10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-QSB

———————

x

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

For the quarterly period ended: January 31, 2008

or

o

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

For the transition period from: _____________ to _____________

———————

MERA PHARMACEUTICALS, INC.

 (Exact name of small business issuer as specified in its charter)

———————

Delaware	033-23460	04-3683628
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

73-4460 Queen Ka'ahumanu Highway, Suite 110
Kailua-Kona, Hawaii  96740

(Address of Principal Executive Office) (Zip Code)

(808) 326-9301

(Issuer’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

———————

Check whether the issuer (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. x Yes  o No

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

o Yes xNo

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  

510,369,915 shares of $0.0001 par value common stock outstanding as of January 31, 2008

80 shares of $0.0001 par value Series A preferred stock outstanding as of January 31, 2008
974 shares of $0.0001 par value Series B preferred stock outstanding as of January 31, 2008

Transitional Small Business Disclosure Format (check one): x Yes  o No

Mera Pharmaceuticals, Inc.

Form 10-QSB
For the Quarter Ended January 31, 2008

Table of Contents

			Page
Part I - Financial Information
	Item 1:  Financial Statements
		Condensed Balance Sheet	2
		Condensed Statements of Operations	3
		Condensed Statements of Cash Flows	4
		Notes to Condensed Financial Statements	5
	Item 2:  Management's Discussion and Analysis or Plan of Operation		7
	Item 3.  Controls and Procedures		8
Part II - Other Information
	Item 1:  Legal Proceedings		9
	Item 2:  Unregistered Sale of Equity Securities and Use of Proceeds		9
	Item 3.  Defaults Upon Senior Securities		9
	Item 4:  Submission of Matters to a Vote of Security Holders		9
	Item 5:  Other Information		9
	Item 6:  Exhibits		9
	Signature		10

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Mera Pharmaceuticals, Inc.

Condensed Balance Sheet

(Unaudited)

			January 31, 2008
ASSETS
Current assets:
	Cash and cash equivalents		$	13,305
	Accounts receivable			9,338
	Prepaid expenses and other current assets			47,226
Total current assets				69,869
Plant and equipment, net				2,111,811
Other assets, net of accumulated amortization of $34,320				3,120
Total Assets			$	2,184,800
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable and accrued liabilities		$	396,440
	Notes payable - related parties			89,636
Total Current Liabilities				486,076
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: 750,000,000
		shares authorized, 510,369,915 shares issued
		and outstanding		51,037
	Additional paid-in capital			7,736,743
	Accumulated deficit			(6,089,058)
Total stockholders' equity				1,698,724
Total Liabilities and Stockholders' Equity			$	2,184,800

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, 2008		January 31, 2007
NET SALES		130,171		71,324
Cost of Goods Sold		6,064		20,635
GROSS PROFIT		124,107		50,689
Costs and Expenses
Research and development costs		51,066		52,468
Selling, general and administrative		127,900		89,312
Depreciation and Amortization		72,157		70,864
Total costs and expenses		251,123		212,644
Operating loss		(127,016)		(161,955)
Other income (expense):
Interest income		127		182
Other income		8,783		-
Interest expense		(2,441)		(2,296)
Total other income (expense)		6,469		(2,114)
Net loss before income tax provision		(120,547)		(164,069)
Tax expense		-		-
Refundable tax credit		5,115		5,422
Net loss	$	(115,432)	$	(158,647)
Loss per share - basic and diluted		(0.0002)		(0.0003)
Weighted average shares outstanding -		510,369,915		497,518,363
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, 2008		January 31, 2007
Cash Flows from Operating Activities:
Net loss	$	(115,432)	$	(158,647)
Adjustments to reconcile net loss to net cash
used in operating activities:
Accumulated depreciation and amortization		72,157		70,864
Changes in assets and liabilities
Accounts receivable		(1,390)		(7,640)
Prepaid expenses and other current assets		(9,598)		(36,232)
Accounts payable and accrued liabilities		30,564		50,074
Net cash used by operating activities		(23,699)		(81,581)
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		-		60,000
Proceeds from related party notes payable		48,300		39,000
Payment of related party notes payable		(24,000)		-
Net cash provided by financing activities		24,300		99,000
Net increase (decrease) in cash and cash equivalents		601		17,419
Cash and cash equivalents, beginning of the period		12,704		6,559
Cash and cash equivalents, end of the period	$	13,305	$	23,978

See the accompanying notes to the financial statements.

4

MERA PHARMACEUTICALS, INC.

NOTES TO CONDESED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED JANUARY 31, 2008 AND 2007

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, 2008 are not necessarily indicative of the results that may be expected for the year ending October 31, 2008. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended October 31, 2007, 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 th e circumstances.  Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

2.

Related Party Transactions

During the three months ended January 31, 2008, the Company borrowed $48,300 from a director and officer, and made repayments of $24,000 to the same individual. Amounts borrowed carry a rate of interest of 12% per annum.

Notes payable – related parties consists of the following as of January 31, 2008:

Unsecured demand notes payable – shareholder notes bearing an annual interest rate of 10% due on March 31, 2004. Notes are currently past maturity, however no demand for payment has been made.	$	41,936
Unsecured demand notes payable – shareholder notes bearing an annual interest rate of 8% due on various dates through March 26, 2006. Notes are currently past maturity; however no demand for payment has been made.		10,000
Unsecured demand notes payable – shareholder notes bearing an annual interest rate of 12% due on various dates throughout 2008. .		37,700
Total notes payable, related parties	$	89,636

3.

Material Agreements

On November 9, 2007, the Company entered into an amended and restated license agreement with HR BioPetroleum, Inc (HRBP), a Delaware corporation. The agreement grants HRBP access and use of the Companies facilities for eighteen months to perform a research project relating to large-scale cultivation and production of certain microalgae species, and grants HRBP license rights to a patent and other intellectual property owned by the Company.

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4.

Subsequent Events

On February 15, 2008 the Company entered into a lease for its facility in Kailua-Kona, Hawaii. The lease runs for a period of thirty years, with a provision that the rent may be redetermined by the lessor every fifth year. Future minimum payments for the first five year period of the lease are as follows:

Fiscal year ending October 31,
2008	$	25,025
2009		33,366
2010		33,366
2011		33,366
2012		33,366
2013		8,342
Total	$	166,831

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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; pote ntial 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, 2008 we had an accumulated deficit of $6,089,058. 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.

Results of Operations

Revenues.  Revenue rose 83% for the quarter ending January 31, 2008 to $130,171 vs. $71,324 in the year ago quarter ending January 31, 2007.   This increase was primarily due to restarting a revised and newly extended  technical service agreement  with HRBioPetroleum during December 2007. Technical service contract revenue was approximately 54% of total revenue and is expected to rise in future quarters as we enter into new agreements with other entities where it makes economic sense for the Company.

Cost of Sales.  Cost of goods sold was $6,064 for the quarter ending January 31, 2008 versus $20,635 in the quarter ending January 31, 2007 as the Company had increased inventory and had additional processing costs in the year ago period. Gross profit margins were 93.2% for the first quarter versus 71.1% in the year ago period.  The Company sold less bulk and wholesale products than in the previous period as we decided to concentrate more on retail and internet sales which carry higher profit margins.

Research and Development Costs.  Research and development costs decreased to $51,066 for the quarter ending January 31, 2008 versus $52,468 for the quarter ending January 31, 2007, a decrease of approximately 2.5%. This decrease was due to the gap in Research and Development caused by the temporary hiatus in the HRBioPetroeum technical service agreement.   

Selling, General and Administrative Expenses. These expenses increased approximately 43% to $127,900 in the quarter ending January 31, 2008 as compared with $89,312 in the quarter ending January 31, 2007.  This

7

increase was due to costs associated to our future growth and expansion plans, which includes the hiring of part time workers to help upgrade the facility and conduct long delayed maintenance.  It is expected that such expenses will rise in future periods as the Company begins to institute its growth plan.

Interest Expense.  For the quarters ended January 31, 2008 versus 2007, interest expense was $2,441 and $2,296. This increase was due to a slightly higher level of borrowing by the Company during the first quarter of 2008 compared to the first quarter of 2007.

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.

(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.

8

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

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).

9

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.

Dated:  March 10, 2008	MERA PHARMACEUTICALS, INC.
	By:	/s/ Gregory F. Kowal
		Gregory F. Kowal
		Chief Executive Officer

10

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

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 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 report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:   March 10, 2008	By:	/s/ Gregory F. Kowal
		Gregory F. Kowal
		Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

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 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 report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:   March 10, 2008	By:	/s/ Anthony E. Applebaum
		Anthony E. Applebaum
		Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with this quarterly report of Mera Pharmaceuticals, Inc. (the “Company”) on 10-QSB for the quarter ended January 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory F. Kowal, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date:   March 10, 2008	By:	/s/ Gregory F. Kowal
		Gregory F. Kowal
		Chief Executive Officer

(ii) A certification furnished pursuant to this Item will not be deemed “filed” for purposes of section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the small business issuer specifically incorporates it by reference.

EX-31.1

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with this quarterly report of Mera Pharmaceuticals, Inc. (the “Company”) on 10-QSB for the quarter ended January 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anthony E. Applebaum, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date:   March 10, 2008	By:	/s/ Anthony E. Applebaum
		Anthony E. Applebaum
		Principal Financial and Accounting Officer

(ii) A certification furnished pursuant to this Item will not be deemed “filed” for purposes of section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the small business issuer specifically incorporates it by reference.