |                                                               |          
|Balance at May 31, 2001             |              | 394,274,720             |         | 3,943    |                                                               | --       
|December 17, 2001 Shares to be      |             
|Cancelled                           |              | (203,250,000            | )       | --       |                                                               | (2,033   
|December 17, 2001 Shares to be      |             
|Issued                              |              | 758,975,280             |         | --       |                                                               | 7,590    
|Capital Contributed by Shareholders |              | --                      |         | --       |                                                               | --       
|Net Loss                            |              | --                      |         | --       |                                                               | --       
|                                    |              |                         |         |          |                                                               |          
|Balance at May 31, 2002             |              | 950,000,000             |         | $ 3,943  |                                                               | $ 5,557  

F - 5

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MERCARI
COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY
31, 2003

|                                  | Common Stock | Common         Stock | Paid-In | Retained | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopment |          
|--------------------------------- | ------------ | -------------------- | ------- | -------- | ------------------------------------------------------------- | ---------
|
|Balance at May 31, 2002           |              | 950,000,000          |         | $ 3,943  |                                                               | $ 5,557  
|Cancellation of shares previously |             
|authorized                        |              | --                   |         | (2,033   | )                                                             | 2,033    
|Issuance of shares previously     |             
|authorized                        |              | --                   |         | 7,590    |                                                               | (7,590   
|Net Loss                          |              | --                   |         | --       |                                                               | --       
|                                  |              |                      |         |          |                                                               |          
|Balance at May 31, 2003           |              | 950,000,000          |         | $ 9,500  |                                                               | $      --
|                                  |              |                      |         |          |                                                               |          
|                                  |              |                      |         |          |                                                               |          

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, | CumulativeSinceAugust 31,2001InceptionofDevelopment |  
|----------------------------------------- | -------------------------- | --------------------------------------------------- | -
|
|CASH FLOW FROM OPERATING                  |                            |                                                     |  
|ACTIVITIES:                               |                           
|Net Loss                                  |                            | $(6,478                                             | )
|Increase (Decrease) in Accounts Payable   |                            | 6,424                                               |  
|                                          |                            |                                                     |  
|Net Cash Used in operating activities     |                            | (54                                                 | )
|                                          |                            |                                                     |  
|CASH FLOWS FROM INVESTING                 |                           
|ACTIVITIES:                               |                           
|Net cash provided by investing activities |                            | --                                                  |  
|                                          |                            |                                                     |  
|CASH FLOWS FROM FINANCING                 |                           
|ACTIVITIES:                               |                           
|Stock issued for cash                     |                            | --                                                  |  
|Cash distributed by shareholders          |                            | --                                                  |  
|                                          |                            |                                                     |  
|Net cash provided by financing activities |                            | --                                                  |  
|                                          |                            |                                                     |  
|Net (Decrease) Increase in                |                           
|Cash and Cash Equivalents                 |                            | (54                                                 | )
|Cash and Cash Equivalents                 |                           
|at Beginning of Period                    |                            | 204                                                 |  
|                                          |                            |                                                     |  
|Cash and Cash Equivalents                 |                           
|at End of Period                          |                            | $    150                                            |  
|                                          |                            |                                                     |  
|                                          |                            |                                                     |  
|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 STATEMENTSFOR THE YEARS ENDED MAY 31, 2003 AND 2002

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. Since August 31, 2001, 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, 2003. 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 STATEMENTSFOR THE YEARS ENDED MAY 31, 2003 AND 2002

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     |        | $  (6,478 | )              
|                                |        |           |                
|                                |        |           |                

|                                | For the year ended May 31, 2002 |               |  
|------------------------------- | ------------------------------- | ------------- | -
|Basic Earnings (Loss) per Share |                                 |               |  
|Loss to common shareholders     |                                 | $     (18,675 | )
|                                |                                 |               |  
|                                |                                 |               |  

There
are no outstanding common stock equivalents for May 31, 2003 and 2002 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, 2003, the Company had a net operating loss carryforward for income
tax reporting purposes of approximately $944,000 that may be offset against
future taxable income through 2022. 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 STATEMENTSFOR THE YEARS ENDED MAY 31, 2003 AND 2002

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, 2003 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
203,250,000 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 758,975,280
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.

F - 10

---