AiXin Life International, Inc. - Annual Report: 2009 (Form 10-K)

x  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
                                                                                                For the fiscal year ended: May 31, 2009

¨  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                                                                                         For the transition period from ________ to ________

Mercari Communications Group, Ltd.
                    (Exact name of registrant in its charter)

Registrant’s telephone number, including area code: (303) 623-0203

Securities registered pursuant to section 12 (b) of the Act: None 
Securities registered pursuant to section 12 (g) of the Act: 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes ¨  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) 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 at least the past 90 days.

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 (§ 229.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10- K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

The aggregate market value of voting and nonvoting common equity held by nonaffiliates computed with reference to the last price at which the common equity was sold, or the average bid and asked price of such common equity: the aggregate value of the voting and nonvoting common stock held by nonaffiliates as of November 30, 2008, was $10,229 based upon the price at which the common stock was last sold prior to November 30, 2008.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

As of May 31, 2009, there were 1,589,399 shares of Issuer’s common stock outstanding. No other class of equity securities is issued or outstanding.

Documents incorporated by reference: None

Mercari Communications Group, Ltd.
Form 10-K Annual Report

TABLE OF CONTENTS

PART I

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Part I

ITEM 1.  BUSINESS

     The registrant was incorporated under the laws of the State of Colorado on December 30, 1987. From 1987 until early in 1990, the registrant was engaged in the business of providing educational products, counseling, seminar programs, and publications such as newsletters to adults aged 30 to 50. The registrant 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 registrant registered its common stock with the SEC under the Securities Exchange Act of 1934 (“Exchange Act”) during 1988. The registrant’s business failed in early 1990. The registrant ceased all operating activities during the period from June 1, 1990 to August 31, 2001 and was considered dormant. During this period that the registrant was dormant, the registrant did not file required reports with the SEC under the Exchange Act.

     During 2001, the registrant was reactivated with a business plan of filing all delinquent documents with the Colorado Secretary of State, the SEC, and federal and state tax authorities; and seeking to merge with another company which has assets and an active business. The registrant has filed all of such delinquent documents with the Colorado Secretary of State and the federal and state tax authorities, and all reports required under the Exchange Act since 2002 and is now current in reporting obligations under the Exchange Act.

     During August of 2004, the registrant’s shareholders approved a plan of quasi reorganization pursuant to which accounts were restated to eliminate the accumulated deficit and related capital accounts on the registrant’s balance sheet. This quasi reorganization was effective on March 1, 2004. On August 3, 2004, the registrant effected a 900 for 1 reverse stock split; and on June 2, 2009, the registrant effected a 3 ½ for 1 reverse stock split.

     All references to the registrant’s common stock in this Form have been restated to reflect these reverse stock splits. As of May 31, 2009, there were 1,589,399 shares of the registrant’s common stock outstanding.

Business

     During each of the years since the registrant was reactivated, the registrant has had no revenue and has had losses approximately equal to the expenditures required to reactivate and comply with filing and reporting obligations. The registrant does not expect any revenue unless and until a business acquisition transaction is completed. Expenditures have been paid by the registrant from capital contributions and loans made to the registrant by entities controlled by the registrant's directors.

     During June of 2007, registrant’s two largest shareholders each purchased 142,857 shares (reflecting the subsequent reverse share split) for $5,000 cash, and in November 2007, each also purchased 214,286 shares for $7,500 cash. Each of the two shareholders is affiliated with one of registrant’s two directors. Each shareholder also made a loan of $5,500 to registrant in May 2009, made a loan of $5,000 in November 2008, and made a loan of $3,000 in May 2009.

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     On November 30, 2008, the registrant entered into a nonbinding letter of intent (“Letter of Intent”) with Diversified Private Equity Corporation (“DPEC”) and its wholly owned subsidiaries and affiliated companies (collectively referred to as “DPEC”). DPEC is headquartered in New York, NY, and is a vertically integrated company that creates, develops, markets, sells and manages private equity investment opportunities principally in the biotechnology industry and in non leveraged global real estate assets. Also parties to the Letter of Intent are Kanouff, LLC (“KLLC”) and Underwood Family Partners, Ltd. (“Partnership”), the two entities which are the majority shareholders of the registrant and which are controlled by the officers and directors of the registrant. The Letter of Intent sets forth the general terms upon which DPEC and its investors would acquire, by way of a reorganization transaction, between approximately 96.5% and 97% of the total issued and outstanding common stock of the registrant. Following the reorganization, the Letter of Intent provides that the existing shareholders of the registrant would retain between approximately 3.5% and 3% of the total issued and outstanding common stock of the registrant. Under the Letter of Intent, all of these percentages are subject to dilution based upon any additional financing contemplated under the Letter of Intent. Additionally, it was contemplated under the Letter of Intent that KLLC and the Partnership would sell to DPEC a total of 400 shares of common stock of the registrant which they currently own in exchange for the payment by DPEC of $350,000; $50,000 of which was paid as a deposit. Pursuant to the Letter of Intent, the registrant and DPEC agree to negotiate a definitive reorganization agreement under which the reorganization would be consummated as a tax free reorganization. The entry into a reorganization agreement is subject to completion of due diligence and the satisfaction of certain terms and conditions by the parties. The Letter of Intent provides that it would terminate if a reorganization does not occur by April 6, 2009, which date may be extended for 30 days by either the registrant or DPEC. The proposed reorganization will provide DPEC with a public company platform to facilitate its future growth and development. On February 25, 2009, the parties to the Letter of Intent entered into a Modification and Amendment of the Letter of Intent (“Amended LOI”). The Amended LOI did not become legally effective until March 27, 2009. Under the Amended LOI, the termination date was changed to August 14, 2009, unless extended for an additional 30 days by either DPEC or the registrant; the post reorganization percentage ownership ranges are changed to between approximately 96.5 % and 98% for DPEC shareholders and 2% to 3.5% for shareholders of the registrant; the purchase price of the 400 shares by DPEC from KLLC and the partnership is changed to $360,000; and the deposit paid to KLLC and the Partnership is changed to $100,000. On August 4, 2009, DPEC extended the termination date from August 14, 2009 to September 14, 2009.

How to obtain our SEC Filings

     The registrant files annual, quarterly, and special reports, and other information with the Securities and Exchange Commission (“SEC”). These reports and other information can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, D.C. 20549. Such materials may also be accessed electronically by means of the SEC’s website at www.sec.gov.

ITEM 1A.   RISK FACTORS

     AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN EVALUATING OUR BUSINESS, OPERATIONS AND FINANCIAL CONDITION. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US, THAT WE CURRENTLY DEEM IMMATERIAL OR THAT ARE SIMILAR TO THOSE FACED BY OTHER COMPANIES IN OUR BUSINESS IN GENERAL, SUCH AS COMPETITIVE CONDITIONS, MAY ALSO IMPAIR OUR BUSINESS OPERATIONS.

We have no recent operating history or basis for evaluating prospects.

     We have no operating business or plans to develop one. We are currently seeking to enter into a merger or business combination with another operating company. To date, our efforts have been limited to meeting our regulatory filing requirements and searching for a merger target.

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We have limited resources and no revenues from operations, and will need additional financing in order to execute any business plan.

     We have limited resources, no revenues from operations to date and our cash on hand may not be sufficient to satisfy our cash requirements during the next twelve months. In addition, we will not achieve any revenue until, at the earliest, the consummation of a merger or other transaction and we cannot ascertain our capital requirements until such time. There can be no assurance that determinations ultimately made by us will permit us to achieve our business objectives.

We will be able to effect at most one merger, and thus may not have a diversified business.

     We will most likely have the ability to effect only a single merger. This probable lack of diversification may subject us to numerous economic, competitive and regulatory developments, any or all of which may have a material adverse impact upon the particular industry in which we may operate subsequent to the consummation of a merger. If a merger transaction is completed, we will become dependent upon the development or market acceptance of a single or limited number of products, processes or services.

We depend substantially upon our two officers to make all management decisions.

     Our ability to effect a merger will be dependent upon the efforts of President, L. Michael Underwood, and our Secretary and Treasurer, John P. Kanouff, who are also the directors and represent the controlling shareholders. We have not entered into any employment agreements or other understandings with either person concerning compensation or obtained any “key man” life insurance. The loss of the services of these officers would have a material adverse effect on achieving our business objectives and success. We do not anticipate that we will hire additional personnel.

There may be conflicts of interest between our management and our non-management shareholders.

     Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of other shareholders. Our two officers and directors are also beneficial owners of our two controlling shareholders. They may be entitled to receive compensation from a target company they identify in connection with a business combination. A conflict of interest may arise between our management’s personal pecuniary interest and their fiduciary duty to our shareholders.

There is competition for those private companies suitable for a merger transaction of the type contemplated by management.

     We are in a highly competitive market for a relatively small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with or acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.

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Future success is highly dependent on the ability of our management to complete a transaction with a suitable private business.

     The nature of our operations is highly speculative. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While we intend to seek a business combination with an entity having established an operating history or a well financed business plan, we cannot assure you that we will be successful in completing a transaction with a candidate meeting that criterion. In the event we complete a business combination, the success of our operations will be dependent upon management of the successor firm and numerous other factors beyond our control.

We have no definitive agreement for a business combination or other transaction.

     Although we signed a letter of intent on November 30, 2008, we have no definitive agreement with respect to engaging in a business combination with DPEC. No assurances can be given that we will successfully conclude a business combination with DPEC.

Management will change upon the consummation of a merger.

     After the closing of a merger or business combination, our current management will not retain any control or managerial responsibilities, and our officers and directors intend to resign from their positions with us following completion of the transaction.

Current shareholders will be immediately and substantially diluted upon a merger or business combination.

     Our Articles of Incorporation authorized the issuance of 950,000,000 shares of common stock. There are currently 948,410,601 authorized but unissued shares of common stock available for issuance. To the extent that additional shares of common stock are authorized and issued in connection with a merger or business combination, our shareholders will experience significant dilution of their respective ownership interests. Furthermore, the issuance of a substantial number of shares of common stock may adversely affect prevailing market prices, if any, for the common stock and could impair our ability to raise additional capital through the sale of equity securities in the future.

Control by existing shareholders.

     Our two officers and directors beneficially own 87.2% of the outstanding shares of our common stock. As a result, the two officers and directors are able to exercise control over matters requiring shareholder approval, including the election of directors, and the approval of mergers, consolidations and sales of all or substantially all of our assets.

Our common stock is a “penny stock” which may restrict the ability of shareholders to sell our common stock in the secondary market.

     The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price, as defined, of less than $5.00 per share, or an exercise price of less than $5.00 per share, subject to certain exceptions, including an exception of an equity security that is quoted on a national securities exchange. Our common stock is not now quoted on a national exchange but is traded on Nasdaq’s OTC Bulletin Board (“OTCBB”). Thus, they are subject to rules that impose additional sales practice requirements on broker-dealers who sell these securities. For example, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser’s written consent to the transactions prior to the purchase. Additionally, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered underwriter, and current quotations for the securities, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The “penny stock” rules, may restrict the ability of our shareholders to sell our common stock in the secondary market.

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Our common stock has been thinly traded, liquidity is limited, and we may be unable to obtain listing of our common stock on a more liquid market.

     Our common stock is quoted on the NASDAQ OTC Bulletin Board (“OTCBB”), which provides significantly less liquidity than a securities exchange or an automated quotation system. There is uncertainty that we will ever be accepted for a listing on an automated quotation system or national securities exchange. There is currently limited or no volume of trading in our common stock. The purchasers of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

     None. Also, as a smaller reporting company the registrant is not required to provide information under this item.

ITEM 2.   PROPERTIES

     The principal executive offices of the registrant are currently located at the home of the registrant’s secretary, John P. Kanouff, 2525 East Cedar Avenue, Denver, Colorado 80209. The registrant is receiving the use of this space from Mr. Kanouff without cost. Registrant currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate matters.

ITEM 3.   LEGAL PROCEEDINGS

     No material legal proceedings to which the registrant is a party or to which the registrant’s property is subject is pending and no such material proceeding is known by management to be contemplated.

ITEM 4.   SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of shareholders of the registrant during the fourth quarter of the fiscal year covered by this report.

PART II

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHES OF EQUITY SECURITIES

(a)   Market Information.

During the past five years, no public market for the common stock of the registrant existed until February 29, 2008 when the registrant’s common stock was cleared for trading on the OTC Bulletin Board and the Pink Sheets. The current trading symbol for the registrant’s common stock is “MCAR”.  Although three broker dealers registered as market makers for the registrant’s common stock, only a minimal number of shares have been traded since February 29, 2008. The average bid price for a share of the registrant’s common stock from February 29, 2008, to May 30, 2008 was $.262504. The average bid price for a share of the registrant’s common stock from June 2, 2008, to May 31, 2009, was $.01. There was no ask price for a share of the registrants common stock during either of the foregoing periods. These quotations reflect inter-dealer quotations and prices without retail mark-up, mark-down or commissions and may not reflect actual transactions.

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(b)   Holders.

     As of May 31, 2009, there were 1,589,399 shares of common stock issued and outstanding held by approximately 137 shareholders of record on that date. There are no shares of preferred stock outstanding.

(c)   Dividends.

     The Registrant has not declared or paid any dividends on the common stock from inception to the date of this report. There are no restrictions on the payment of dividends. No dividends are contemplated at any time in the foreseeable future.

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

     There are no securities of the registrant authorized or committed for issuance under any equity or other compensation plan.

(e)   CUSIP Number.

The CUSIP number for our $0.00001 par value common stock is 587572 40 5.

ITEM 6.   SELECTED FINANCIAL DATA

     As a smaller reporting company, the registrant is not required to provide information for this item.

ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following should be reviewed in connection with the financial statements and management’s comments thereon set forth under this Item and Item 8 of this Report.

Plan of Operations

     The registrant had no operations since 1990. The registrant is a development stage business, which intends to acquire a business which is privately owned and intends to become a publicly owned business. The registrant is current in its state and federal corporate and tax filing obligations, and is current in its reporting obligations under the Exchange Act. The registrant is now actively seeking acquisition candidates. The registrant has entered into a non binding letter of intent to engage in a reorganization transaction as described in Item 1 of this Report.

     During each of the years since the registrant was reactivated in 2001, the registrant has had no revenue and has had losses approximately equal to the expenditures made to reactivate and meet required 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 loans from affiliates of the directors of the registrant.

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     The registrant requires working capital principally to fund its current operations which consist of filing required documents with federal and state regulatory authorities to maintain registrant’s status as in compliance with applicable requirements, and seeking a merger or acquisition candidate. There are no commitments from banks or other lending sources, including from officers and directors, for lines of credit or similar short-term borrowing; but the registrant has in the past been able to obtain additional capital required from affiliates of the directors of the registrant.

     In order to complete any acquisition, the registrant 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 registrant.

     The registrant’s business plan may require substantial funding from a public or private offering of its common stock in connection with a business acquisition, for which the registrant has no commitments. The registrant may actively pursue other financing or funding opportunities at such time as a business acquisition opportunity becomes available.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     As a smaller reporting company, the registrant is not required to provide information for this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS REPORT

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INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS REPORT

     We have audited the accompanying balance sheets of Mercari Communications Group, Ltd. (a development stage company) as of May 31, 2009 and 2008, and the related statements of operations and cash flows for the two years ended May 31, 2009 and 2008, and the cumulative period from March 1, 2004 (inception of development stage) to May 31, 2009, and the statement of stockholders’ equity for the period from December 30, 1987 (inception) to May 31, 2009. 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 (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2009 and 2008, and the results of its operations and its cash flows for the two years ended May 31, 2009 and 2008, and the cumulative period from March 1, 2004 (inception of development stage) to May 31, 2009 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

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

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

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

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2009

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2009
(continued)

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2009
(continued)

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MERCARI COMMUNICATIONS GROUP, LTD.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM DECEMBER 30, 1987 (INCEPTION) TO MAY 31, 2009
(continued)

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

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

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 were payable by the Company only at the time, and in the event, the Company became current in reporting obligations under the Securities Exchange Act of 1934, as amended. On March 9, 2007 when the notes became payable, the Company issued and delivered to each of the two lenders 285,714 shares of the Company’s unregistered common stock as payment for the notes.

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

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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 $105,000 for the period from March 1, 2004 (inception of development stage) to May 31, 2009, 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 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.

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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 is in the development stage, and has not commenced planned principal operations.

Nature of Business

     The Company has no products or services as of May 31, 2009. 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.

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

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, 2009 and 2008 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, 2009, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $105,000 that may be offset against future taxable income through 2028. 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.

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

     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.

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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 been contributing capital to the Company to meet its ordinary and normal operating expenses.

NOTE 4 - COMMITMENTS

     As of May 31, 2009 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 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 by the three current Directors. 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 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 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 142,857 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.

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NOTE 5 - COMMON STOCK TRANSACTIONS (continued)

     On November 27, 2007, the Company sold 214,286 shares of its common stock to Kanouff, LLC (“KLLC”), a Colorado limited liability company, for $7,500 in cash and 214,286 shares of its common stock to Underwood Family Partners, Ltd. (“Partnership”), a Colorado limited partnership, for $7,500 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.

     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 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.

NOTE 6 - RELATED PARTY TRANSACTIONS

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

     On May 19, 2008, the Company received a loan for $5,500 from Kanouff, LLC (“KLLC”), a Colorado limited liability company, and a loan for $5,500 from Underwood Family Partners, Ltd. (“Partnership”), a Colorado limited partnership. 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. On November 18, 2008, the Company received a loan for $5,000 from KLLC and a loan for $5,000 from the Partnership. These loans are due on demand and carry an interest rate of 5% per annum. On May 29, 2009, the Company received a loan for $3,000 from KLLC and a loan for $3,000 from the Partnership. These loans are due on demand and carry an interest rate of 5% per annum. At May 31, 2009, principal and accrual interest totaling $27,849 was due on these loans.

NOTE 7 - 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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NOTE 8 - UNCERTAIN TAX POSITIONS

     Effective June 1, 2007, the company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of FIN 48 did not have a material impact on the company’s condensed consolidated financial position and results of operations. At June 1, 2007, the company had no liability for unrecognized tax benefits and no accrual for the payment of related interest.

     Interest costs related to unrecognized tax benefits are classified as “Interest expense, net” in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized $0 of interest expense related to unrecognized tax benefits for the year ended May 31, 2009. In many cases the company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. With few exceptions, the company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2005. The following describes the open tax years, by major tax jurisdiction, as of May 31, 2009:

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NOTE 9 - SUBSEQUENT EVENTS

     On November 30, 2008, the Company entered into a nonbinding letter of intent (“Letter of Intent”) with Diversified Private Equity Corporation (“DPEC”) and its wholly owned subsidiaries and affiliated companies (collectively referred to as “DPEC”). DPEC is headquartered in New York, NY, and is a vertically integrated company that creates, develops, markets, sells and manages private equity investment opportunities principally in the biotechnology industry and in non-leveraged global real estate assets. Also parties to the Letter of Intent are Kanouff, LLC (“KLLC”) and Underwood Family Partners, Ltd. (“Partnership”), the two entities which are the majority shareholders of the Company and which are controlled by the officers and directors of the Company. The Letter of Intent sets forth the general terms upon which DPEC and or its investors would acquire, by way of a merger with a to be formed wholly owned subsidiary of the Company, between approximately 96.5% and 97% of the total issued and outstanding common stock of the Company. Following the merger, the Letter of Intent provides that the existing shareholders of the Company would retain between approximately 3.5% and 3% of the total issued and outstanding common stock of the Company. Under the Letter of Intent, all of these percentages are subject to dilution based upon any additional financing contemplated under the Letter of Intent. Additionally, it was contemplated under the Letter of Intent that KLLC and the Partnership would sell to DPEC a total of 400 shares of common stock of the Company which they currently own in exchange for the payment by DPEC of $350,000; $50,000 of which was paid as a deposit. Pursuant to the Letter of Intent, the Company and DPEC agree to negotiate a definitive merger agreement under which the merger would be consummated as a tax free reorganization. The entry into a merger agreement is subject to the completion of due diligence and the satisfaction of certain terms and conditions by all parties. The Letter of Intent provides that it would terminate if a merger does not occur by April 6, 2009, which date may be extended for 30 days by either the Company or DPEC. The proposed reorganization will provide DPEC with a public company platform to facilitate its future growth and development. On February 25, 2009, the parties to the Letter of Intent entered into a Modification and Amendment of the Letter of Intent (“Amended LOI”). The Amended LOI did not become legally effective until March 27, 2009. Under the Amended LOI, the termination date is changed to August 14, 2009, unless extended for an additional 30 days by either DPEC or the Company; the post merger percentage ownership ranges are changed to between approximately 96.5% and 98% for DPEC shareholders and 2% to 3.5% for shareholders of the Company; the purchase price of the 400 shares by DPEC from KLLC and the Partnership is changed to $360,000; and the deposit paid to KLLC and the Partnership is changed to $100,000. On August 4, 2009, DPEC extended the termination date from August 14, 2009 to September 14, 2009.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     The registrant has had no disagreement with its accountants 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.

ITEM9A(T).  CONTROLS AND PROCEDURES

(a)    Evaluation of Disclosure Controls and Procedures

     We have established disclosure controls and procedures to ensure that material information relating to the Company is made known to the officers who certify the Company’s financial reports and to the Board of Directors. As of the end of the period covered by this report, the registrant carried out an evaluation, under the supervision and with the participation of the registrant’s president and the treasurer, of the effectiveness of the design and operation of the registrant's disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. Based upon the evaluation, the registrant's president and the treasurer concluded that, as of the end of the period, the registrant's disclosure controls and procedures were effective in timely alerting them to material information relating to the registrant required to be included in the reports that the registrant files and submits pursuant to the Exchange Act and that the information is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms.

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     Our management, consisting of our president and treasurer, does not expect that our disclosure controls and procedures or our internal controls will necessarily prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the registrant would be detected.

(b)    Management’s Report on Internal Control Over Financial Reporting

     The registrant’s president and treasurer, acting as the chief executive officer and chief financial officer are responsible for establishing and maintaining disclosure controls and procedures for the registrant. These officers assessed the effectiveness of our internal control over financial reporting as of May 31, 2009. In making this assessment the officers concluded that, as of that date registrant’s internal control over financial reporting is effective based on reasonable criteria for very small issuers as such as registrant and in accordance with the interpretive guidance included in Release No. 34-55929.

     This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

(c)    Changes in Internal Controls

     There were no significant changes in the registrant's internal controls over financial reporting or in any other areas that could significantly affect the registrant's internal controls subsequent to the date of their most recent evaluations, including any corrective actions with regard to significant deficiencies and material weaknesses.

ITEM 9B.  OTHER INFORMATION

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

     The following table sets forth the names and ages of all directors and executive officers of the registrant as of the end of the last fiscal year and on the date of this report:

No current director has any arrangement or understanding whereby they are or will be selected as a director or nominee past the current term of office.

     Officers will hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. The officers are elected by the Board of Directors at its annual meeting immediately following the shareholders’ annual meeting and hold office until their death or until they earlier resign or are removed from office. There are no written or other contracts providing for the election of directors or term of employment of executive officers, all of whom serve on an “at will” basis.

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     The registrant does not have any standing audit, nominating or compensation committees, or any committees performing similar functions. The registrant has no such committees because of its small size, relative inactivity and limited financial resources. The Board of Directors acts to make nominations of persons to be considered for election or appointment as a director, a process considered to be acceptable for the registrant, given its small size and limited activities.

     The Board of Directors meets periodically throughout the year as the level of corporate activity dictates. During the years of 1990 through 1999 the Board held no meetings and there were no actions taken by unanimous consent. During each fiscal year from 2001 through May 31, 2006 there was one meeting of the Board of Directors, by telephone. During the fiscal year ended May 31, 2009, there were seven meetings of the Board, all by unanimous written consent.

     On April 23, 2007, Thomas A. Higgins and Allan Bergenfield resigned as Directors of the Company. On April 23, 2007, Robert W. Marsik appointed Messrs. Underwood and Kanouff to fill the existing vacancies on the Board and then resigned as a Director of the Company and as president, secretary and treasurer of the Company. On April 24, 2007, Messrs. Underwood and Kanouff were elected as officers of the registrant.

Executive Profiles

     L. Michael Underwood. During the past five years, Mr. Underwood’s principal occupation has been acting as the sole officer of LMU & Company (“LMUCO”), a Colorado corporation wholly owned by Mr. Underwood. LMUCO’s business consists of providing consulting services to businesses. Mr. Underwood is not currently a director of any other publicly held entity.

     John P. Kanouff. During the past five years, Mr. Kanouff’s principal occupation has been acting as the manager of Kanouff, LLC (“KLLC”), a Colorado limited liability company wholly owned by Mr. Kanouff. KLLC’s business consists of providing consulting services to businesses. From November of 2004, to July of 2006, Mr. Kanouff was a registered representative with US EURO Securities, Inc., a member of the National Association of Securities Dealers. Mr. Kanouff is not currently a director of any other publicly held entity.

Audit Committee and Audit Committee Financial Expert

     The registrant does not have a standing audit committee at the present time. Our Board of Directors has determined that the registrant does not have a board member that qualifies as an “audit committee financial expert” as defined in Item 401(e) of Regulation S-B, nor do we have a board member that qualifies as “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.

     We believe that our directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The Board of Directors of our company does not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee for this corporation can be adequately performed by the Board of Directors. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the level of our business activity and the fact that we have generated no revenue from operations to date.

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     Based solely on our review of the copies of the Section 16(a) reports furnished to the registrant, the registrant considers that all Section 16(a) filing requirements applicable to the officers, directors, and holders of 10% of our outstanding common stock were timely met during the fiscal year ended May 31, 2009.

Code of Ethics

     The registrant has not adopted a Code of Ethics that applies to the registrant’s principal executive officers, the principal financial officer, the principal accounting officer or the controller. No Code of Ethics has been adopted because the registrant has two directors, who also serve as the only officers and the registrant and the Board of Directors chose not to reduce to writing standards designed to deter wrongdoing and promote honest and ethical conduct. The Board of Directors believes that the registrant’s very small size and the limited number of personnel who are responsible for its operations make a formal Code of Ethics unnecessary.

     No compensation was paid to the Board of Directors or to executive officers of the registrant in their capacities as such, or for any other purpose between December 2000, and the date of this Report. The current directors do not anticipated that any compensation will be paid to any current member of the board or to any current officer of the registrant.

Employment Agreements or Other Compensation Arrangements:  None.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKER MATTERS

     The following table sets forth, as of May 31, 2009, the shares of common stock owned by each current director, by directors and executive officers as a group, and by each person known by the registrant to own more than 5 % of the outstanding common stock.