UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
FORM 10-Q |
(Mark one) | | |
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended July 31, 2010 |
| Or | |
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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Commission File Number: 333-23460 |
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MERA PHARMACEUTICALS, INC. |
(Exact name of Registrant as specified in its charter) |
Delaware | | 04-3683628 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification 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 [ ] |
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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 [ ] |
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547,769,915 shares of $0.0001 par value common stock outstanding as of July 31, 2010 80 shares of $0.0001 par value Series A preferred stock outstanding as of July 31, 2010 974 shares of $0.0001 par value Series B preferred stock outstanding as of July 31, 2010 |
Mera Pharmaceuticals, Inc.
Form 10-Q
For the Quarter Ended July 31, 2010
Contents
| | | | Page |
Part I - Financial Information | | |
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| 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 | | 10 |
| | | | |
| Item 3. Controls and Procedures | | 12 |
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Part II - Other Information | | |
| | | | |
| Item 1: Legal Proceedings | | 13 |
| | | | |
| Item 2: Changes In Securities | | 13 |
| | | | |
| Item 3. Defaults Upon Senior Securities | | 13 |
| | | | |
| Item 4: Submission of Matters to a Vote of Security Holders | | 13 |
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| Item 5: Other Information | | 13 |
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| Item 6: Exhibits and Reports on Form 8-K | | 13 |
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| Signature | | | 14 |
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Mera Pharmaceuticals, Inc.
Condensed Balance Sheet
(Unaudited)
| | July 31, 2010 | | | October 31, 2009 | |
| | (Unaudited) | | | (Audited) | |
| | | | | | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 850 | | | $ | 3,135 | |
Accounts receivable | | | 21,102 | | | | 6,656 | |
Tax credit receivable | | | 46,520 | | | | 31,229 | |
Prepaid expenses and other current assets | | | 3,992 | | | | 15,994 | |
| | | | | | | | |
Total current assets | | | 72,464 | | | | 57,014 | |
| | | | | | | | |
Plant and equipment, net | | | 328,184 | | | | 200,482 | |
| | | | | | | | |
Total Assets | | $ | 400,648 | | | $ | 257,496 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 470,899 | | | $ | 314,212 | |
Notes payable - related parties | | | 51,936 | | | | 51,936 | |
Deferred revenue | | | 160,200 | | | | 30,450 | |
| | | | | | | | |
Total Current Liabilities | | | 683,035 | | | | 396,598 | |
| | | | | | | | |
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 | | | | 2 | |
Common stock, $.0001 par value: 750,000,000 | | | | | | | | |
shares authorized, 547,769,915 shares issued | | | | | | | | |
and outstanding | | | 54,777 | | | | 54,777 | |
Additional paid-in capital | | | 7,920,003 | | | | 7,920,003 | |
Treasury stock at cost | | | (2,025 | ) | | | (2,025 | ) |
Accumulated deficit | | | (8,255,144 | ) | | | (8,111,859 | ) |
Total stockholders' deficit | | | (282,387 | ) | | | (139,102 | ) |
| | | | | | | | |
Total Liabilities and Stockholders' Equity | | $ | 400,648 | | | $ | 257,496 | |
The accompanying notes are an integral part of these financial statements
Mera Pharmaceuticals, Inc.
Condensed Statement of Operations
| | | | | | | | | | | | | |
| | | Three Months Ended July 31, 2010 | | | Three Months Ended July 31, 2009 | | | Nine Months Ended July 31, 2010 | | | Nine Months Ended July 31, 2009 | |
| | | | | | | | | |
| | | | | | | | | |
| | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | | | (Unaudited) | |
| | | | | | | | | | | | | |
NET SALES | | | $ | 67,115 | | | $ | 106,213 | | | $ | 224,743 | | | $ | 500,912 | |
Cost of goods sold | | | - | | | | 12,851 | | | | 10,401 | | | | 15,240 | |
| | | | | | | | | | | | | | | | | |
GROSS PROFIT | | | 67,115 | | | | 93,362 | | | | 214,342 | | | | 485,672 | |
| | | | | | | | | | | | | | | | | |
Operating Expenses | | | | | | | | | | | | | | | | |
Selling and administrative expenses | | | 38,284 | | | | 88,073 | | | | 145,521 | | | | 282,489 | |
Research and development costs | | | 70,262 | | | | 82,658 | | | | 203,667 | | | | 252,117 | |
Depreciation | | | 11,149 | | | | 21,607 | | | | 22,298 | | | | 64,822 | |
| | | | | | | | | | | | | | | | | |
Total operating expenses | | | 119,695 | | | | 192,338 | | | | 371,486 | | | | 599,428 | |
| | | | | | | | | | | | | | | | | |
Operating loss | | | (52,580 | ) | | | (98,976 | ) | | | (157,144 | ) | | | (113,756 | ) |
| | | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest income | | | - | | | | 816 | | | | - | | | | 2,445 | |
Other income | | | 980 | | | | - | | | | 2,312 | | | | 746 | |
Interest expense | | | (1,248 | ) | | | (1,248 | ) | | | (3,744 | ) | | | (3,781 | ) |
| | | | | | | | | | | | | | | | | |
Total other income (expense) | | | (268 | ) | | | (432 | ) | | | (1,432 | ) | | | (590 | ) |
| | | | | | | | | | | | | | | | | |
Net loss before tax provision | | | (52,848 | ) | | | (99,408 | ) | | | (158,576 | ) | | | (114,346 | ) |
| | | | | | | | | | | | | | | | | |
Provision for income taxes | | | - | | | | - | | | | - | | | | - | |
Refundable tax credit | | | 4,730 | | | | 8,164 | | | | 15,291 | | | | 21,878 | |
| | | | | | | | | | | | | | | | | |
NET INCOME (LOSS) | | $ | (48,118 | ) | | $ | (91,244 | ) | | $ | (143,285 | ) | | $ | (92,468 | ) |
| | | | | | | | | | | | | | | | | |
Net income (loss) per common share | | $ | (0.0001 | ) | | $ | (0.0002 | ) | | $ | (0.0003 | ) | | $ | (0.0002 | ) |
| | | | | | | | | | | | | | | | | |
Weighted Average Shares Outstanding | | | 547,769,915 | | | | 547,769,915 | | | | 547,769,915 | | | | 547,769,915 | |
The accompanying notes are an integral part of these financial statements
Mera Pharmaceuticals, Inc.
Condensed Statements of Cash Flows
(Unaudited)
| | Nine Months Ended July 31, 2010 | | | Nine Months Ended July 31, 2009 | |
| | | | |
| | | | |
| | (Unaudited) | | | (Unaudited) | |
Cash Flows from Operating Activities: | | | | | | |
Net loss | | $ | (143,285 | ) | | $ | (92,468 | ) |
Adjustments to reconcile net loss to net cash | | | | | | | | |
used in operating activities: | | | | | | | | |
Accumulated depreciation and amortization | | | 22,298 | | | | 64,822 | |
Changes in assets and liabilities | | | | | | | | |
Accounts receivable | | | (14,447 | ) | | | 3,367 | |
Tax credit receivable | | | (15,291 | ) | | | (21,878 | ) |
Prepaid expenses and other current assets | | | 12,002 | | | | 13,057 | |
Accounts payable and accrued liabilities | | | 156,688 | | | | | |
Deferred Revenue | | | 129,750 | | | | 21,526 | |
Net cash provided (used) by operating activities | | | 147,715 | | | | (11,574 | ) |
| | | | | | | | |
Cash Flows from Investing Activities: | | | | | | | | |
Purchases of marketable equitable securities | | | - | | | | (28,663 | ) |
Proceeds from sales of marketable equitable securities | | | - | | | | 63,063 | |
Expansion of physical plant | | | (150,000 | ) | | | - | |
Purchases of fixed assets | | | - | | | | (30,206 | ) |
Net cash used by investing activities | | | (150,000 | ) | | | 4,194 | |
| | | | | | | | |
Cash Flows from Financing Activities: | | | | | | | | |
| | | - | | | | - | |
Net cash provided by financing activities | | | - | | | | - | |
| | | | | | | | |
Net increase in cash and cash equivalents | | | (2,285 | ) | | | (7,380 | ) |
Cash and cash equivalents, beginning of the period | | | 3,135 | | | | 19,288 | |
Cash and cash equivalents, end of the period | | $ | 850 | | | $ | 11,908 | |
| | | | | | | | |
Supplemental Cash Flow Information | | | | | | | | |
Interst Paid | | $ | - | | | $ | - | |
Taxes Paid | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these financial statements
MERA PHARMACEUTICALS, INC.
NOTES TO CONDESED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2010 AND 2009
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-Q. 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 July 31, 2010 are not necessarily indicative of the results that may be expected for the year ending October 31, 2010. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended October 31, 2009, included in Form 10-K 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 instrument s. 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.
2.Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company incurred a net loss of $48,118 for three months the ending July 31, 2010 and has a total accumulated deficit of $8,255,144. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development and sales of Kona Sea Salt. These factors raise substantial doubt that the Company will be able to continue as a going concern.
Management has plans to seek additional capital through private placement and public offerings of its common stock, and projects that revenue will increase in future years. There are no assurances, however, with respect to the future success of these plans.
MERA PHARMACEUTICALS, INC.
NOTES TO CONDESED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2010 AND 2009
3. Summary of Significant Accounting Policies
Revenue Recognition. The Company has adopted Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin, Topic No. 13, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. Product revenue is recognized upon shipment to customers. Contract services revenue is recognized as services are performed on a cost reimbursement basis. Royalties are recognized upon receipt.
4. Recent Accounting Pronouncements
Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.
In September 2009, the FASB has published ASU No. 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this Update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted. 0;The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
In October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allo cated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have any impact on the Company’s financial position and results of operations.
MERA PHARMACEUTICALS, INC.
NOTES TO CONDESED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2010 AND 2009
In December 2009, the FASB has published ASU 2009-16 “Transfers and Servicing (Topic 860): Accounting for Transfers of Financial Assets.” ASU No. 2009-16 is a revision to ASC 860, “Transfers and Servicing,” and amends the guidance on accounting for transfers of financial assets, including securitization transactions, where entities have continued exposure to risks related to transferred financial assets. ASU No. 2009-16 also expands the disclosure requirements for such transactions. This ASU will become effective for us on April 1, 2010. The adoption of this standard is not expected to have any impact on the Company’s financial position and results of operations.
In December 2009, the FASB has published ASU 2009-17 “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” ASU No. 2009-17 amends the guidance for consolidation of VIEs primarily related to the determination of the primary beneficiary of the VIE. The adoption of this standard is not expected to have any impact on the Company’s financial position and results of operations.
In January 2010, the FASB has published ASU 2010-01 “Equity (Topic 505) - Accounting for Distributions to Shareholders with Components of Stock and Cash—a consensus of the FASB Emerging Issues Task Force,” as codified in ASC 505. ASU No. 2010-01 clarifies the treatment of certain distributions to shareholders that have both stock and cash components. The stock portion of such distributions is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective basis. Early adoption is permitted. The adoption of this standard did not have an i mpact on the Company’s financial position and results of operations.
In January 2010, the FASB has published ASU 2010-02 “Consolidation (Topic 810) - Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification,” as codified in ASC 810, “Consolidation.” ASU No. 2010-02 applies retrospectively to April 1, 2009, our adoption date for ASC 810-10-65-1 as previously discussed in this financial note. This ASU clarifies the applicable scope of ASC 810 for a decrease in ownership in a subsidiary or an exchange of a group of assets that is a business or nonprofit activity. The ASU also requires expanded disclosures. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this standard is not expected to have any impact on the Company’s financial position and results of operations.
In January 2010, the FASB has published ASU 2010-06 “Fair Value Measurements and Disclosures (Topic 820): - Improving Disclosures about Fair Value Measurements”. ASU No. 2010-06 clarifies improve disclosure requirement related to fair value measurements and disclosures – Overall Subtopic (Subtopic 820-10) of the FASB Accounting Standards Codification. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure about purchase, sales, issuances, and settlement in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim peri ods within those fiscal years. The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
MERA PHARMACEUTICALS, INC.
NOTES TO CONDESED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 2010 AND 2009
In February 2010, the FASB issued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s financial statements.
5. Related Party Transactions
On November 2, 2009 the Company entered into an agreement with an entity created and controlled by certain members of its Board of Directors. The agreement involves the purchase by such entity of Bulk Kona Deep Sea Salt from unsold inventory at a price of $7.25 per kilogram. The Company estimates its direct cost for this material is approximately $5.00 per kilogram. The purpose of this transaction is, in the absence of any other funding sources, to provide cash flow needed to maintain and grow operations so that the Company is able to produce enough Kona Deep Sea Salt to market and sell outside of Hawaii. This program will end once the Company is able to attain positive cash flow sufficient to sustain such operations. Under this agreement, the Company shall have the right of first refusal to repurchase some or the entire product purchased by the related entity at a price of $8.50 per Kilogram if certain conditions are met. During the three months ended July 31, 2010 the Company received $36,250 from the related entity under this agreement. All such income was recorded as deferred revenue resulting from product that had not yet been shipped.
6. Subsequent Events
Management evaluated all activities of the company through September 10, 2010 of the Company’s consolidated financial statements and concluded that no subsequent events have occurred that would require adjustments or disclosures into the consolidated financial statements.
Other ASU’s that are effective after July 31, 2010, are not expected to have a significant effect on the company financial position or results of operations
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 custom er 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-K 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 July 31, 2010 we had an accumulated deficit of $8,255,144. 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 smaller operating losses through the current fiscal year. We also 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 declined 34.3% for the quarter ending July 31, 2010 to $67,115 vs. $106,213 in the year ago quarter ending July 31, 2009. Revenue for the nine month period declined to $224,743 vs. $500,912 for the comparable periods, an decrease of 55.1%. The decline in revenues for the quarter and nine month period was primarily attributable to the conclusion of our technical service agreement with HRBioPetroleum. Revenue from continuing operations versus the second quarter ending April 30, 2010 increased 9.2% from $61,413.
Cost of Sales. Cost of goods sold was $0 for the quarter ending July 31,2010 versus $12,851 in the quarter ending July 31, 2009 as the Company was able to reduce existing inventories and ease the burden of exhausting cash flow without purchasing additional supplies. Inventories were brought in alignment to better reflect sales rates, and there was a shifting of costs from production of existing product to sales development programs. The cost of goods sold for the nine month period ended July 31, 2010 decreased by 31.7% to $10,401 from $15,240 in the comparable nine month period in the prior fiscal year. The cost of sales is expected to increase during the fourth quarter due to inflationary pressures and new purchases of supplies and materials. Sales increases will also add to the cost of sales with shipping and fuel costs playing a major factor in the expected increase.
Research and Development Costs. Research and development costs decreased to $70,262 for the quarter ending July 31, 2010 versus $82,658 for the quarter ending July 31, 2009, an decrease of approximately 18.5%. The decrease was due to the costs associated with the completion of the Company’s technical service agreement work on the projects with HRBioPetroleum and the shifting of staff to other projects.
Selling, General and Administrative Expenses. These expenses decreased to $38,284 the quarter ending July 31, 2010 as compared with $88,073 in the quarter ending July 31, 2009 an decrease of 56.5%. The company was able to contain expenses though the use of part time workers who are available on a call basis when needed. These costs are expected to increase in the future as the Company has plans to increase its sales staff which will allow the Company to grow its future revenue in 2011 and beyond. These growth plans, will include the hiring of full and part time workers to help upgrade and maintain the facility in addition to our current sales staff.
Interest Expense. For the quarters ended July 31, 2010 versus 2009, interest expense was $1,248 and $1,248.
LIQUIDITY At July 31, 2010 and October 31, 2009, we had working capital deficits of $610,571 and $339,584, respectively.
At July 31, 2010, we had total assets of $400,648 compared to total assets of $257,496 at July 31, 2009. Cash Decreased $2,285 for the nine months ending June 30, 2010 compared to year-end 2009. Net cash used in operating activities in the nine months ending July 31, 2010, was $143,285, as compared with $92,468 in the comparable period in 2009; net cash used in investing activities in the nine months ending July 31, 2010 was $150,000 loss in 2010, as compared with $4,194 in the comparable period in 2009.
ITEM 3. Evaluation of Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive and financial officer to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost- benefit relationship of possible controls and procedures.
As of July 31, 2010, an evaluation was performed under the supervision and with the participation of our management, including our chief executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our chief executive and principal financial officer concluded that our disclosure controls and procedures were effective.
Changes in Internal Controls
There have been no changes in the Company's internal controls over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting, except that the Company increased its internal controls around the issuance and recording of common stock sales.
Limitations on the Effectiveness of Controls
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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. The Company's disclosure controls and procedures are designed to provide reasonable assurance of achieving its objectives. The Company's chief executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective at that reasonable assurance level.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION
None.
ITEM 6. 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) |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| MERA PHARMACEUTICALS, INC. |
| | | |
Dated: September 14, 2010 | By: | /s/ Gregory F. Kowal | |
| | Gregory F. Kowal | |
| | Chief Executive Officer | |
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