UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

 

FORM 10-Q

(Mark one)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 28, 2015

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 0-17284

 

 

MERCARI COMMUNICATIONS GROUP, LTD.

(Exact name of registrant as specified in its charter)

  

 

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

 

135 Fifth Ave., 10^thFloor, New York, NY10010

(Address of principal executive offices)

 

(212) 739-7689

(Issuer’s telephone number)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 x  No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x  No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer	¨		Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes x  No ¨

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: As of April 14, 2015, there were 45,411,400 shares of the registrant’s common stock issued and outstanding.

 

  

MERCARI COMMUNICATIONS GROUP, LTD.

FORM 10-Q

February 28, 2015

 

INDEX

 

		Page
Introductory Note. Cautionary Statement Regarding Forward-looking Information and Risk Factors		3
Part I – Financial Information
Item 1.	Condensed Financial Statements	4
	Condensed Balance Sheets	4
	Condensed Statements of Operations	5
	Condensed Statements of Cash Flows	6
	Notes to Condensed Financial Statements	7 – 12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
Part II – Other Information
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	Mine Safety Disclosures	15
Item 5.	Other Information	15
Item 6.	Exhibits	16
	Signatures	17
	Exhibit Index	18

 

 

INTRODUCTORY NOTE. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION AND RISK FACTORS

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 about Mercari Communications Group, Ltd. (the “Company,” “Mercari,” “we,” “us,” and “our”) that are subject to risks and uncertainties.  Forward-looking statements include information concerning future financial performance, business strategy, projected plans and objectives.  Statements preceded by, followed by or that otherwise include the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “may increase,” “may fluctuate” and similar expressions of future or conditional verbs such as “will,” “should,” “would,” and “could” are generally forward-looking in nature and not historical facts.  Actual results may differ materially from those projected, implied, anticipated or expected in the forward-looking statements. Readers of this Quarterly Report should not rely solely on the forward-looking statements and should consider all uncertainties and risks throughout this report. The statements are representative only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement.

 

These forward-looking statements, implicitly and explicitly, include the assumptions underlying the statements and other information with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, financial condition, results of operations, future performance and business, including management’s expectations and estimates with respect to revenues, expenses, return on equity, return on assets, asset quality and other financial data.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, these statements involve risks and uncertainties that are subject to change based on various important factors, some of which are beyond the control of the Company. The following factors, among others, could cause the Company’s results or financial performance to differ materially from its goals, plans, objectives, intentions, expectations and other forward-looking statements:

 

·

general economic and industry conditions;

 

·

limited resources and need for additional financing;

 

·

competition for suitable private companies with which to merge;

 

·

no definitive agreements or business opportunities identified;

 

·

substantial dilution to current shareholders if a merger occurs; and

 

·

our stock is thinly traded with limited liquidity.

 

All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this Quarterly Report on Form 10-Q to reflect events or circumstances after the date hereof. New factors emerge from time to time, and it is not possible for us to predict which factors, if any, will arise. In addition, the Company cannot assess the impact of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.  Financial Statements

 

MERCARI COMMUNICATIONS GROUP, LTD.

CONDENSED BALANCE SHEETS

 

		(unaudited)
		February 28, 2015				May 31, 2014
Current Assets
Cash		$	3,911			$	1,503
Prepaid Expense			-				1,348
Total Assets		$	3,911			$	2,851
Current Liabilities
Accounts Payable & Accrued Liabilities		$	466			$	4,124
Shareholder Advances			62,000				46,500
Total Liabilities			62,466				50,624
Stockholders' Deficit
Common Stock, Par value $.00001; Authorized 950,000,000 shares, Issued 45,411,400 shares at February 28, 2015 and May 31, 2014, respectively			454				454
Paid-In Capital			158,722				158,722
Accumulated Deficit			(217,731	)			(206,949	)
Total Stockholders'  Deficit			(58,555	)			(47,773	)
Total Liabilities and Stockholders' Deficit		$	3,911			$	2,851

 

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

 

  

MERCARI COMMUNICATIONS GROUP, LTD.

CONDENSED STATEMENTS OF OPERATIONS

 

		(unaudited)								(unaudited)
		For the three months ended								For the nine months ended
		February 28,								February 28,
		2015				2014				2015				2014
Revenues:		$	-			$	-			$	-			$	-
Expenses:
General and administrative			1,977				2,122				10,782				14,592
Loss from operations			(1,977	)			(2,122	)			(10,782	)			(14,592	)
Provision for Income Tax			-				-				-				-
Net Income (Loss)		$	(1,977	)		$	(2,122	)		$	(10,782	)		$	(14,592	)
Basic & Diluted Loss Per Share			(0.0000	)			(0.0000	)			(0.0002	)			(0.0003	)
Weighted Average Shares			45,411,400				45,411,400				45,411,400				45,411,400

 

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

 

 

MERCARI COMMUNICATIONS GROUP, LTD.

CONDENSED STATEMENTS OF CASH FLOWS

 

		(unaudited)
		For the nine months ended February 28,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss		$	(10,782	)		$	(14,592	)
(Increase) Decrease in Prepaid Expense			1,348
Increase (Decrease) in Accounts Payable		$	(3,658	)		$	4,800
Increase (Decrease) in Accrued Interest			-				-
Net Cash Used in operating activities			(13,092	)			(9,792	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities			-				-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shareholder advance			15,500				10,500
Net Cash Provided by financing activities			15,500				10,500
Net Increase in Cash and Cash Equivalents			2,408				708
Cash and Cash Equivalents at Beginning of Period			1,503				42
Cash and Cash Equivalents at End of Period		$	3,911			$	750
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest		$	-			$	-
Franchise and income taxes		$	-			$	-

 

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

 

 

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of accounting policies for Mercari Communications Group, Ltd. (the “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, 2015 and for the 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 nine months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full year.

 

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 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 $217,731 from inception to February 28, 2015, 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 been contributing capital or making advances to the Company to meet its ordinary and normal 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.

 

 

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

 

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

 

Organization and Basis of Presentation

 

The Company was incorporated under the laws of the State of Colorado on December 30, 1987. From 1988 until early in 1990, the Company was engaged in the business of providing educational products, counseling, seminar programs, and publications such as newsletters to adults aged 30 to 50. The Company financed its business with private offerings of securities, obtaining shareholder loans, and with an underwritten initial public offering of securities registered with the Securities and Exchange Commission (“SEC”). The Company’s business failed in early 1990. The Company ceased all operating activities during the period from June 1, 1990 to November 30, 2001 and was considered dormant. During this period that the Company was dormant, it did not file required reports with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”). From November 30, 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, has not commenced planned principal operations.

 

Nature of Business

 

The Company has no products or services as of February 28, 2015. 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.

 

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 ASC 740-10 & 740-30 (formerly SFAS No.109, “Accounting for Income Taxes”). ASC 740 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 period applicable to the common shareholders by the weighted average number of common shares during the periods. There are no outstanding common stock equivalents for February 28, 2015 and 2014 and are thus not considered.

 

 

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

 

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

 

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.

 

Fair Value of Financial Instruments

 

The carrying value of cash and accrued expenses, if applicable, approximate their fair values based on the short-term maturity of these instruments. The carrying amounts of debt were also estimated to approximate fair value.

 

The Company utilizes the methods of fair value measurement as described in ASC 820 to value its financial assets and liabilities. As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

 

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

  

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

 

New Accounting Pronouncements

 

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the tern substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued).

 

The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted.

 

The Company has reviewed all other recently issued but not yet effective accounting pronouncements and have determined that these new accounting pronouncements are either not applicable or would not have a material impact on the results of operations or changes in the financial position.

 

NOTE 2 - COMMITMENTS

 

As of February 28, 2015 all activities of the Company are conducted on a rent free basis at the corporate offices of Algodon Wines & Luxury Development Group, Inc. or “AWLD”, the majority shareholder of the Company. Currently, there are no outstanding debts owed by the Company for the use of these facilities.

 

NOTE 3 - COMMON STOCK TRANSACTIONS

 

On August 3, 2004, the Company authorized a 900 to 1 reverse stock split of the Company’s common stock. On May 29, 2008, the Company authorized a 3.5 to 1 reverse stock split of the Company’s common stock. All references to the Company’s common stock in the financial statements have been restated to reflect the reverse stock splits.

 

On December 17, 2001, the Board of Directors approved the cancellation of 64,524 shares of common stock. During the year ended May 31, 2003, these shares were cancelled.

 

On December 17, 2001, the Board of Directors authorized the sale of 240,945 restricted common shares at par value to three directors of the Company. The directors paid $7,590 in cash consideration for those shares. During the year ended May 31, 2003, these shares were issued.

 

On January 19, 2007, the Company issued two promissory notes for $10,000 each to two nonaffiliated lenders. The notes were payable by the Company only at the time, and in the event, the Company became current in reporting obligations under the Exchange Act, as amended. At the time when the notes became payable, the Company agreed to issue and deliver to each of the two lenders 285,714 shares of the Company’s unregistered common stock. On March 9, 2007, the Company issued 571,428 shares of stock as payment for the notes payable.

 

On June 18, 2007, the Company sold 142,857 shares of its common stock to Kanouff, LLC (“KLLC”), a Colorado limited liability company, for $5,000 in cash, and sold 142,857 shares of its common stock to Underwood Family Partners, Ltd. (the “Partnership”), a Colorado limited partnership, for $5,000 in cash. John P. Kanouff, a former officer and director of the Company, is the sole owner and member of KLLC; and L. Michael Underwood, a former 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.

 

  

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 - COMMON STOCK TRANSACTIONS (continued)

 

On November 27, 2007, the Company sold 214,286 shares of its common stock to Kanouff, LLC for $7,500 in cash and sold 214,286 shares of its common stock to Underwood Family Partners, Ltd. for $7,500 in cash. 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.

 

In connection with the 3.5 to 1 reverse stock split approved on May 29, 2008, an additional 5,729 shares of common stock were issued due to rounding provisions included in the terms of the reverse stock split. On June 4, 2008, the Company cancelled 5,729 of its outstanding shares of common stock. These shares were surrendered for cancellation by the then majority shareholders of the Company in order to offset shares issued by the Company in rounding up transactions in connection with the 3.5 to 1 reverse stock split approved on May 29, 2008.

 

On November 9, 2009, pursuant to the Stock Purchase Agreement described under Note 9, Mercari offered and sold 43,822,001 shares of its common stock to AWLD. The offer and sale by the Company of the common stock to AWLD was exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof. The Company made this determination based on the representations of AWLD which included, in pertinent part, that AWLD was an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, that AWLD was acquiring the common stock for investment purposes for its own account and not as nominee or agent, and not with a view to the resale or distribution thereof, and that AWLD understood that the common stock may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.

 

NOTE 4 - RELATED PARTY TRANSACTIONS

 

There are no current related party transactions other than discussed in the Company’s annual report on Form 10-K for the year ended May 31, 2014 and other previous filings as filed with the SEC.

 

For the nine months ended February 28, 2015, the Company received additional shareholder advances totaling $15,500 from AWLD, the Company’s parent, bringing the total advance balance to $62,000. This total advance carries no interest and is intended to be converted to equity in the future.

 

NOTE 5 – STOCK PURCHASE AGREEMENT

 

On November 9, 2009, we entered into and closed a Stock Purchase Agreement with Algodon Wines & Luxury Development Group, Inc., a privately-held Delaware corporation, and Kanouff, LLC and Underwood Family Partners, Ltd., the two entities which, immediately prior to closing, were the majority shareholders of the Company and which are controlled by the officers and directors of the Company, which resulted in a change in control of the Company (the “Stock Purchase”). In connection with the Stock Purchase, AWLD purchased, and the Company sold, an aggregate of 43,822,001 shares of common stock for a purchase price of $43,822, or $0.001 per share. In addition, AWLD purchased 200 shares of common stock from KLLC and 200 shares of common stock from Partnership for a purchase price of $180,000 payable to each selling shareholder, of which $105,000 was paid at closing and $75,000 was previously paid in connection with a letter of intent and related amendments. Immediately following the closing of the Stock Purchase Agreement, there were 45,411,400 shares of common stock issued and outstanding. Immediately following the closing of the Stock Purchase Agreement, AWLD owned an aggregate of 43,822,401 shares of the Company’s common stock out of the total of 45,411,400 shares of common stock issued and outstanding at the closing, or approximately 96.5% of the Company’s issued and outstanding shares.

 

  

MERCARI COMMUNICATIONS GROUP, LTD.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 5 – STOCK PURCHASE AGREEMENT (Continued)

 

The Stock Purchase Agreement contains post-closing covenants whereby Mercari and AWLD agree to utilize their commercially reasonable efforts to cause Mercari to (i) remain a Section 12(g) reporting company in compliance with and current in its reporting requirements under the Exchange Act; and (ii) cause all of the assets and business or equity interest of AWLD, its subsidiaries and affiliated companies to be transferred to Mercari and, in connection with such transactions, cause Mercari’s stock to be distributed by AWLD to AWLD’s stockholders and the holders of equity interests in the affiliated companies (“Reorganization Transaction”). In connection with and contemporaneously with the Reorganization Transaction, it is anticipated that Mercari and/or AWLD will seek to obtain at least $10 million in gross proceeds from a financing (the “Financing”). If the gross proceeds from the Financing exceed $15 million at the time of the last closing of such financing, Mercari will issue additional shares of common stock to AWLD at a purchase price of $.001 per share as follows: (i) 18,164,560 additional shares if the amount of the Financing is at least $15 million and less than $20 million; or (ii) 34,058,550additional shares if the amount of the Financing is $20 million or more. After consummation of the Financing, Mercari will seek to register for resale all of the shares issued in the Financing and shares of common stock issued by Mercari from and after December 1, 2001 and prior to the date of the Stock Purchase Agreement. Mercari will use its commercially reasonable efforts to file the registration statement within 60 days after consummation of the Reorganization Transaction (“Filing Date”) and to have the registration statement become effective within 180 days after the Filing Date. If the SEC requires Mercari to reduce the number of shares included under such registration statement, any such reduction will first be made from the shares issued in the Financing. The post-closing obligations of AWLD and Mercari discussed herein are contingent upon AWLD’s good faith determination that, after taking commercially reasonable efforts, the transactions are feasible. Such determination shall take into account all relevant material factors, including without limitation, then-current economic, financial and market conditions.

 

Upon closing of the Stock Purchase, Mercari experienced a change in control and a change in all the members of the Board of Directors and executive officers.

 

NOTE 6 – SUBSEQUENT EVENTS

 

The Company adopted ASC 855, and has evaluated all events occurring after February 28, 2015, the date of the most recent balance sheet, for possible adjustment to the financial statements or disclosures through the date on which the financial statements were issued.

 

  

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

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-K for the year ended May 31, 2015. Also, persons reading this Report should read and consider the Risk Factors included in Item 1A of the Company’s annual report on Form 10-K for the year ended May 31, 2014.

 

Results of Operations

 

The Company intends to acquire a United States or foreign based business which is privately owned and wishes to become a publicly owned business. The Company was inactive and did not file reports required under the Securities Exchange Act of 1934 (“Exchange Act”) from 1990 through 2000, and has not conducted any material business operations since 1990. The Company was reactivated in 2001 and is now current in its state and United States internal revenue filing obligations and the Company has filed all reports required to be filed by it with the SEC under the Exchange Act, during the past seven years. 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 directors of the Company.

 

Liquidity and Capital Resources

 

The Company requires working capital principally to fund its current activities. 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 officers, directors and principal shareholders 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 may actively pursue other financing or funding opportunities at such time as a business acquisition opportunity becomes available.

 

During February of 2008, shares of the common stock of the Company were cleared for quotation on the OTC Bulletin Board and the Pink Sheets under the symbol of “MCAR.”

 

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.  Quantitative and Qualitative Disclosures About Market Risk.

 

As a smaller reporting company, the Company is not required to provide the information required by this Item.

 

Item 4.   Controls and Procedures.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the design and operation of our disclosure controls and procedures were effective as of such date to provide assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in internal controls over financial reporting during the Company’s last fiscal quarter (the quarter ended February 28, 2015) that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

There is no pending litigation to which the Company is presently a party or to which the Company’s property is subject and management is not aware of any litigation which may arise in the future.

 

Item 1A.  Risk Factors

 

As a smaller reporting company, the Company is not required to provide the information required by this Item.

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

 

During the quarter ended February 28, 2015, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933, as amended, that have not been previously reported in a Form 8-K.

 

Item 3.   Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

N/A.

 

Item 5.  Other Information

 

On April 11, 2015, Mark G. Downey was terminated as Chief Financial Officer, Secretary and Treasurer of Company effective immediately. Mr. Downey’s termination was primarily based on the Company’s effort to reduce expenses and reconfigure staff, and not as the result of any disagreement with the Company practices or policies.

 

On April 13, 2015, the Board of Directors of the Company appointed Maria Echevarria as Chief Financial Officer, Secretary and Treasurer of the Company, effective immediately. Ms. Echevarria’s biography is set forth below.

 

Maria Echevarria, age 35, was appointed Chief Financial Officer, Chief Operating Officer, Secretary and Compliance Officer for the Company effective April 10, 2015. She joined the Company as Corporate Controller in June of 2014 and had primary responsibility for the Company’s corporate consolidation, policies and procedures as well as financial reporting for SEC compliance, coordinating budgets and projections, preparing financial presentations and analyzing financial data. Ms. Echevarria has over 15 years of experience in Accounting, Compliance, Finance, Information Systems and Operations. Her experience includes SEC reporting and financial analysis, and her career accomplishments include developing and implementing major initiatives such as SOX, BSA and AML reporting and valuation of financial instruments. Prior to her employment with the Company, Ms. Echevarria served as Director of Finance and Accounting for The Hope Center, a nonprofit, from 2008 to June 2014 overseeing Finance, Information Systems and Operations. From 2001 through 2008 she served as a Quality Control and Compliance Analyst, Financial Analyst, and Accounting Manager for Banco Popular, in San Juan, Puerto Rico. She specialized in Mortgage Quality Control, Compliance, Financial Analysis and Mortgage Accounting, and corresponding with the FHA, VA and other mortgage guarantors. Ms. Echevarria also coordinated audits and compliance programs related to reporting, remittances, escrow accounting and default management for Fannie Mae, Freddie Mac and other private investors. She has developed and taught accounting courses for Herzing University, and currently serves as an adjunct faculty member at Southern New Hampshire University. She is a CPA, licensed in New Jersey and Puerto Rico, and holds a B.B.A. in Accounting from the University of Puerto Rico and a MBA in Business from University of Phoenix. Mrs. Echevarria was born and raised in Puerto Rico, and is fluent in Spanish and English.

 

  

Item 6.   Exhibits

 

Please see the exhibit index following the signature page of this report.

 

  

SIGNATURES

 

Pursuant to the requirements 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.
DATE: April 14, 2015	By:	/s/ Scott L. Mathis
		Scott L. Mathis, Chief Executive Officer
DATE: April 14, 2015	By:	/s/ Maria I. Echevarria
		Maria I. Echevarria, Chief Financial Officer

 

 

EXHIBIT INDEX

 

The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

 

Exhibit
Number		Description of Exhibit
3.1		Articles of Incorporation.(1)
3.2		Articles of Amendment to Articles of Incorporation.(2)
3.3		Bylaws of the Registrant (as amended).(3)
3.4		Plan of Recapitalization adopted August 4, 2004.(4)
16.1		Letter from former auditor Robison Hill & Co. to Securities and Exchange Commission, dated March 17, 2015.(5)
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
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
(1)		Incorporated by reference from Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed on March 7, 2007.
(2)		Incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 3, 2008.
(3)		Incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 3, 2008.
(4)		Incorporated by reference from Exhibit 3.3 to the Company’s Annual Report on Form 10-K filed on March 7, 2007.
(5)		Incorporated by reference from Exhibit 16.1 to the Company’s Current Report on form 8-K filed on March 17, 2015.