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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Action of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 16, 2002
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MERA PHARMACEUTICALS, INC.
(FORMERLY AQUASEARCH, INC. )
(Exact name of Registrant as specified in its charter)
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DELAWARE 33-23460-LA 04-368-3628
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization Number) Identification Number)
73-4460 QUEEN KA'AHUMANU HIGHWAY, SUITE 110
KAILUA-KONA, HAWAII 96740
(Address of principal executive offices)
(808) 326-9301
(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 16, 2002, Mera Pharmaceuticals, Inc. ("Mera" or the
"Company") merged with Aqua RM Co., Inc. ("Aqua RM") with Mera being
the surviving corporation (the "Merger). As a consequence of the
Merger, the former shareholders of Aqua RM now own, collectively, a
majority of the issued and outstanding shares of common stock of
Mera, and, as a result, the transaction was treated as a disposition
of Mera's assets to Aqua RM for accounting purposes.
Assets disposed of by Mera as a result of the Merger consisted
primarily of Cash, Accounts Receivable, Inventories, Prepaid Expenses
and Plant and Equipment. The total assets received by Aqua RM from
Mera were valued at approximately $4,700,000. In addition, as a
result of the Merger, Aqua RM assumed approximately $2,960,000 in
liabilities of Mera.
The sole consideration paid by the former Aqua RM shareholders for
the Mera common stock that they received in the Merger was their Aqua
RM common stock.
Mera filed a timely report on Form 8-K on October 1, 2002 to announce
the Merger and report a change in control and an acquisition or
disposition of assets resulting from the Merger. This Amendment No. 1
to the Form 8-K is filed to include pro forma financial information
required by Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
None are required because Aqua RM is not considered a business
under Rule 11-01(d) of Regulation S-X and per Securities and
Exchange Commission letter to Aquasearch, Inc. (predecessor to
Mera) dated July 29, 2002.
(b) Pro Forma Financial Information
The following unaudited pro forma combined financial statements
give effect to the Merger and the application of fresh start
accounting principles adopted by Mera as a result of the
satisfaction by September 16, 2002 (the "Effective Date") of all
conditions of its Plan of Reorganization (the "Plan") confirmed
by the U.S. Bankruptcy Court for the District of Hawaii.
The unaudited pro forma condensed combined balance sheet as of
July 31, 2002 gives effect to the Merger and application of
fresh start accounting principles as if both had occurred on
July 31, 2002. The unaudited pro forma condensed combined
statement of operations for the nine months ended July 31, 2002
gives effect to the Merger and the application of fresh start
accounting principles as if both had occurred on November 1,
2001. Aqua RM was formed on February 4, 2002 and had no activity
during any of Mera's prior fiscal years. As a result, a pro
forma condensed combined statement of operations using Mera's
fiscal year ended October 31, 2001 is not presented.
The unaudited pro forma condensed combined financial statements
were derived by adjusting Mera's and Aqua RM's historical
financial statements. The unaudited pro forma condensed combined
financial statements are provided for informational purposes
only and should not be construed to be indicative of Mera's
combined financial position or results of operations had the
Merger been consummated and fresh start accounting principles
adopted on the date assumed and do not project Mera's combined
financial position or results of operations for any future date
or period.
The unaudited pro forma condensed combined financial statements
and accompanying notes should be read in conjunction with Mera's
historical financial statements and notes thereto included in
Mera's Annual Report on Form 10-KSB as of and for the year ended
October 31, 2001 and its quarterly report on Form 10-QSB as of
and for the nine months ended July 31, 2002.
Mera Pharmaceuticals, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of July 31, 2002
Mera
Pharmaceuticals Aqua RM Pro Forma Discharge
July 31, 2002 July 31, 2002 Pro Forma Combined of
(Unaudited) (Unaudited) Adjustments July 31, 2002 Debt
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Cash and cash equivalents $ 923,341 $ 90,943 $ 194,000 (a) $ 1,208,284 $ -
Accounts receivable, net 42,439 - - 42,439
Tax receivable 208,955 - - 208,955
Investment Receivable - - - - 850,000 (b)
Inventories 714,331 - - 714,331
Prepaid expenses and other 80,246 - - 80,246
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1,969,312 90,943 194,000 2,254,255 850,000
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3,257,753 4,009 3,261,762
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$ 5,227,065 $ 94,952 $ 194,000 $ 5,516,017 $ 850,000
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Accounts payable and accrued expenses $ 724,391 $ 531,518 $ - $ 1,255,909 $ 223,192 (c)
Notes payable 2,350,000 - - 2,350,000 (b)
Deferred notes payable 850,000 (b)
Other liabilities 49,001 - - 49,001
3,955,324 - (186,695) (a) 3,768,629 (3,768,629) (c)
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7,078,716 531,518 (186,695) 7,423,539 (2,695,437)
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Common stock 13,335 13,335 39,992 (b,c)
Additional paid-in capital 19,976,153 19,976,153 1,460,008 (b,c)
Subscribed Stock - 194,000 194,000 -
Less Subscription Receivable - (194,000) 194,000 (a) - -
Accumulated deficit (21,841,139) (436,566) 186,695 (a) (22,091,010) 2,045,437 (c)
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Total stockholders' equity (deficit) (1,851,651) (436,566) 380,695 (1,907,522) 3,545,437
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Total Liabilties and
Stockholders' Equity (Deficit) $ 5,227,065 $ 94,952 $ 194,000 $ 5,516,017 $ 850,000
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Mera
Pharmaceuticals
Fresh Reorganized
Start July 31, 2002
Adjustments (Unaudited)
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Cash and cash equivalents $ - $ 1,208,284
Accounts receivable, net 42,439
Tax receivable 208,955
Investment Receivable 850,000
Inventories 714,331
Prepaid expenses and other 80,246
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- 3,104,255
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(137,915) (d) 3,123,847
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$ (137,915) $ 6,228,102
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Accounts payable and accrued expenses $ - $ 1,479,101
Notes payable 2,350,000
Deferred notes payable 850,000
Other liabilities 49,001
-
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- 4,728,102
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Common stock (13,335) (d) 39,992
Additional paid-in capital (19,976,153) (d) 1,460,008
Subscribed Stock (194,000) (d) -
Less Subscription Receivable - -
Accumulated deficit 20,045,573 (d) -
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(137,915) 1,500,000
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$ (137,915) $ 6,228,102
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See accompanying notes to unaudited pro forma combined financial statements.
MERA PHARMACEUTICALS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 2002
Mera Aqua RM
Pharmaceuticals February 4, 2002
Nine Months Ended (Inception) - Pro Forma Pro Forma
July 31, 2002 July 31, 2002 Adjustments Combined
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Revenues
Products $ 433,700 $ - $ - $ 433,700
Contract Services 224,464 - - 224,464
Royalties 45,179 - - 45,179
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Total Revenues 703,343 - - 703,343
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Costs and Expenses
Cost of products sold 226,151 - - 226,151
Cost of subcontract services 385,117 - - 385,117
Research and development costs 506,811 30,410 - 537,221
General and administrative 926,413 219,643 - 1,146,056
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Total costs and expenses 2,044,492 250,053 - 2,294,545
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Net loss from operations $ (1,341,149) $ (250,053) $ - $ (1,591,202)
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Loss per share (0.01) (0.09) (0.00)
Weighted average shares outstanding 122,131,641 2,639,923 388,798,818
See accompanying notes to unaudited pro forma combined financial statements.
MERA PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIALS STATEMENTS
1. Basis of Presentation
The accompanying pro forma condensed combined financial statements
and related explanatory notes of Mera are unaudited. However, in the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the
financial position and results of operations for the periods
presented have been included. The unaudited pro forma condensed
combined financial statements do not include all of the information
and footnotes required by generally accepted accounting principles
for complete financial statements and therefore should be read in
conjunction with the audited financial statements and explanatory
notes thereto for the fiscal year ended October 31, 2001 included in
Mera's Annual Report on Form 10-KSB.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the recorded amounts reported
in the unaudited condensed combined financial statements and
accompanying notes. A change in the facts and circumstances
surrounding these estimates could result in a change to the estimates
and impact future operating results.
The pro forma condensed combined financial statements are provided
for informational purposes only and are not necessarily indicative of
past or future results of operations or the financial position of the
Company, nor are they necessarily indicative of future operating
results or financial position.
2. Reorganization and Fresh-Start Reporting
On October 30, 2001, certain creditors of the Company filed an
involuntary petition under Chapter 11 of the United States Bankruptcy
Code, in the United States Bankruptcy Court, District of Hawaii
against Aquasearch, Inc. (predecessor to Mera). On November 30, 2001,
the Company stipulated to an entry of an Order for Relief, agreeing
to the jurisdiction of the Bankruptcy Court for purposes of resolving
the petition that had been filed. On December 3, 2001, the Company's
motion to the Bankruptcy Court to incur indebtedness was granted, and
Aquasearch, Inc. entered into a Debtor-in-Possession financing
arrangement with certain parties. On June 17, 2002, the Bankruptcy
Court confirmed the Plan. Under Chapter 11, certain claims against
the Debtor accruing prior to the filing of the petition for relief
under the federal bankruptcy laws were stayed while the Debtor
continued to operate. These claims are identified on the balance
sheet as "liabilities subject to compromise."
Pursuant to the Plan, Aqua RM merged with and into Mera on September
16, 2002. A total of 263,992,029 shares of the Company's common stock
were issued to Aqua RM Co., Inc. shareholders in consummation of the
Merger. In addition, 2,656,850 shares of the Company's common stock
were issued pursuant to the Plan to holders of Aquasearch, Inc.
warrants that were validly issued and outstanding as of October 31,
2001. Total shares of common stock of Mera issued and outstanding
following the Merger are 388,798,818. The Merger was the final
outstanding material event to achieve compliance with the
requirements of the Plan, and, as such, the effective date of the
Plan was September 16, 2002, the date of the Merger. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 141,
the Merger will be accounted for using the purchase method of
accounting.
MERA PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIALS STATEMENTS
In accounting for the effects of the reorganization, the Company
adopted "fresh start" accounting principles contained in the American
Institute of Certified Public Accountants Statement of Position 90-7
("SOP 90-7"). The Company applied principles contained in SOP 90-7
because post-Merger, existing Mera shareholders owned less than 50%
of Mera's total issued and outstanding common stock and the
reorganization value of Mera's assets upon completion of the Plan was
less than the sum of total pre-petition liabilities allowed plus
post-petition liabilities.
Fresh start accounting principles require that the Company establish
a reorganization value. Mera's reorganization value was calculated to
be $4,700,000 (see calculation in Note 3(b) below). The Company's
tangible assets were recorded at their assumed fair value and the
reorganization value was allocated to such assets in accordance with
SFAS No. 141.
3. Pro Forma Balance Sheet
The enclosed pro forma condensed combined balance sheet reflects
adjustments made in conjunction with the discharge of debt, fresh start
accounting and accounting for the Merger. The following notes provide
detail on adjustments made:
(a) The following pro forma adjustments have been made to the historical
balance sheets of Mera and Aqua RM:
1.) Elimination of an $186,695 charge on the books of Aqua RM. This
amount is to be paid by Mera post-Merger to settle liabilities
of Aqua RM creditors.
2.) Receipt of $194,000 by Aqua RM as payment for Aqua RM stock
subscriptions. This transaction occurred upon completion of the
Merger.
(b) Management calculated the reorganization value of the Company to be
$4,700,000. The reorganization value is allocated as follows:
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Loans received $ 2,350,000
Commitment for additional loans 850,000
New common stock issued ($.0001 par value) 39,992
Additional paid in capital 1,460,008
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Total reorganization value $ 4,700,000
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MERA PHARMACEUTICALS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIALS STATEMENTS
(c) Pro forma liabilities subject to compromise totaled $3,768,629 at
July 31, 2002. Of such amount, $223,192 remained to be paid at July
31, 2002. The remaining amount of $3,545,437 was discharged. In
accordance with SOP 90-7, the discharge of debt was allocated first
to the new equity of Mera and then as a gain from the forgiveness of
debt. The allocation of the discharge of debt is as follows:
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New common stock issued ($.0001 par value) $ 39,992
Additional paid in capital 1,460,008
Gain on the forgiveness of debt 2,045,437
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Total debt discharged $ 3,545,437
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(d) In accordance with SOP 90-7, fresh start adjustments were made to
eliminate equity account balances prior to confirmation of the Plan,
the accumulated deficit and to adjust the fair value of assets.
4. Pro Forma Statement of Operations
The unaudited pro forma condensed combined statement of operations
gives effect to the combined income and expenses of Mera and Aqua RM.
Certain transactions related to the settlement of liabilities subject
to compromise have been excluded because they did not occur in the
normal course of business. Details regarding such transactions are
contained in Note 3(a). No other pro forma adjustments were required.
5. Loss Per Share
Pro forma loss per share amounts were calculated pursuant to
Statement of Financial Accounting Standard No.128, "Earnings Per
Share." The assumed effects of the exercise of any potential dilutive
securities would be anti-dilutive. Accordingly dilutive per share
amounts have not been presented.
Because the Merger involves the issuance of securities, pro forma
combined loss per share amounts are presented based on the weighted
average number of shares outstanding as if such securities were
issued at the beginning of the period (November 1, 2001).