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# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

# Washington, D.C. 20549

# FORM 10-QSB

(Mark one)

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x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended August 31, 2007

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

For the transition period from _______________ to ______________.

Commission File Number 0-17284

MERCARI COMMUNICATIONS GROUP, LTD.(Exact name of small business issuer as specified in its charter)

|Colorado(State or other jurisdiction of incorporation or organization) |  | 84-1085935(IRS Employer Identification No.)
|---------------------------------------------------------------------- |  | -------------------------------------------

2525 East Cedar Avenue, Denver, Colorado, 80209
(Address of principal executive offices)

(303) 623-0203(Issuers telephone number)

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 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]

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

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practical date: August 31, 2007 - 4,062,897

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

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PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

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



(Unaudited)          
August 31,
     
     
     May 31, 
20072007Current AssetsCash in Escrow
     
     $
     5,125
     
     $
     -Total Current Assets
     
     
     5,125
     
     
     -Total Assets
     
     $
     5,125
     
     $
     -Current Liabilities:Accounts Payable & Accrued Liabilities
     
     $
     3,295
     
     $
     2,825Total Liabilities
     
     
     3,295
     
     
     2,825Stockholders' Equity:Common Stock, Par value $.00001Authorized 950,000,000 shares,Issued 4,062,897 shares at August 31, 2007 and
     
     
     40
     
     
     303,062,897 at May 31, 2007Paid-In Capital
     
     
     67,844
     
     
     57,854Deficit accumulated during thedevelopment stage since March 1, 2004in connection with quasi reorganization
     
     
     (66,054
     )
     
     (60,709
     )Total Stockholders' Equity
     
     
     1,830
     
     
     (2,825
     )Total Liabilities andStockholders' Equity
     
     $
     5,125
     
     $
     -


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

2

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

Cumulative  since  March 1,  2004  Inception of  development  stageFor the three months ended  August 31,2007
     
     2006Revenues:
     $
     -
     $
     -
     $
     -Expenses:General and administrative
     
     5,345
     
     64
     
     66,054Net Income
     $
     (5,345)
     $
     (64)
     $
     (66,054)Basic & Diluted Earnings Per Share
     $
     -
     $
     -Weighted Average Shares
     
     3,878,114
     
     1,062,897






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

3

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

CumulativeSinceMarch 31,2004Inception ofDevelopmentStageFor the three months ended 
August 31,2007
     
     2006CASH FLOWS FROM OPERATINGACTIVITIES:Net Loss
     $
     (5,345
     )
     $
     (64
     )
     $
     (66,054
     )Increase (Decrease) in Accounts Payable
     
     470
     
     
     -
     
     
     (15,671
     )Net Cash Used in operating activities
     
     (4,875
     )
     
     (64
     )
     
     (81,725
     )CASH FLOWS FROM INVESTINGACTIVITIES:Net cash provided by investing activities
     
     -
     
     
     -
     
     
     -CASH FLOWS FROM FINANCINGACTIVITIES:Payments on shareholder loans
     
     -
     
     
     -
     
     
     (610
     )Proceeds from shareholder loans
     
     -
     
     
     -
     
     
     2,350Proceeds from notes payable
     
     -
     
     
     -
     
     
     20,000Proceeds from sale of stock
     
     10,000
     
     -
     
     
     10,000Cash contributed by shareholders
     
     -
     
     
     -
     
     
     55,000Net Cash Provided by financing activities
     
     10,000
     
     
     -
     
     
     86,740Net (Decrease) Increase inCash and Cash Equivalents
     
     5,125
     
     
     (64
     )
     
     5,015Cash and Cash Equivalentsat Beginning of Period
     
     -
     
     
     1,133
     
     
     110Cash and Cash Equivalentsat End of Period
     $
     5,125
     
     $
     1,069
     
     $
     5,125


4

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

Cumulative  Since  March 31,  2004  Inception ofFor the three months ended August 31,2007
     
     2006
     DevelopmentStageSUPPLEMENTAL 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:

On January 19, 2007, the Company issued two promissory notes for $10,000 each to two nonaffiliated lenders. The notes are payable by the Company only at the time, and in the event, the Company becomes current in reporting obligations under the Securities Exchange Act of 1934, as amended. At the time when the notes become payable, the Company agreed to issue and deliver to each of the two lenders 1,000,000 shares of the Companys unregistered common stock. On March 9, 2007, the Company issued 2,000,000 shares of stock as payment for the notes payable.









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.



|Interim Reporting
|-----------------

The unaudited financial statements as of August 31, 2007 and for the three months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.

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 $66,000 for the period from March 1, 2004 (inception of development stage) to August 31, 2007, 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.



|Nature of Business
|------------------

The Company has no products or services as of August 31, 2007. The Company is seeking 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.

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

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



|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 at August 31, 2007 and 2006 and are thus not considered.



|Concentration of Credit Risk
|----------------------------

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



|NOTE 2  INCOME TAXES
|---------------------



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

2007
     
     
     2006Net Operating Losses
     
     
     9,106
     
     $
     5,919Valuation Allowance
     
     
     (9,106
     )
     
     (5,919
     )-
     
     $
     -


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

2007
     
     
     2006Provision (Benefit) at US Statutory Rate
     $
     3,187
     
     $
     1,159Increase (Decrease) in Valuation Allowance
     
     (3,187
     )
     
     (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 August 31, 2007 all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities.



|NOTE 5  COMMON STOCK TRANSACTIONS
|----------------------------------

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

On December 17, 2001, the Board of Directors authorized the sale of 843,305 restricted common shares at par value to the three 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.

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

On August 3, 2004, the Company authorized a 1 for 900 reverse stock split of the Companys common stock. The reverse stock split reduced the number of outstanding common shares from 950,000,000 to 1,062,897, after rounding up. All references to the Companys common stock in the financial statements have been restated to reflect the reverse stock split.

On January 19, 2007, the Company issued two promissory notes for $10,000 each to two nonaffiliated lenders. The notes are payable by the Company only at the time, and in the event, the Company becomes current in reporting obligations under the Securities Exchange Act of 1934, as amended. At the time when the notes become payable, the Company agreed to issue and deliver to each of the two lenders 1,000,000 shares of the Companys unregistered common stock. On March 9, 2007, the Company issued 2,000,000 shares of stock as payment for the notes payable.

On June 18, 2007, the Company sold 500,000 shares of its common stock to Kanouff, LLC (KLLC), a Colorado limited liability company, for $5,000 in cash and 500,000 shares of its common stock to Underwood Family Partners, Ltd. (Partnership), a Colorado limited partnership, for $5,000 in cash. John P. Kanouff, an officer and director of the Company, is the sole owner and member of KLLC; and L. Michael Underwood, an officer and director of the Company, is the general partner of the Partnership. The Company sold such shares to KLLC and the Partnership in order to obtain working capital. The Registrant relied upon Section 4(2) of the Securities Act of 1933 as providing the exemption from registration under such Act for such transactions.



|NOTE 6  CONTINGENT LIABILITIES
|-------------------------------

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



|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.

In February 2007, the Company repaid $610 of the total shareholder loan due of $2,350, and the balance of the loan of $1,740 was forgiven and reclassified as paid-in capital.



|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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Item 2. Managements Discussion and Analysis or Plan of Operation.

General This discussion should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations in the Companys annual report on Form 10-KSB for the year ended May 31, 2007.



|Results of Operations
|---------------------

The Company had no operations from 1990 through August 31, 2007. The Company is a development stage business, which intends to acquire a United States or foreign based business which is privately owned and wishes to become a publicly owned business. The Company is now current in its state and United States internal revenue filing obligations and in its reporting obligations under the Securities Exchange Act of 1934, as amended. The Company is now actively seeking one or more acquisition candidates.

During each of the years since the Company was reactivated, the Company has had no revenue and has had quarterly and annual 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 directors. We expect to continue to have losses until and unless we complete a business acquisition or similar transaction.



|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.

Our business plan requires substantial funding from a public or private offering of our common stock in connection with a business acquisition, for which we have no commitments. The Company intends to actively pursue other financing or funding opportunities.



|Off Balance Sheet Arrangements
|------------------------------

We have no off balance sheet financing or similar arrangements and we do not expect to initiate any such arrangement.



|Item 3. 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.

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| | (b)     Changes in Internal Controls
| | ------------------------------------

Based on this evaluation as of August 31, 2007, 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.



|PART II  OTHER INFORMATION
|---------------------------

Item 1. Legal Proceedings

There is no pending litigation, which the Company is presently a party to and management is not aware of any litigation which may arise in the future.

Item 2. Changes in Securities

On June 18, 2007, the Company sold 500,000 shares of its common stock to Kanouff, LLC ("KLLC"), a Colorado limited liability company, for $5,000 in cash and 500,000 shares of its common stock to Underwood Family Partners, Ltd. ("Partnership"), a Colorado limited partnership, for $5,000 in cash. John P. Kanouff, an officer and director of the Company, is the sole owner and member of KLLC; and L. Michael Underwood, an officer and director of the Company, is the general partner of the Partnership. The Company sold such shares to KLLC and the Partnership in order to obtain working capital. The Registrant relied upon Section 4(2) of the Securities Act of 1933 as providing the exemption from registration under such Act for such transactions.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits.



|31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
|------------------------------------------------------------------------------------------------------------------------------



|31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
|------------------------------------------------------------------------------------------------------------------------------



|32.1 Certification of Chief Executive Officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|--------------------------------------------------------------------------------------------------------------------------------------------------------



|32.2 Certification of Chief Financial Officer pursuant to 18 U. S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|--------------------------------------------------------------------------------------------------------------------------------------------------------

(b)    The Company did not file a report on Form 8-K during the three months ended August 31, 2007.

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|SIGNATURES
|----------

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

|                        |  |  | MERCARI COMMUNICATIONS GROUP, LTD.
|----------------------- |  |  | ----------------------------------
|                        |  |  |                                   
|                        |  |  | By /s/ L. Michael Underwood       
|                        |  |  | L. Michael Underwood, President   
|                        |  |  | (Principal Executive)             
|Date:  October 12, 2007 |  |  |                                   

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