MRPI Mera Pharmaceuticals Inc (CE)

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

This Report contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including statements that include the words "believes," "expects," "estimates," "anticipates" or similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements.  Risk factors include, but are not limited to, our ability to raise or generate additional capital; our ability to cost-effectively manufacture our products on a commercial scale; the concentration of our current customer base; competition; our ability to comply with applicable regulatory requirements; potential need for expansion of our production facility; the potential loss of a strategic relationship; inability to attract and retain key personnel; management's ability to effectively manage our growth; difficulties and resource constraints in developing new products; protection and enforcement of our intellectual property; compliance with environmental laws; climate uncertainty; currency fluctuations; exposure to product liability lawsuits; and control of our management and affairs by principal stockholders.

The reader should carefully consider, together with the other matters referred to herein, the information contained under the caption "Risk Factors" in our Annual Report on Form 10-KSB for a more detailed description of these significant risks and uncertainties.  We caution the reader, however, that these factors may not be exhaustive.

Since inception, our primary operating activities have consisted of basic research and development and production process development, recruiting personnel, purchasing operating assets, raising capital and sales of product.  From September 16, 2002, the effective date of our plan of reorganization, through April 30, 2007 we had an accumulated deficit of $5,874,828. 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.  Revenues for the quarter ended April 30, 2007 were $135,169 as compared to $69,450 for the equivalent period in 2006, an increase of 96%.

The increase was due to management strategies which are aimed at long term steady growth in multiple areas.  Specifically, in two areas:  Sales of our Asta Factor line of products and research contract services using Mera’s patented growth modules with third parties for fee’s and success based incentives.  The company has contracted with an entity that should fuel revenue through the end of the fiscal year ending October 2007 with the possibility of a extension of service.  The company is also in current negotiations with another entity to use our facility either in conjunction with or separate from the current contract.  The company also expects to introduce a new product early in the fourth quarter of 2006 which is expected to further increase revenue in the future.

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From an operational basis, excluding Depreciation and Amortization, Mera had a operating profit of $2,026 which is the first operating profit in the company’s history.  While nominal in dollars, the trend continues to improve even though there will be fluctuations in future quarterly earnings and revenues.

Cost of Sales.  Cost of goods sold was $3,714 for the quarter ending April 30, 2007 versus $11,129 in the same quarter in 2006, a decrease of 67%. Gross profit margins from sales of product for the quarter were approximately 97%, versus 84% for the same period in 2006. The decrease in cost of goods sold, and the corresponding increase in gross profit margin, was due primarily to a greater percentage of in direct retail sales, which carry greater profit margins as compared to wholesale revenues.

Research and Development Costs .  Research and development costs were $47,338 for the quarter ending April 30, 2007. This was an increase if approximately 29% over the $36,831 that was incurred for the same period in the prior year. The increase was due to the above mentioned contract services research project. These expenses will rise over the next few quarters as we increase the amount of work under contract.

Selling, General and Administrative Expenses .    In the quarter ended April 30, 2007 as compared to the same period during the prior year, selling, general and administrative costs declined from $112,808 to $80,144 or approximately 29%. The reduction was due to general cost cutting measures, primarily in the area of salaries. It is expected that such expenses will rise in future periods as the Company begins to grow its businesses and add new employees to its staff.

Interest Expense.  For the quarters ended April 30, 2007 and 2006, interest expense was $2,109 and $2,364, respectively. This decrease was due to a slightly lower level of borrowing by the Company during the second quarter of 2007 compared to the same period in 2006.