-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VaMV4qk/MLAuk9tYsQrR0rPGec4zLNwOmLNIagdPex/+F4y4GDXd6Qco/Be4IHwn YjRyNSb/18h/a8mY7VluMw== 0000909012-06-000322.txt : 20060315 0000909012-06-000322.hdr.sgml : 20060315 20060315102340 ACCESSION NUMBER: 0000909012-06-000322 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060131 FILED AS OF DATE: 20060315 DATE AS OF CHANGE: 20060315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERA PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000837490 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 043683628 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-23460 FILM NUMBER: 06686982 BUSINESS ADDRESS: STREET 1: 73-4460 QUEEN KA'AHUMANU HWY. STREET 2: SUITE 110 CITY: KAILUA-KONA STATE: HI ZIP: 96740 BUSINESS PHONE: (808) 326-9301 MAIL ADDRESS: STREET 1: 73-4460 QUEEN KA'AHUMANU HWY. STREET 2: SUITE 110 CITY: KAILUA-KONA STATE: HI ZIP: 96740 FORMER COMPANY: FORMER CONFORMED NAME: AQUASEARCH INC DATE OF NAME CHANGE: 19920703 10QSB 1 t302442.txt FOR THE QUARTER ENDED 1/31/06 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark one) [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2006 Or [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 COMMISSION FILE NUMBER: 333-107716 ---------------------------------- MERA PHARMACEUTICALS, INC. (Exact name of Registrant as specified in its charter) DELAWARE 04-3683628 (State or other jurisdiction of (IRS Employer Identification incorporation or organization) Number) 73-4460 QUEEN KA'AHUMANU HIGHWAY, SUITE 110 KAILUA-KONA, HAWAII 96740 (808) 326-9301 (Address and telephone number of principal executive offices) 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 periods as 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 [ ] Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. YES [X] NO [ ] 479,175,623 shares of $0.0001 par value common stock outstanding as of January 31, 2006 80 shares of $0.0001 par value Series A preferred stock outstanding as of January 31, 2006 974 shares of $0.0001 par value Series B preferred stock outstanding as of January 31, 2006 ================================================================================ MERA PHARMACEUTICALS, INC. FORM 10-QSB FOR THE QUARTER ENDED JANUARY 31, 2006 CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1: Financial Statements Condensed Balance Sheet 3 Condensed Statements of Operations 4 Condensed Statements of Cash Flows 5 Notes to Condensed Financial Statements 6 Item 2: Management's Plan of Operation Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Controls and Procedures 9 PART II - OTHER INFORMATION Item 1: Legal Proceedings 9 Item 2: Changes In Securities 9 Item 3. Defaults Upon Senior Securities 9 Item 4: Submission of Matters to a Vote of Security Holders 9 Item 5: Other Information 10 Item 6: Exhibits and Reports on Form 8-K 10 Signature 10 Certifications 11
MERA PHARMACEUTICALS, INC. CONDENSED BALANCE SHEET (UNAUDITED) January 31, 2006 ------------- ASSETS Current assets: Cash and cash equivalents $ 105,487 Accounts receivable, net 12,454 Prepaid expenses and other current assets 85,121 ----------- Total current assets 203,062 Plant and equipment, net 2,493,630 Other assets, net of accumulated amortization of $34,320 28,080 ----------- Total Assets $ 2,724,772 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued expenses and customer credits $ 387,147 Notes payable - related parties 65,336 ----------- Total Current Liabilities 452,483 ----------- Contingencies Stockholders' equity: Convertible preferred stock, $.0001 par value, 10,000 shares authorized, 80 Series A shares issued and outstanding and 974 Series B shares issued and outstanding 2 Common stock, $.0001 par value: 500,000,000 shares authorized, 479,175,623 shares issued and outstanding 47,918 Additional paid-in capital 7,481,423 Accumulated deficit (5,257,054) ----------- Total stockholders' equity 2,272,289 ----------- Total Liabilities and Stockholders' Equity $ 2,724,772 =========== See the accompanying notes to the financial statements
-2-
MERA PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) -------------- ------------- Three Months Three Months Ended Ended January 31, January 31, 2006 2005 -------------- ------------- NET SALES 152,394 132,341 Cost of Goods Sold 18,180 89,187 ------------- ------------- GROSS PROFIT 134,214 43,154 ------------- ------------- Costs and Expenses Cost of subcontract services -- 74,697 Research and development costs 60,749 21,601 Selling, general and administrative 118,290 131,993 Depreciation and Amortization 72,261 37,760 Provision for excess and obsolete inventory -- 25,000 ------------- ------------- Total costs and expenses 251,300 291,051 ------------- ------------- Operating loss (117,086) (247,897) Other income (expense): Interest income 243 -- Interest expense (2,213) (771) ------------- ------------- Total other income (expense) (1,970) (771) ------------- ------------- Net loss before income tax provision (119,056) (248,668) Tax expense -- -- Refundable tax credit 5,468 1,750 ------------- ------------- Net loss $ (113,588) $ (246,918) ============= ============= Loss per share - basic and diluted (0.0002) (0.0005) Weighted average shares outstanding - 479,175,623 430,375,659 basic and diluted See the accompanying notes to the financial statements
-3-
MERA PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) ------------- ------------ Three Months Three Months Ended Ended January 31, January 31, 2006 2005 --------- ------------ Cash Flows from Operating Activities: Net loss $(113,588) $(246,918) Adjustments to reconcile net loss to net cash used in operating activities: Accumulated depreciation and amortization 72,261 60,743 Changes in assets and liabilities Accounts receivable (4,982) 926 Inventories -- 25,000 Prepaid expenses and other current assets (72,872) (88,060) Accounts payable, accured expenses and customer credits 86,129 56,888 --------- --------- Net cash used by operating activities (33,052) (191,421) --------- --------- Cash Flows from Investing Activities: Purchases of fixed assets -- -- --------- --------- Net cash used by investing activities -- -- --------- --------- Cash Flows from Financing Activities: Proceeds from issuance of stock 150,000 215,000 Proceeds from notes payable -- 643 Payment of notes payable (12,000) (20,000) --------- --------- Net cash provided by financing activities 138,000 195,643 --------- --------- Net increase (decrease) in cash and cash equivalents 104,948 4,222 Cash and cash equivalents, beginning of the period 539 4,401 --------- --------- Cash and cash equivalents, end of the period $ 105,487 $ 8,623 ========= ========= See the accompanying notes to the financial statements
-4- MERA PHARMACEUTICALS, INC. NOTES TO CONDESED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 31, 2006 AND 2005 1. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ended January 31, 2006 are not necessarily indicative of the results that may be expected for the year ending October 31, 2006. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended October 31, 2005, included in Form 10-KSB filed with the Securities and Exchange Commission The preparation of the Company's Consolidated Financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. The more significant areas requiring the use of management's estimates and assumptions relate to depreciation and amortization calculations; inventory valuations; asset impairments (including impairments of goodwill, long-lived assets, and investments); valuation allowances for deferred tax assets; reserves for contingencies and litigation; and the fair value and accounting treatment of financial instruments. The Company bases its estimates on the Company's historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions. -5- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Report contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements that include the words "believes," "expects," "estimates," "anticipates" or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements. Risk factors include, but are not limited to, our ability to raise or generate additional capital; our ability to cost-effectively manufacture our products on a commercial scale; the concentration of our current customer base; competition; our ability to comply with applicable regulatory requirements; potential need for expansion of our production facility; the potential loss of a strategic relationship; inability to attract and retain key personnel; management's ability to effectively manage our growth; difficulties and resource constraints in developing new products; protection and enforcement of our intellectual property; compliance with environmental laws; climate uncertainty; currency fluctuations; exposure to product liability lawsuits; and control of our management and affairs by principal stockholders. The reader should carefully consider, together with the other matters referred to herein, the information contained under the caption "Risk Factors" in our Annual Report on Form 10-KSB for a more detailed description of these significant risks and uncertainties. We caution the reader, however, that these factors may not be exhaustive. Since inception, our primary operating activities have consisted of basic research and development and production process development, recruiting personnel, purchasing operating assets, raising capital and sales of product. From September 16, 2002, the effective date of our plan of reorganization, through January 31, 2006 we had an accumulated deficit of $5,257,054. Our losses to date have resulted primarily from costs incurred in research and development, production costs and from general and administrative expenses associated with operations. We expect to continue to incur operating losses through the current fiscal year. We expect to have quarter-to-quarter and year-to-year fluctuations in revenues, expenses and losses, some of which could be significant. We have a limited operating history. An assessment of our prospects should include the technology risks, market risks, expenses and other difficulties frequently encountered by early-stage operating companies, and particularly companies attempting to enter competitive industries with significant technology risks and barriers to entry. We have attempted to address these risks by, among other things, hiring and retaining highly qualified persons, diversifying our customer base and expanding revenue sources, e.g., by performing other contract services and increasing efforts to sell raw materials to other product formulators. However, our best efforts cannot guarantee that we will overcome these risks in a timely manner, if at all. -6- RESULTS OF OPERATIONS REVENUES. Revenue rose 15.15% for the quarter ending January 31, 2006 to $152,394 vs. $132,341 in the year ago quarter ending January 31, 2005. This increase was primarily due to strengthening sales in our retail Asta Factor line of products. Also included in revenues are approximately $75,000 from licensing and a technical services agreement with a single customer. The Company is unsure whether such revenues will continue in the future. COST OF SALES. Cost of goods sold was $18,180 for the quarter ending January 31, 2006 versus $89,187 in the quarter ending January 31, 2005. Gross profit margins from sales of product were approximately 77%, versus -11% for the same period in the prior year. The decrease in cost of goods sold, and the corresponding increase in gross profit margin, was due primarily to overall cost cutting efforts by the Company. RESEARCH AND DEVELOPMENT COSTS. Research and development costs increased to $60,749 for the quarter ending January 31, 2006 versus $21,601 for the quarter ending January 31, 2005, an increase of approximately 181%. The increase was primarily due to the ending of our research reimbursement contract with the Department of Energy. This contract covered approximately $46,000 of research expenses in the first quarter of 2005, but was no longer in effect during the same period in 2006. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. These expenses declined approximately 10% to $118,290 in the quarter ending January 31, 2006 as compared to $131,993 in the quarter ending January 31, 2005. This reduction was due to general cost cutting measures, primarily in the area of salaries. It is expected that such expenses will rise in future periods as the Company begins to institute a new marketing plan. INTEREST EXPENSE. For the quarters ended January 31, 2006 versus 2005, interest expense was $2,213 and $771. This increase was due to a slightly higher level of borrowing by the Company during the first quarter of 2006 compared to the first quarter of 2005. In addition interest expense increased because the Company began interest accrual on a note due to a related party. The interest in question was previously halted, and while we believe that such interest may ultimately be forgiven, there is no definitive agreement in place to that effect. As such we began to accrue interest as a contingency. ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our chief executive officer, we conducted an evaluation of our disclosure controls and procedures, as such terms are defined in Rule 13a-14(c) promulgated under the Exchange Act, within the 90 day period prior to the filing date of this quarterly report. Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting Officer concluded that our disclosure controls and procedures were effective as of that date. -7- (b) There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES In December 2005 the Company issued a total of 11,538,462 shares of common stock to private investors at a price of $0.013 per share. These issuances were exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2). Proceeds from the sales of securities were used as general working capital. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION In January, 2006, the Company effected an internal reorganization of the company into two operating units. One of the units, to be described as the "Consumer Products Division," will continue to focus on the identification and development of the Company's own nutritional supplement and other products for distribution and sale to consumers. The other division, described as the "Research Division," will focus on collaborations with other companies and organizations utilizing Mera's patented technology and expertise in the cultivation of microalgae to demonstrate the commercial feasibility of producing products developed by others and providing production capability for those products. Neither of the Divisions will be separately incorporated, but they will conduct their respective operations within the Company's current corporate structure. As a result of the establishment of the two operating Divisions, the Company has also made changes in its management. Daniel P. Beharry stepped down from his position as Chief Executive Officer of the Company to become president of the Research Division. He will remain a member of the Board of Directors. Gregory F. Kowal, currently the Chairman of the Company's board of directors, will assume the role of Chief Executive Officer. -8- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS 31.1 Certification of Chief Executive Officer pursuant to Rule 13a - 14 (a) of the Securities Exchange Act of 1934 (filed herewith electronically). 31.2 Certification of Principal Financial and Accounting Officer pursuant to Rule 13a - 14 (a) of the Securities Exchange Act of 1934 (filed herewith electronically). 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith electronically). 32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (filed herewith electronically) b. REPORTS ON FORM 8-K (i) January 5, 2006 reporting other events, specifically the Company's internal reorganization and management change. SIGNATURES Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this Quarterly Report on Form 10-QSB to be signed on its behalf by the undersigned thereunto duly authorized. MERA PHARMACEUTICALS, INC. Dated: March 13, 2006 By: /S/ GREGORY F. KOWAL -------------------------- Gregory F. Kowal Chief Executive Officer -9- EX-31.1 2 exh31-1.txt CERTIFICATIONS Exhibit 31.1 I, Gregory F. Kowal, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Mera Pharmaceuticals, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 13, 2006 /s/Gregory F. Kowal - ---------------------- Gregory F. Kowal Chief Executive Officer EX-31.2 3 exh31-2.txt Exhibit 31.2 I, Anthony E. Applebaum, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Mera Pharmaceuticals, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The Company's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: d) designed such disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; e) evaluated the effectiveness of the Company's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and f) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Company's other certifying officers and I have disclosed, based on our most recent evaluation, to the Company's auditors and the audit committee of Company's board of directors (or persons performing the equivalent functions): c) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data and have identified for the Company's auditors any material weaknesses in internal controls; and d) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and 6. The Company's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 13, 2006 /s/ ANTHONY E. APPLEBAUM - ---------------------------------------- Anthony E. Applebaum Principal Financial and Accounting Officer EX-32.1 4 exh32-1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 UNITED STATES CODE SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Gregory F. Kowal, Chief Executive Officer of Mera Pharmaceuticals, certify that (1) Mera Pharmaceuticals, Inc.'s Form 10-QSB for the quarter ended January 31, 2006 fully complies with the requirements of Section 3 (a) or 15 (d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-QSB for the quarter ended January 31, 2006 fairly presents, in all material respects, the financial condition and the results of operations of Mera Pharmaceuticals, Inc. Date: March 13, 2006 /s/Gregory F. Kowal - ---------------------------------------- Gregory F. Kowal Chief Executive Officer A signed original of this written statement required by Section 906 has been provided to Mera Pharmaceuticals, Inc. and will be retained by Mera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 5 exh32-2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 UNITED STATES CODE SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Anthony E. Applebaum, Chief Executive Officer of Mera Pharmaceuticals, certify that (1) Mera Pharmaceuticals, Inc.'s Form 10-QSB for the quarter ended January 31, 2006 fully complies with the requirements of Section 3 (a) or 15 (d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Form 10-QSB for the quarter ended January 31, 2006 fairly presents, in all material respects, the financial condition and the results of operations of Mera Pharmaceuticals, Inc. Date: March 13, 2006 /s/ ANTHONY E. APPLEBAUM - ---------------------------------------- Anthony E. Applebaum Principal Financial and Accounting Officer A signed original of this written statement required by Section 906 has been provided to Mera Pharmaceuticals, Inc. and will be retained by Mera Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----