10QSB 1 mercari2280510q.htm FEBRUARY 28, 2005 FORM 10-QSB Mercari Communications Group, Ltd. 2/28/2005 10-QSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark one)


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

For the quarterly period ended February 28, 2005


[  ] 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.)


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

(303) 791-3888
(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]

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 22, 2005—1,055,555

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



PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

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

February 28,
2005

May 31,
2004

ASSETS      
Current Assets 
   Cash  $   5,087   $      710  
   Cash in Escrow  4,357   16,681  
   Prepaid Expense  --   3,500  


     Total Assets  $   9,444   $ 20,891  




LIABILITIES AND STOCKHOLDERS' EQUITY 
Liabilities: 
  Accounts Payable & Accrued Liabilities  $   1,500   $   1,628  
  Shareholder Loans  2,350   550  


          Total Liabilities  3,850   2,178  


Stockholders’ Equity 
Common stock (par value $.00001), 
   Authorized 950,000,000 shares, 
   Issued 1,055,555 shares at February 28, 2005 
   and May 31, 2004  10   10  
Paid-In Capital  36,134   31,134  
Deficit accumulated during the development stage 
   Since March 1, 2004 in connection with 
   Quasi reorganization  (30,550 ) (12,431 )


          Total Stockholders’ Equity  5,594   18,713  


          Total Liabilities and Stockholders’ Equity  $   9,444   $ 20,891  





See accompanying notes

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

For the Three Months Ended For the Nine Months Ended Cumulative
Since
March 1, 2004
Inception of
February 28,
2005

February 28,
2004

February 28,
2005

February 28,
2004

Development
Stage

Revenues   $             --   $             --   $             --   $             --   $        --  





Expenses  2,449   2,129   18,119   8,970   30,550  





       Net Loss  $     (2,449 ) $     (2,129 ) $   (18,119 ) $     (8,970 ) $(30,550 )










Basic & Diluted 
   Loss per Share  $             --   $             --   $       (0.02 ) $       (0.01 )  








Weighted Average 
Shares  1,055,555   1,055,555   1,055,555   1,055,555    









See accompanying notes

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

For the Nine Months Ended
February 28,

Cumulative
Since
March 1, 2004
Inception
of
Development
2005
2004
Stage
CASH FLOWS FROM OPERATING        
ACTIVITIES: 
Net Loss  $(18,119 ) $(8,970 ) $(30,550 )
(Increase) Decrease in Prepaid Expenses  3,500   --   --  
Increase (Decrease) in Accounts Payable  (128 ) 8,930   (17,466 )



  Net Cash Used in operating activities  (14,747 ) (40 ) (48,016 )



CASH FLOWS FROM INVESTING 
ACTIVITIES: 
  Net cash provided by investing activities  --   --   --  



CASH FLOWS FROM FINANCING 
ACTIVITIES: 
Contributed capital  5,000   --   5,000  
Proceeds from shareholder loans  1,800   --   2,350  
Cash contributed by shareholders  --   --   50,000  



  Net cash provided by financing activities  6,800   --   57,350  



Net (Decrease) Increase in 
  Cash and Cash Equivalents  (7,947 ) (40 ) 9,334  
Cash and Cash Equivalents 
  at Beginning of Period  17,391   150   110  



Cash and Cash Equivalents 
  at End of Period  $   9,444   $    110   $   9,444  






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 

See accompanying notes

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005 AND 2004
(Unaudited)

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 February 28, 2005 and for the three and nine 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 and nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.

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 February 28, 2005. 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.

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005 AND 2004
(Unaudited)

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

Loss per Share

     Basic loss per share has been computed by dividing the loss for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years. There are no outstanding common stock equivalents for February 28, 2005 and 2004 and are thus not considered.

Concentration of Credit Risk

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

NOTE 2 — INCOME TAXES

     As of May 31, 2004, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $12,000 that may be offset against future taxable income through 2024. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.

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.

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005 AND 2004
(Unaudited)

NOTE 3 — DEVELOPMENT STAGE COMPANY (continued)

     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 February 28, 2005 all activities of the Company have been conducted by corporate officers from either their homes or business offices. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities.

NOTE 5 — COMMON STOCK TRANSACTIONS

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

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

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

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.

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2005 AND 2004
(Unaudited)

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 three months ended February 28, 2005, an officer loaned the Company $1,800 to pay general and administrative expenses. Amounts due to the officer are non-interest bearing, unsecured and payable at anytime the shareholder desires.

NOTE 8 — QUASI REORGANIZATION

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

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, 2004.

Results of Operations

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

     During each of the years since the Company was reactivated, the Company has had no revenue and has had losses approximately equal to the expenditures made to reactivate and meet filing and reporting obligations. We 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.

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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 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.


       (b) Changes in Internal Controls

     Based on his evaluation as of February 28, 2005, 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.

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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

     None.

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

     The Company did not file a report on Form 8-K during the nine months ended February 28, 2005.
















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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.
(Registrant)


DATE: August 23, 2005 By   /s/ Robert W. Marsik                           
       Robert W. Marsik, President
       (Principal Executive and Financial Officer)


































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