MERA PHARMACEUTICALS INC - FORM 10-Q

Attached files

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EX-31.1 - CERTIFICATION - MERA PHARMACEUTICALS INC	mrpi_311.htm
EX-32.2 - CERTIFICATION - MERA PHARMACEUTICALS INC	mrpi_322.htm
EX-31.2 - CERTIFICATION - MERA PHARMACEUTICALS INC	mrpi_312.htm
EX-32.1 - CERTIFICATION - MERA PHARMACEUTICALS INC	mrpi_321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period endedApril 30, 2011

o	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 333-23460

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 o NO þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)		Smaller reporting company þ

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

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 þ NO o

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

557,299,676 shares of $0.0001 par value common stock outstanding as of July 25, 2012

1,000 shares of $0.0001 par value Series C preferred stock outstanding as of July 25, 2012

Mera Pharmaceuticals, Inc.

Form 10-Q

For the Quarter Ended April 30, 2011

Contents

		Page
Part I - Financial Information

Item 1: Financial Statements

	Condensed Balance Sheets as of April 30, 2011 (unaudited) and as of October 31, 2010	3

	Unaudited Condensed Statements of Operations for the three and six months ended April 30, 2011 and April 30, 2010	4

	Unaudited Condensed Statements of Cash Flows for the six months Ended April 30 2011 and April 30, 2010	5

	Notes to Unaudited Condensed Financial Statements	6

Item 2: Management's Plan of Operation

	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	12

Item 3. Quantitative and Qualitative Disclosures about Market Risk		14

Item 4. Controls and Procedures		14

Part II - Other Information

Item 1: Legal Proceedings		15

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		15

Item 3. Defaults Upon Senior Securities		15

Item 4: Removed and Reserved		15

Item 5: Other Information		15

Item 6: Exhibits		15

Signature		16

Mera Pharmaceuticals, Inc.

Condensed Balance Sheets

	April 30, 2011			October 31, 2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,267		$	5,940
Accounts receivable		12,391			8,864

Total current assets		13,658			14,804

Plant and equipment, net		6,266			8,034

Other assets		26,523			50,519

Total Assets	$	46,447		$	73,357

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	380,246		$	373,661
Accounts payable - related parties		150,000			150,000
Notes payable - related parties		51,936			51,936
Deferred revenue		210,950			174,700

Total Current Liabilities		793,132			750,297

Contingencies

Stockholders' deficit:
Preferred stock, $.0001 par value, 5,200 shares authorized, none issued and outstanding, respectively		-			-
Series A- Convertible Preferred Stock $0.0001 par value, 2,400 shares authorized, 80 and 80 issued and outstanding, respectively		1			1
Series B- Convertible Preferred Stock $0.0001 par value, 2,400 shares authorized, 974 and 974 shares issued and outstanding		1			1
Common stock, $.0001 par value: 750,000,000		54,777			54,777
shares authorized, 547,769,915 shares issued and 547,769,915 outstanding, respectively
Additional paid-in capital		7,968,873			7,968,873
Treasury stock at cost (500,000 Shares)		(2,025	)		(2,025	)
Accumulated deficit		(8,768,312	)		(8,698,567	)
Total stockholders' deficit		(746,685	)		(676,940	)

Total Liabilities and Stockholders' Deficit	$	46,447		$	73,357

See accompanying notes to unaudited condensed financial statements

Mera Pharmaceuticals, Inc.

Condensed Statements of Operations

(Unaudited)

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
	April 30, 2011			April 30, 2010			April 30, 2011			April 30, 2010
Net Sales	$	87,268		$	61,413		$	151,888		$	157,628
Cost of Goods Sold		10,207			9,095			13,743			10,401

GROSS PROFIT		77,061			52,318			138,145			147,227

Costs and Expenses
Research and development costs		49,359			70,474			87,224			133,406
Selling, general and administrative		64,379			56,491			124,305			107,238
Depreciation and Amortization		1,259			6,824			4,056			11,149

Total costs and expenses		114,997			133,789			215,585			251,793

Operating loss		(37,936	)		(81,471	)		(77,440	)		(104,566	)

Other income (expense):
Other income		-			-			2,958			1,333
Interest expense		(969	)		(1,248	)		(2,496	)		(2,496	)

Total other income (expense)		(969	)		(1,248	)		462			(1,163	)

Net loss before income tax provision		(38,905	)		(82,719	)		(76,978	)		(105,729	)

Provision for income taxes		-			-			-			-
Refundable tax credit		3,855			4,941			7,233			10,561

Net loss	$	(35,050	)	$	(77,778	)	$	(69,745	)	$	(95,168	)

Loss per share - basic and diluted		(0.01	)		(0.01	)		(0.01	)		(0.02	)
Weighted average shares outstanding -		547,769,915			547,769,915			547,769,915			547,769,915
basic and diluted

See accompanying notes to unaudited condensed financial statements

Mera Pharmaceuticals, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	Six Months			Six Months
	Ended			Ended
	April 30, 2011			April 30, 2010
Cash Flows from Operating Activities:
Net loss	$	(69,745	)	$	(95,168	)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Accumulated depreciation and amortization		4,056			11,149
Changes in Operating Assets and Liabilities
Accounts receivable		(3,527	)		(6,959	)
Other assets		23,996			(10,561	)
Prepaid expenses		-			8,011
Accounts payable and accrued liabilities		6,585			150,093
Deferrecd revenue		36,250			93,500
Net cash provided by (used in) operating activities		(2,385	)		150,065

Cash Flows from Investing Activities:
Purchases of marketable equitable securities		-			-
Proceeds from sales of marketable equitable securities		-			-
Purchases of fixed assets		(2,288	)		(150,000	)
Net cash used in investing activities		(2,288	)		(150,000	)

Cash Flows from Financing Activities:
Net cash provided by (used in) financing activities		-			-

Net increase (decrease) in cash and cash equivalents		(4,673	)		65
Cash and cash equivalents, beginning of the period		5,940			3,135
Cash and cash equivalents, end of the period	$	1,267		$	3,200


Cash paid for interest	$	-		$	-
Cash paid for taxes	$	-		$	-

See accompanying notes to unaudited condensed financial statements

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

NOTE A- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Organization - Mera Pharmaceuticals, Inc. (the “Company” or “Mera”), originally was seeking to develop and commercializes natural products from microalgae using its proprietary, large-scale photobioreactor technology.

During 2009, the Company switched its focus to engaging in the development of Sea Salt for sale in commercial and consumer uses. The salt is concentrated, low sodium and organic. The water used to produce the salt is drawn from an ocean depth of one-half mile. It is different in chemical composition from other sea salts because it comes from deep-sea water. It contains less sodium and more potassium, as well as higher concentrations of trace minerals. The Company's operations are located in Kailua-Kona, Hawaii.

Basis of Presentation

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 six-month period ended April 30, 2011 are not necessarily indicative of the results that may be expected for the year ending October 31, 2011. For further information, refer to the financial statements and footnotes thereto for the year ended October 31, 2010, included in Form 10-K filed with the Securities and Exchange Commission.

The preparation of the Company’s 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 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 long-lived assets); 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.

Cash and Cash Equivalents - The Company considers all highly liquid debt securities purchased with original or remaining maturities of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include valuation of inventory, valuation of deferred tax assets and impairment of property and equipment.

Fair Value of Financial Instruments - The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair market value because of the short maturity of those instruments. Notes payable approximate fair value.

Accounts Receivable - The Company performs ongoing credit evaluations of customers, and generally does not require collateral. Allowances are maintained for potential credit losses and returns and such losses have been within management’s expectations.

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

Credit Risk - It is the Company’s practice to place its cash equivalents in either high quality money market securities or to invest in short term corporate bonds. Certain amounts of such funds might not be insured by the Federal Deposit Insurance Corporation. However, the Company considers its credit risk associated with cash and cash equivalents to be minimal.

Inventories - Inventories are stated at the lower of cost (which approximates first-in, first-out) or market. At April 30, 2011, inventories consisted of $742,736 of work in process, $61,771 of finished goods, $72,771 of other inventory assets and $19,338 of raw materials. Management has recorded a full valuation allowance for obsolete and excess inventory totaling $896,616.

	April 30,		April 30,
	2011		2010
Raw Materials	$	19,338	$	19,338
Work In Process		742,736		742,736
Inventory Asset		72,771		76,751
Finished Goods		61,771		61,771
		896,616		900,596

Inventories Allowance		(896,616)		(900,596)
	$	-	$	-

Revenue Recognition - 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. The Company recognizes revenue when the price is fixed and determinability persuasive evidence of an arrangement exists, the products are shipped and collectability is reasonable assured.

Plant and Equipment, net - Plant and equipment are stated at cost less accumulated depreciation. Depreciation is recorded principally using the straight-line method, based on the estimated useful lives of the assets (property and plant, 10-40 years; machinery and equipment, 3-10 years). When applicable, leasehold improvements and capital leases are amortized over the lives of respective leases, or the service lives of the improvements, whichever is less.

Expenditures for renewals and improvements that significantly extend the useful life of an asset are capitalized. The costs of software with an expected life of more than one year, and used in the business operations are capitalized and amortized over their expected useful lives. Expenditures for maintenance and repairs are charged to operations when incurred. When assets are sold or retired, the cost of the asset and the related accumulated depreciation are removed from the accounts and any gain or loss is recognized at such time.

Impairment of Long Lived Assets and Long Lived Assets to be Disposed Of – ASC 360 “Accounting for the Impairment or Disposal of Long-Lived Assets” establishes the accounting model for long-lived assets to be disposed of by sale and applies to all long-lived assets, including discontinued operations. This statement requires those long-lived assets be measured at the lower of carrying amount or fair value less cost to sell.

Stock Issued For Services - In December 2004, the FASB issued ASC No. 718, Compensation – Stock Compensation (“ASC 718”). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

Equity instruments (“instruments”) issued to persons other than employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. ASC No. 505, Equity Based Payments to Non-Employees (“ASC 505”) defines the measurement date and recognition period for such instruments. In general, the measurement date is (a) when a performance commitment, as defined, is reached or (b) when the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC 505.

Research and Development Costs - Generally accepted accounting principles state that costs that provide no discernible future benefits, or allocating costs on the basis of association with revenues or among several accounting periods that serve no useful purpose, should be charged to expense in the period occurred. ASC 350 “Accounting for Research and Development Costs” requires that certain costs be charged to current operations including, but not limited to: salaries and benefits; contract labor; consulting and professional fees; depreciation; repairs and maintenance on operational assets used in the production of prototypes; testing and modifying product and service capabilities and design; and, other similar costs.

Income Taxes - The Company uses the asset and liability method of accounting for income taxes as required by ASC 740 “Accounting for Income Taxes”. ASC requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of certain assets and liabilities. Since its inception, the Company has incurred net operating losses. Accordingly, no provision has been made for income taxes. Statutory taxes not based on income are included in general and administrative expenses.

Loss Per Share - The Company computed basic and diluted loss per share amounts for April 30, 2011 and 2010 pursuant to the ASC 260, “Earnings per Share.” The assumed effects of the exercise of 11,215,000 shares of outstanding stock options, and conversion of 833,333 shares of convertible preferred stock series A and 8,695,429, shares of convertible preferred stock series B were anti-dilutive and, accordingly, dilutive per share amounts have not been presented in the accompanying statements of operations.

Concentrations- During 2010 and 2011, the Company obtains 100% of its salt from one source.

As of April 30, 2011 and 2010, the Company has accounts receivable balances that exceed 10% from 2 and 2 customers, respectively.

	2011		2010
Customer A		31%		N/A
Customer B		17%		15%
Customer C		N/A		20%

As of April 30, 2011 and 2010, the Company has a sales concentration that exceeded 10% to 1 and 1 customer, respectively.

		2011				2010
Customer A			20%				46%

Recent Accounting Pronouncements - In December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such; we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

NOTE B- 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 $35,050 and $69,745 for three and six months ending April 30, 2011, and has a total accumulated deficit of $8,768,312. There is also a working capital deficiency of $779,474 and a stockholder's deficiency of $746,685 as of April 30, 2011. 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.

NOTE C- RELATED PARTY TRANSACTIONS

In December 2003 the Board agreed to pay one of its members a commission of 4% of sales made to a Hawaiian distributor. The commission amount to be paid is based on sales consummated and approximately $13,000 was payable under this agreement as of April 30, 2011.

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. As of April 30, 2011 and 2010, the Company has received a total of $239,250 and $152,250 under this agreement. Of such amount, $210,950 and $123,950 has been recorded as deferred revenue for product that has not yet been shipped.

In March 2009 the Company entered into an agreement with a Director. The Director’s Company to provide construction services in exchange for payment of $150,000. As of the date of these financial statements, such amount has not yet been paid.

The Company has an unsecured demand notes payable – shareholder bearing an annual interest rate of 10% due on March 31, 2004. The notes are currently past maturity; however no demand for payment has been made (See Note D).

The Company has an unsecured demand notes payable – shareholder bearing an annual interest rate of 8% due on various dates through March 26, 2006. The notes are currently past maturity; however no demand for payment has been made (See Note D).

NOTE D- NOTES PAYABLE - RELATED PARTIES

Notes payable – related parties consists of the following as of April 30, 2011:

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

The Company has an unsecured demand notes payable – shareholder bearing an annual interest rate of 10% due on March 31, 2004. The notes are currently past maturity; however no demand for payment has been made.	$	41,936
The Company has an unsecured demand notes payable – shareholder bearing an annual interest rate of 8% due on various dates through March 26, 2006. The notes are currently past maturity; however no demand for payment has been made.		10,000
Total notes payable, related parties	$	51,936

The Company accrued $949 and $1,248 for the three months ended April 30, 2011 and 2010, and $2,496 and $2,496 for the six months ended April 30, 2011 and 2010, respectively, for interest expense due on notes payable-related parties.

NOTE E- STOCK HOLDERS EQUITY

(A)	Preferred Stock- The Company has 5,200 preferred shares authorized to be issued with the rights and preferences to be determined by the Board of Directors as of April 30, 2010 and 2011.

(B)

Stock Options- On November 7, 2004 the Board of Directors adopted the 2004 Stock Option Plan, authorizing issuance of options on up to 60 million shares of the Company’s common stock. In December of 2004, the Board approved issuance of options to purchase approximately 48,000,000 shares of its common stock to existing officers, directors and employees, subject to shareholder approval of the plan. In May 2005, such approval was received. The fair value of the options on the grant date was $480,000 calculated using the Black-Scholes Option Pricing Model. As of April 30, 2011 approximately 11,215,000 were deemed vested based on length of service with the Company since the date the Company’s Plan of Reorganization was approved. Terminated employees who have elected not to exercise options have forfeited their options. Approximately 37,000,000 total options have been forfeited since the adoption of the Stock Option Plan.

The following table summarizes the transactions of the Company’s stock options for the two-year period ended April 30, 2011

	Number of Shares		Weighted Average Exercise Price
Options outstanding, April 30, 2009		12,430,000	$	0.01
Options granted		-		-
Options exercised		-		-
Options forfeited		(1,215,000)		0.01
Options outstanding, April 30, 2010		11,215,000	$	0.01
Options granted		-		-
Options exercised		-		-
Options forfeited		-		-
Options outstanding, April 30, 2011		11,215,000	$	0.01

MERA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2011 AND 2010

April 30, 2011 Options Outstanding							Options Exercisable
Range of Exercise Price		Number Outstanding at April 30, 2011		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at April 30, 2011		Weighted Average Exercise Price
$	.01		11,215,000	2.08 years	$	.01		11,215,000	$	.01

April 30, 2010 Options Outstanding							Options Exercisable
Range of Exercise Price		Number Outstanding at April 30, 2010		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at April 30, 2010		Weighted Average Exercise Price
$	.01		11,215,000	3.08 years	$	.01		11,215,000	$	.01

NOTE F- LEGAL PROCEEDINGS

On June 22, 2011, Michael Broby, a former consultant filed a suit in the 3rd Circuit Court, State of Hawaii courts against Mera Pharmaceuticals, Inc. The complaint alleges breach of contract and breach of covenant of good faith and fair dealing arising out of a commission contract and is seeking damages in excess of $50,000. Mera management is planning to vigorously defend themselves against this claim, as they believe there is no merit.

NOTE G- RECLASSIFICATIONS

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company’s net loss or cash flows.

NOTE H – SUBSEQUENT EVENT

Merger

On June 15, 2012, Mera Pharmaceuticals, Inc. (the “Company”) entered into a Share Exchange Agreement (the “Agreement”) with Villari Family Centers, Inc., a Florida corporation (“VFC”), and the shareholders of VFC. Pursuant to the terms of the Agreement, the VFC shareholders exchanged 100% of their shares of VFC for shares of the Company’s Series C Convertible Preferred Stock, which, upon conversion, will constitute 95% of the Company’s common voting stock on a fully diluted basis as of the date of closing. The Company will account for this transaction as a reverse merger.

In connection with the issuance of the Series C Convertible Preferred Stock, the Board of Directors and Holders of a Majority of the Voting Interests of the Company has ratified the increase of its authorized common stock to 18,000,000,000 shares.

The rights and preference of the Series C stockholders rank in parity with the Corporation’s Common Stock and Series A and Series B Preferred Stock. The Series C is convertible mandatorily on June 14, 2013 or at the option of 51% of its holders into their proportionate shares of common stock on a fully diluted basis. The Series C will be cancelled once it is redeemed.

Additionally, in connection with the merger, the Series A and B preferred stock automatically converts into an aggregate of 9,529,761 shares of the Company's common stock, resulting in total common stock issued and outstanding of 557,299,676, post merger.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

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-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 April 30, 2011 we had an accumulated deficit of $8,768,818. 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 increased 42% for the three months ending April 30, 2011 to $87,268 compared $61,413 for the three months ending April 30, 2010. The increase in revenues was due primarily to increased sales of our AstaFactor nutraceutical supplement. We had several large international AstaFactor sales in first quarter 2011 that did not occur in first quarter 2012. Additionally we ran several promotions and discounts on AstaFactor which generated increased customer response and sales. We plan to continue such promotions for the foreseeable future and believe that we will maintain corresponding increases in year over year revenues.

For the six month period ending April 30, 2011, revenues were $151,888 compared to $157,628 for the six months ended April 30, 2010, a decrease of 4%. The decrease was due primarily to a one time, large bulk sea-salt sale that occurred in the first quarter of 2010, which did not occur in the same period for 2011. Had the large bulk sea-salt sale not occurred in 2010, our first quarter 2011 revenue would have increased 12% in comparison to the previous year. Our expectation is that revenue will increase slightly for the rest of the 2010-2011 fiscal year.

Cost of Sales

For the three months ending April 30, 2011, cost of goods sold increased 12% -- $10,207 versus $9,095 for the three months ending April 20, 2010. For the six month period ending April 30, 2011, cost of goods increased 32% -- $13,743 versus $10,401 for the six months ended April 30, 2010. The primary factor that increased cost of goods sold was increased product sales. This trend is expected to continue as the Company foresees continued increases in sales of its products.

Research and Development Costs

Research and development costs decreased to $49,359 for the three months ending April 30, 2011 compared $70,474 to the three months ending April 30, 2010, a decline of 30%. For the six month period ending April 30, 2011, research and development costs decreased 35% -- $87,224 versus $133,406 for the six months ended April 30, 2010. The decrease was due primarily to cost cutting measures, and to a re-focus of the Company on production of its Sea Salt product line.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $64,379 for the three months ending April 30, 2011 as compared to $56,491 the quarter ending April 30, 2011, an increase of 14%, and increased to $124,305 for the six months ended April 30, 2011 versus $107,238 for the six months ended April 30, 2010. The increase was due primarily to compensation expense of that was accrued for the Company CEO during fiscal 2011 that was not incurred in fiscal 2010.

Interest Expense

For the three months ended April 30, 2011 and 2010, interest expense was $969 and $1,248 respectively. For the six months ended April 30, 2011 and 2010, interest expense was $2,496 and $2,496 respectively. Debt was neither incurred nor paid during either period.

Off-Balance Sheet Arrangements

We don't have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities"(SPEs).

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting policies generally accepted in the United States of America. Our discussion and analysis of our financial condition and results of operations are based on these financial statements. The preparation of these financial statements requires the application of accounting policies in addition to certain estimates and judgments by our management. Our estimates and judgments are based on currently available information, historical results and other assumptions we believe are reasonable. Actual results could differ from these estimates.

There have been no material changes to the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended October 31, 2010.

Going Concern

For a discussion of going concern issues, see Note B to our financial statements in Part 1, Item 1 to this quarterly report.

Liquidity and Capital Resources

The Company currently does not have enough cash to satisfy its minimum cash requirements for the next twelve months. 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.

The present state of the Company's liquidity and capital resources raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as we are a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of the Company’s management, including its principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were not effective as of April 30, 2011, because we do not have sufficient staff to segregate responsibilities and no written documentation of internal control policies. Additionally, our annual report on Form 10-K for the year ended October 31, 2010 and our quarterly report on Form 10-Q for the quarter ended April 30, 2011 were not filed within the time periods specified in the SEC's rules. We plan to seek to correct these deficiencies during the current fiscal year or the next.

During the quarterly period covered by this Report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGESTERED SALE OF SECURITES AND USE OF PROCEEDS

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.

Date: July 25, 2012	By:	/s/ Charles Gary Spaniak, Sr.
		Charles Gary Spaniak, Sr.
		Chief Executive Officer

	By:	/s/ Lawrence H. Wolfe
		Lawrence H. Wolfe
		Principal Financial and Accounting Officer

MERA PHARMACEUTICALS INC - FORM 10-Q - July 25, 2012

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MERA PHARMACEUTICALS INC Reports