##### Table of Contents

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# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

# FORM 10-KSB

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

For the
fiscal year ended: May 31, 2006

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                        |  | 
|(State or other jurisdiction of |  | 
|incorporation or organization)  |  | 
|                                |  | 

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

Registrants
telephone number, including area code:   (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 is not required to file reports pursuant to Section 13 on 15(d) of the
Exchange Act. [   ]

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]

Indicate by
checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes      [X]          
NO  [   ]

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 market value of the
voting and non-voting common stock held by non-affiliates as of May 31, 2006 is
not possible to determine, as there is no reported public or other 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 May 31, 2006 and February
28, 2007, there were 1,062,897 shares of Issuers common stock outstanding.
No other class of equity securities is 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

Transitional
Small Business Disclosure Format     Yes    [   ]     No  [X]





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##### Table of Contents

TABLE OF CONTENTS



|         |  | PAGE NO.                                                                            
|-------- |  | ------------------------------------------------------------------------------------
|PART I   |  | 3                                                                                   
|         |  |                                                                                     
|Item 1   |  | Description of Business                                                             
|         |  |                                                                                     
|Item 2   |  | Description of Property                                                             
|         |  |                                                                                     
|Item 3   |  | Legal Proceedings                                                                   
|         |  |                                                                                     
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                 
|         |  |                                                                                     
|PART II  |  | 6                                                                                   
|         |  |                                                                                     
|Item 5   |  | Market for Common Equity and Related Stockholder Matters                            
|         |  |                                                                                     
|Item 6   |  | Managements Discussion and Analysis of Financial Condition and Results of Operation
|         |  |                                                                                     
|Item 7   |  | Financial Statements                                                                
|         |  |                                                                                     
|Item 8   |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
|         |  |                                                                                     
|Item 8A  |  | Control and Procedures                                                              
|         |  |                                                                                     
|PART III |  | 9                                                                                   
|         |  |                                                                                     
|Item 9   |  | Directors Executive Officeres of the Company                                        
|         |  |                                                                                     
|Item 10  |  | Executive Compensation                                                              
|         |  |                                                                                     
|Item 11  |  | Security Ownership of Beneficial Owners and Management                              
|         |  |                                                                                     
|Item 12  |  | Certain Relationships and Related Transactions                                      
|         |  |                                                                                     
|Item 13  |  | Exhibits, and Reports on Form 8-K                                                   
|         |  |                                                                                     
|Item 14  |  | Principal Accountant Fees & Services                                                
|         |  |                                                                                     

2



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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 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 outstanding Series A Warrants for redemption on
June 16, 1989.  There were  3,137,720 Series A Warrants exercised for total gross
proceeds of $32,101.  All remaining Series A Warrants expired  following the warrant
call.

The
Company ceased all operations in early 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
that intends to become a publicly owned corporation.

In
December, 2001 the Board of Directors 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 IPO.  The Company did not meet
those  revenue levels before the Company ceased operations and the shares were thus
subject to cancellation.  The Board  of Directors also authorized the purchase of
758,975,280 restricted common shares at par value by the three  Directors for $7,590 in
cash and services.  Following the cancellation and the purchase there were 950,000,000
common shares issued and 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.

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 1,062,897. All
references to the Companys common stock in the balance of this Report 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 was adjusted, effective March 1, 2004,
the first day of the fourth fiscal 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.

3



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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 included 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
were  to be payable only upon completion of such a transaction.  In the Consulting
Agreement, the Company agreed to  make all filings necessary to remain current under the
Securities Exchange Act of 1934, as amended, and to effect  the reverse stock split.

In
2004 the Companys President, Robert W. Marsik, 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
capital to pay amounts owed by the Company to its auditors and  legal counsel and to pay
costs of the Company incurred in connection with preparing and filing required reports
under the Securities Exchange Act of 1934, as amended, and to maintain the Company as
current in its filing  obligations under that Act, and expenses incurred in connection
with holding a special meeting of shareholders to  approve the reverse share split and
other matters.

Mr.
Marsiks loan was due March 9, 2006.  As security for payment of the note, Mr.
Marsik and the other  two directors of the Company had pledged a total of 533,083 shares
of Company common stock owned by them to an  affiliate of the lender as an accommodation
pledge.  Effective as of May 31, 2006 the Consulting Agreement was  terminated and the
loan to Mr. Marsik and the pledges of shares were cancelled by the parties.

Beginning
in 2002, the Company, acting through its president, began to seek one or more
privately-owned  business which would be interested in an acquisition by or of the
Company.

Potentially
available business opportunities may occur in many different industries and at various
stages of development, all of which will make the task of comparative investigation and
analysis of such business  opportunities difficult and complex.  Due to our limited
capital available for investigation and management's  limited experience in business
analysis, we may not discover or adequately evaluate adverse facts about the  opportunity
to be acquired.

Mercari
is unable to predict when it may participate in a business opportunity.  It expects,
however,  that the analysis of specific proposals and the selection of a business
opportunity may take several months or  more.  Mercari does not plan to raise additional
capital at the present time.

The
manner in which Mercari participates in an acquisition opportunity will depend upon the
nature of  the opportunity, the respective needs and desires of Mercari and the merger or
acquisition candidate, and the  relative negotiating strength of Mercari and such merger
or acquisition candidate.  The exact form or structure  of Mercari's participation in a
business opportunity or venture will be dependent upon the needs of the  particular
situation. Mercaris participation may be structured as an asset purchase, a lease, a
license, a joint  venture, a partnership, a merger, an acquisition of securities, or
another arrangement.  Through May 31, 2006,  the end of its most recent fiscal year, the
Company had not found any acceptable acquisition candidate.

RISK
FACTORS

In
addition to the other  information  contained in this Report,  Mercari is subject to a
number of risks,  including those set forth below.

No
Recent Operating History. Since 2000, Mercari has engaged in minimal operations and
has conducted only organizational business, except to become current in reporting
with the SEC and other regulatory offices with the intention to acquire, or to be
acquired by, an operating privately-owned business. There can be no assurance that
our activities will be profitable. As of the date of this Report, Mercari has not
entered into any arrangement to participate in any business ventures or purchase any
products.

No
Assets. Mercari has no material assets as of the date hereof. Any business
activity that we may undertake may require substantial capital.

4



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Speculative
Nature of Companys Proposed Operations. The success of Mercari's proposed plan
of operation will depend to a great extent on the operations, financial condition
and management of the companies with which we may merge or which it acquires. While
management intends to seek an acquisition of privately held entities with
established operating histories, there can be no assurance that Mercari will be
successful in locating an acquisition candidate meeting such criteria. In the event
Mercari completes a merger or acquisition transaction, of which there can be no
assurance, the success of Mercari's operations will be dependent upon management
of the successor firm and numerous other factors beyond Mercari's control. Mercari
anticipates that it will seek to merge with or acquire an existing business. After a
business combination has been completed, the surviving entity would be Mercari,
however, management from the acquired entity will operate Mercari.

Securities
are Not Publicly Traded. Mercaris shares are not publicly traded and there is no
assurance that a public market for Mercari shares will develop.

Dilution
in Acquisition Transaction. Mercaris plan of operation is based upon a merger
with or acquisition of a private concern, which in all likelihood would result
in Mercari issuing securities to shareholders of any such target concern. The
issuance of previously authorized and unissued common stock of Mercari will result
in substantial dilution to present and prospective shareholders of Mercari, which will
result in a change in control or management of Mercari.

Dependence
on Management; Limited Participation of Management. The success of Mercari will largely
be dependent upon the active participation of Robert W. Marsik, Mercaris President,
Chief Financial Officer and a Director. Mr. Marsik has limited experience in the
business in which Mercari proposes to engage and, accordingly, Mercari may obtain
outside professionals to assist Mercari to evaluate potential opportunities or business
acquisitions. Mr. Marsik has other full time employment and will be available to
participate in management decisions only on a part time or as needed basis. Mr. Marsik
devotes less than 1% of his time to the business affairs of Mercari, and may be
inadequate to properly attend to its business. Mr. Marsik will not be compensated.

Impact
of Limited Time Devoted to Mercari. Opportunities available to Mercari for
mergers or acquisitions may be lost or delayed as a result of the limited amount of
time devoted to Mercari by management. As a result, an acquisition or merger may never
take place.

No
Business Plan. Mercari has not identified the business opportunities in which it will
attempt to obtain an interest. Mercari therefore cannot describe the specific risks
presented by such business.

Rights
of Dissenting Shareholders. A shareholder of Mercari would have the right to dissent
under Colorado law to any statutory plan of merger or consolidation to which Mercari is
a party or types of other corporate reorganizations which require shareholder approval.

No
Agreement for Business Combination or Other Acquisition Transaction. Mercari has no
arrangement, agreement or understanding with respect to engaging in a merger with, or
acquisition of, any entity private or public. There can be no assurance Mercari will be
successful in identifying and evaluating suitable merger or acquisition candidates or in
concluding a merger or acquisition transaction. Management has not identified any
specific business within an industry for evaluation by Mercari. There is no assurance
Mercari will be able to negotiate a merger or acquisition on favorable terms.

Issuance
of Additional Shares. Only 1,062,897 shares of common stock of the 950,000,000
authorized shares of common stock of Mercari have been issued. The Board of Directors
has the power to issue all unissued shares without shareholder approval. Mercari may
issue additional shares of common stock pursuant to a merger with a private corporation
or in another type of acquisition transaction. Mercari could in the future issue shares
to acquire products, properties or businesses, or for other corporate purposes.

Lack
of Public Market for Securities. Although our common stock is not traded on any public
market, and no market exists for our shares and there is no assurance that a regular
trading market will develop or if developed, that it will be sustained.

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.

5



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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.

ITEM
4 SUBMISSION OF MATTERS TO AVOTE OF
SECURITY HOLDERS

No
meeting of shareholders of the Company was held during the fiscal year ended May
31, 2006.

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 more than 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.

As
of the end of each of the last two fiscal years, the Company had outstanding, or
committed for issuance, 1,062,897 shares, held of record by approximately 135 holders.

(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 not securities of the Company authorized or committed for issuance under any equity
or other compensation plan.

ITEM
6 MANAGEMENTS DISCUSSION AND ANALYSISOFFINANCIAL
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 2006.  The Company is a development stage
business, which intends  to acquire or be acquired by a United States or foreign based
business which is privately owned and wishes to  become a publicly owned business.  The
Company intends to remain 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.

6



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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 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
following financial statements of the Company are included in Item 7:

|                                                                        | Page
|----------------------------------------------------------------------- | ----
|Report of Robison, Hill & Co., Independent Certified Public Accountants |     
|Balance Sheets as of May 31, 2006 and 2005                              |     
|Statements of Operations for the years ended May 31, 2006 and 2005      |     
|Statement of Stockholders Equity for the                               |     
|Period from December 30, 1987 (Inception) to May 31, 2006               |     
|Statements of Cash Flows for the years ended May 31, 2006 and 2005      |     
|Notes to Financial Statements                                           |     

7



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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, 2006 and 2005, and the related
statements of operations and cash flows for the two years ended May 31, 2006,
and the cumulative period from March 1, 2004 (inception of development stage) to
May 31, 2006, and the statement of stockholders equity for the period from
December 30, 1987 (inception) to May 31, 2006. 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, 2006 and 2005, and the results of
its operations and its cash flows for the two years ended May 31, 2006, and the
cumulative period from March 1, 2004 (inception of development stage) to May 31,
2006 in conformity with accounting principles generally accepted in the United
States of America.

The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations and has a
net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

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

Salt Lake City,
UtahFebruary 10, 2007

F-1



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

|                                                  | May 31, |          
|------------------------------------------------- | ------- | ---------
|
|Current Assets                                    |         |          
|Cash                                              |         | $   1,071
|Cash in Escrow                                    |         | 62       
|                                                  |         |          
|                                                  |         |          
|Total Current Assets                              |         | 1,133    
|                                                  |         |          
|                                                  |         |          
|Total Assets                                      |         | $   1,133
|                                                  |         |          
|                                                  |         |          
|Current Liabilities:                              |         |          
|Accounts Payable & Accrued Liabilities            |         | $   2,100
|Shareholder Loans                                 |         | 2,350    
|                                                  |         |          
|                                                  |         |          
|Total Current Liabilities                         |         | 4,450    
|                                                  |         |          
|                                                  |         |          
|Total Liabilities                                 |         | 4,450    
|                                                  |         |          
|                                                  |         |          
|Stockholders Equity:                             |         |          
|Common Stock, Par value $.00001                   |         |          
|Authorized 950,000,000 shares,                    |         |          
|Issued 1,062,897 shares at May 31, 2006 and 2005  |         | 10       
|Paid-In Capital                                   |         | 36,134   
|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           |         | (39,461  
|                                                  |         |          
|                                                  |         |          
|Total Stockholders Equity                        |         | (3,317   
|                                                  |         |          
|                                                  |         |          
|Total Liabilities and                             |         |          
|Stockholders Equity                              |         | $   1,133
|                                                  |         |          
|                                                  |         |          

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

F-2



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

|                                   | For the year endedMay 31, | CumulativesinceMarch 1,2004Inception ofdevelopment |  |                       
|---------------------------------- | ------------------------- | -------------------------------------------------- |  | ----------------------
|
|Revenues:                          |                           |                                                    |  | $                    
|                                   |                           |                                                    |  |                       
|Expenses:                          |                           |                                                    |  |                       
|General and administrative         |                           |                                                    |  | 7,728                 
|                                   |                           |                                                    |  |                       
|                                   |                           |                                                    |  |                       
|                                   |                           |                                                    |  |                       
|Net Income                         |                           |                                                    |  | $          (7,728     
|                                   |                           |                                                    |  |                       
|                                   |                           |                                                    |  |                       
|Basic & Diluted Earnings Per Share |                           |                                                    |  | $               (0.01)
|                                   |                           |                                                    |  |                       
|                                   |                           |                                                    |  |                       
|Weighted Average Shares            |                           |                                                    |  | 1,062,897             
|                                   |                           |                                                    |  |                       
|                                   |                           |                                                    |  |                       

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

F-3



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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITY FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2006

|                                   | Common Stock | CommonStock  | 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 |              | 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    |                                                                                   |                                                                             | 
|August 2004 - 900:1 Reverse        |              |              |         |          |                                                                                   |                                                                              | 
|Stock split                        |              | (286,673,769 | )       | (2,867   | )                                                                                 |                                                                             | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 
|Restated Balance at May 31, 1988   |              | 326,231      |         | 3        |                                                                                   |                                                                             | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 
|Stock issued for cash - $.0001/sh  |              | 1,667        |         |         |                                                                                   |                                                                             | 
|Stock issued for cash - $.01/sh    |              | 86,263       |         | 1        |                                                                                   |                                                                             | 
|Offering costs                     |              |             |         |         |                                                                                   |                                                                             | 
|Stock issued for cash - $.01/sh    |              | 3,150        |         |         |                                                                                   |                                                                             | 
|Net loss                           |              |             |         |         |                                                                                   |                                                                             | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 
|Balance at May 31, 1989            |              | 417,311      |         | 4        |                                                                                   |                                                                             | 
|                                   |              |              |         |          |                                                                                   |                                                                              | 

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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2006

|                         | Common Stock | CommonStock | Paid-In | Retained   | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi |  
|------------------------ | ------------ | ----------- | ------- | ---------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | -
|
|Balance at May 31, 1989  |              | 417,311     |         | $        4 |                                                                                   | $                                                                           |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|Stock issued for cash -  |              |             |         |            |                                                                                   |                                                                              |  
|$.0125/share             |              | 336         |         |           |                                                                                   |                                                                             |  
|Stock issued for debt -  |              |             |         |            |                                                                                   |                                                                              |  
|$.004/share              |              | 27,778      |         |           |                                                                                   |                                                                             |  
|Net loss                 |              |            |         |           |                                                                                   |                                                                             |  
|Write-off of assets      |              |            |         |           |                                                                                   |                                                                             |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|Balance at May 31, 1990  |              | 445,425     |         | 4          |                                                                                   |                                                                             |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|Balance at May 31, 2001  |              | 445,425     |         | 4          |                                                                                   |                                                                             |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|December 17, 2001 shares |              |             |         |            |                                                                                   |                                                                              |  
|to be cancelled          |              | (225,833    | )       |           |                                                                                   | (2                                                                           | )
|December 17, 2001 shares |              |             |         |            |                                                                                   |                                                                              |  
|to be issued             |              | 843,305     |         |           |                                                                                   | 8                                                                            |  
|Capital contributed by   |              |             |         |            |                                                                                   |                                                                              |  
|shareholders             |              |            |         |           |                                                                                   |                                                                             |  
|Net loss                 |              |            |         |           |                                                                                   |                                                                             |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|                         |              |             |         |            |                                                                                   |                                                                              |  
|Balance at May 31, 2002  |              | 1,062,897   |         | 4          |                                                                                   | 6                                                                            |  
|                         |              |             |         |            |                                                                                   |                                                                              |  

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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITYFOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2006

|                                    | Common Stock | CommonStock | Paid-In | Retained    | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi |  
|----------------------------------- | ------------ | ----------- | ------- | ----------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | -
|
|Balance at May 31, 2002             |              | 1,062,897   |         | $         4 |                                                                                   | $         6                                                                  |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|Cancellation of shares previously   |              |             |         |             |                                                                                   |                                                                              |  
|authorized                          |              |            |         | (2          | )                                                                                 | 2                                                                            |  
|Issuance of shares previously       |              |             |         |             |                                                                                   |                                                                              |  
|authorized                          |              |            |         | 8           |                                                                                   | (8                                                                           | )
|Net loss                            |              |            |         |            |                                                                                   |                                                                             |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|Balance at May 31, 2003             |              | 1,062,897   |         | 10          |                                                                                   |                                                                             |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|Expired accounts payable            |              |             |         |             |                                                                                   |                                                                              |  
|reclassified to paid-in capital     |              |            |         |            |                                                                                   |                                                                             |  
|Capital contributed by shareholder  |              |            |         |            |                                                                                   |                                                                             |  
|Net loss (prior to quasi            |              |             |         |             |                                                                                   |                                                                              |  
|reorganization)                     |              |            |         |            |                                                                                   |                                                                             |  
|Quasi-reorganization effective      |              |             |         |             |                                                                                   |                                                                              |  
|March 1, 2004                       |              |            |         |            |                                                                                   |                                                                             |  
|Net loss (since quasi organization) |              |            |         |            |                                                                                   |                                                                             |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  
|Balance at May 31, 2004             |              | 1,062,897   |         | 10          |                                                                                   |                                                                             |  
|                                    |              |             |         |             |                                                                                   |                                                                              |  

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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)STATEMENT OF STOCKHOLDERS
EQUITY  FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2006

|                                   | Common Stock | CommonStock | Paid-In | Retained  | DeficitAccumulatedSinceAugust 31, 2001Inception ofDevelopmentStage(Prior to quasi | DeficitAccumulatedSinceMarch 1, 2004Inception ofDevelopmentStage(Since quasi | 
|---------------------------------- | ------------ | ----------- | ------- | --------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------- | 
|
|Balance at May 31, 2004            |              | 1,062,897   |         | $      10 |                                                                                   | $                                                                           | 
|Capital contributed by shareholder |              |            |         |          |                                                                                   |                                                                             | 
|Net loss                           |              |            |         |          |                                                                                   |                                                                             | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|Balance at May 31, 2005            |              | 1,062,897   |         | 10        |                                                                                   |                                                                             | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|Net loss                           |              |            |         |          |                                                                                   |                                                                             | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|Balance at May 31, 2006            |              | 1,062,897   |         | $      10 |                                                                                   | $                                                                           | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 
|                                   |              |             |         |           |                                                                                   |                                                                              | 

The
accompanying notes are an integral part of these financial statements

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

|                                                  | For the years endedMay 31, | CumulativeSinceMarch 31,2004Inception ofDevelopment |  
|------------------------------------------------- | -------------------------- | --------------------------------------------------- | -
|
|CASH FLOWS FROM OPERATING                         |                            |                                                     |  
|ACTIVITIES:                                       |                            |                                                     |  
|Net Loss                                          |                            | $(7,728                                             | )
|(Increase) Decrease in Prepaid Expenses           |                            |                                                    |  
|Increase (Decrease) in Accounts Payable           |                            | 1,908                                               |  
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|Net Cash Used in operating activities             |                            | (5,820                                              | )
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|CASH FLOWS FROM INVESTING                         |                            |                                                     |  
|ACTIVITIES:                                       |                            |                                                     |  
|Net cash provided by investing activities         |                            |                                                    |  
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|CASH FLOWS FROM FINANCING                         |                            |                                                     |  
|ACTIVITIES:                                       |                            |                                                     |  
|Proceeds from shareholder loans                   |                            |                                                    |  
|Cash contributed by shareholders                  |                            |                                                    |  
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|Net Cash Provided by financing activities         |                            |                                                    |  
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|Net (Decrease) Increase in                        |                            |                                                     |  
|Cash and Cash Equivalents                         |                            | (5,820                                              | )
|Cash and Cash Equivalents                         |                            |                                                     |  
|at Beginning of Period                            |                            | 6,953                                               |  
|                                                  |                            |                                                     |  
|Cash and Cash Equivalents                         |                            |                                                     |  
|at End of Period                                  |                            | $ 1,133                                             |  
|                                                  |                            |                                                     |  
|                                                  |                            |                                                     |  
|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.

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MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS

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.

Nature of
Operations and Going Concern

The
accompanying financial statements have been prepared on the basis of accounting
principles applicable to a going concern, which assume that Mercari
Communications Group, Ltd. (hereto referred to as the Company) will
continue in operation for at least one year and will be able to realize its
assets and discharge its liabilities in the normal course of operations.

Several
conditions and events cast doubt about the Companys ability to continue as
a going concern. The Company has incurred net losses of
approximately $39,461 for the period from March 1, 2004 (inception of
development stage) to May 31, 2006, has no revenues and requires additional
financing in order to finance its business activities on an ongoing basis. The
Companys future capital requirements will depend on numerous factors
including, but not limited to, continued progress in finding a merger candidate
and the pursuit of business opportunities. The Company is actively pursuing
alternative financing and has had discussions with various third parties,
although no firm commitments have been obtained. In the interim, shareholders of
the Company have committed to meeting its minimal operating expenses. Management
believes that actions presently being taken to revise the Companys
operating and financial requirements provide them with the opportunity to
continue as a going concern

These
financial statements do not reflect adjustments that would be necessary if the
Company were unable to continue as a going concern. While management
believes that the actions already taken or planned, will mitigate the adverse
conditions and events which raise doubt about the validity of the going
concern assumption used in preparing these financial statements, there can
be no assurance that these actions will be successful. If the Company were
unable to continue as a going concern, then substantial adjustments
would be necessary to the carrying values of assets, the reported amounts of its
liabilities, the reported revenues and expenses, and the balance sheet
classifications used.

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.

F-9



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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
(continued)

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

Nature of
Business

The
Company has no products or services as of May 31, 2006. 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.

Income Taxes

The
Company accounts for income taxes under the provisions of SFAS No.109,
Accounting for Income Taxes. SFAS No.109 requires recognition of
deferred income tax assets and liabilities for the expected future income tax
consequences, based on enacted tax laws, of temporary differences between the
financial reporting and tax bases of assets and liabilities.

Loss per
Share

Basic
loss per share has been computed by dividing the loss for the year applicable to
the common shareholders by the weighted average number of common shares during
the years. There are no outstanding common stock equivalents for May 31, 2006
and 2005 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.

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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
(continued)

NOTE 2
 INCOME TAXES

As
of May 31, 2006, the Company had a net operating loss carry forward for income
tax reporting purposes of approximately $39,461 that may be offset against
future taxable income through 2025. 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
carry-forwards will expire unused. Accordingly, the potential tax benefits of
the loss carry-forwards are offset by a valuation allowance of the same amount.

|                     | 2006 | 2005   
|-------------------- | ---- | -------
|Net Operating Losses |      | $ 5,919
|Valuation Allowance  |      | (5,919 
|                     |      |        
|                     |      | $     
|                     |      |        
|                     |      |        

The
provision for income taxes differs from the amount computed using the federal US
statutory  income tax rate as follows:

|                                           | 2006 | 2005   
|------------------------------------------ | ---- | -------
|Provision (Benefit) at US Statutory Rate   |      | $ 1,159
|Increase (Decrease) in Valuation Allowance |      | (1,159 
|                                           |      |        
|                                           |      | $     
|                                           |      |        
|                                           |      |        

The
Company evaluates its valuation allowance requirements based on projected future
operations. When circumstances change and causes a change in managements
judgment about the recoverability of deferred tax assets, the impact of the
change on the valuation is reflected in current income.

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, 2006 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.

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##### Table of Contents

MERCARI
COMMUNICATIONS GROUP, LTD.(A Development Stage Company)NOTES TO FINANCIAL STATEMENTS
(continued)

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.

On
August 3, 2004, the Company authorized a 900 to 1 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 1,062,897. All references to the
Companys common stock in the financial statements have been restated to
reflect the reverse stock split.

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, and as part of a quasi reorganization, the Company reclassified the
$110,435 of expired liabilities to paid-in capital.

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.

During
the year ended May 31, 2005, an officer loaned the Company $1,800 to pay general
and administrative expenses. Amounts due to the officer are non-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.

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##### Table of Contents

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.

ITEM
8a CONTROLS AND PROCEDURES

The
Companys Chief Executive Officer and Chief Financial Officer are
responsible for establishing and maintaining disclosure controls and procedures
for the Company.

(a)    
Evaluation of Disclosure Controls and Procedures

As
of the end of the period covered by this report,  the Company  carried out an evaluation,
under the supervision and
with the participation of the Companys management, including the
Companys President, of the effectiveness of the design and operation of
the Companys disclosure controls and procedures pursuant to Rule 13a-15
under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Based upon the evaluation, the Companys President concluded
that, as of the end of the period, the Companys disclosure controls and
procedures were effective in timely alerting him to material information
relating to the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.

(b)    
Changes in Internal Controls

Based
on his evaluation as of May 31, 2006, there were no significant changes in the
Companys internal controls over financial reporting or in any other areas
that could significantly affect the Companys internal controls subsequent
to the date of his most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

8



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##### Table of Contents

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 |  |     |         
|Robert W. Marsik  |  |     |         
|Allan Bergenfield |  |     |         
|                  |  |     |         

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
hold office until the next annual meeting of shareholders or 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 each fiscal year from 2001 through May 31, 2006 there was one meeting of
the Board of Directors, by telephone.

Executive
Profiles

Robert
W. Marsik; Chief Executive Officer, President and Secretary Mr.
Marsikhas been a director since 2000. Since October 2004, Mr. Marsik has
been Finance Manager at Burt Kuni Honda, Englewood, Colorado. From June 2002
until September 2004 he was employed as a car salesman for Cush Honda in
Escondido California. For five years prior, he was an independent business
broker with a small 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.

Thomas
A. Higgins; Chairman  Mr. Higgins has been a director since inception.
For the past five years Mr. Higgins 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.

9



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##### Table of Contents

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, or other employee.

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 May 31, 2006 and February 28, 2007, the shares of common
stock owned by each 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                             |                    | 263,889
|1005 East Cobblestone Dr.                     |                    |        
|Highland Ranch, CO 80126                      |                    |        
|                                              |                    |        
|Robert W. Marsik                              |                    | 561,917
|6353 Vacquero Drive                           |                    |        
|Castle Rock, CO 80108                         |                    |        
|                                              |                    |        
|Allan Bergenfield                             |                    | 44,445 
|548 Longhorn Crescent                         |                    |        
|Rockville, MD 20850                           |                    |        
|                                              |                    |        
|All Executive Officers and                    |                    |        
|Directors as a Group                          |                    |        
|(3 persons)                                   |                    | 860,251
|                                              |                    |        

|(1) |  | Based
upon  1,062,897  shares of common stock  issued and  outstanding  and  reflects a
900-into-one  reverse  stock split  adopted by  shareholders August 3, 2004.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

In
2004 and 2005 Mr.  Marsik  loaned a total of $2,350 to the Company,  which was used to
satisfy  Company  obligations  for which  other  resources were not available.  The loans
have not been repaid,  are  noninterest  bearing and are not  represented by notes or
other  written documentation.

10



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##### Table of Contents

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, 2006 and 2005                              |     
|Statement of Operations for the years ended May 31, 2006 and 2005       |     
|Statement of Stockholders Equity for the                               |     
|Period from December 30, 1987 (inception) to May 31, 2006               |     
|Statement of Cash Flows for the years ended May 31, 2006 and 2005       |     
|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
|------------- | -----------------
|3.1           |                  
|3.2           |                  
|3.3           |                  
|31            |                  
|32            |                  

There
were no reports filed on Form 8-K during the year ended May 31, 2006

ITEM
14. PRINCIPAL ACCOUNTANT FEES & SERVICES

The
firm of Robison Hill & Company has acted as independent auditor for the
Company for each of the fiscal years ended May 31, 2001 through 2006. 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:

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|               | Year EndedMay 31, 2006 | Year EndedMay 31, 2005
|-------------- | ---------------------- | ----------------------
|Audit Fees     |                        | $2,805                
|Tax Fees       |                        | 75                    
|All Other Fees |                        | -0-                   
|               |                        |                       

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

Because
the Company has no audit committee of its Board of Directors, directors
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 Board of Directors regarding the extent
of services provided by the independent auditors in accordance with this
pre-approval and the fees incurred to date. The Board of Directors 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 2006 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.

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SIGNATURES

Pursuant
to the requirements of section 13 or 15(d) of the Securities Exchange Act of
1934, 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:  March
7, 2007

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 7th day of March 2007.

|Signatures            | Title
|--------------------- | -----
|                      |      
|                      |      
|/s/ Thomas A. Higgins |      
|Thomas A. Higgins     |      
|                      |      
|                      |      
|                      |      
|/s/ Robert W. Marsik  |      
|Robert W. Marsik      |      
|                      |      
|                      |      
|                      |      
|/s/ Allan Bergenfield |      
|Allan Bergenfield     |      
|                      |      
|                      | 13