Mera Pharmceuticals lost less in third quarter

The Big Isle company says revenues have been better in the fourth quarter

Mera Pharmaceuticals Inc., a Kona-based maker of nutritional supplements from microalgae, said two recently signed contracts will improve its prospects this quarter after its revenue declined 38 percent in its fiscal third quarter that ended July 31.

The Big Island company, which narrowed its fiscal third-quarter loss to $125,803 from $237,548 a year earlier, said its revenue trend "has increased markedly" during the first few weeks of the fourth quarter, according to a filing Thursday with the Securities and Exchange Commission.

Mera said it signed a one-year contract at the end of the third quarter to supply products that will increase annual revenue by about 4 percent. It also signed a 10-year agreement earlier this quarter to supply products to a different party that calls for 10 percent minimum increases each year. The first year's minimum increment purchase also should boost revenue 4 percent during the first year, Mera said in its filing. Mera did not identify either of the purchasers for proprietary reasons.

"It will give the company stability as far as revenue comes in and much more stable cash flow," Mera Chief Executive Gregory Kowal said yesterday. "We're also hoping that over a period of time that these contacts will be expanded upon. In addition, we're looking at and talking to other entities regarding long- term contracts."

Last quarter, revenue fell to $72,792 from $116,592 a year earlier when Mera's revenue included $10,000 earned from a now-completed contract related to a project for the U.S. Department of Energy. The year-earlier revenue also included about $29,160 received in one large transaction with a wholesale distributor.

On a sequential basis, Mera's revenue rose 4.8 percent in the third quarter from the second quarter of this year when revenue was $69,450. Mera improved its gross profit margin last quarter to 74 percent from 36 percent a year ago because of a greater percentage of direct retail sales, which carry great profit margins than wholesale revenue.

Formerly known as Aquasearch Inc., Mera makes three AstaFactor products consisting of astaxanthin, which is an antioxidant and anti-inflammatory. The company, which emerged from bankruptcy in September 2002, never has made an actual profit. However, it recognized a net earnings of $93,779 in its fiscal 2004 second quarter because of accounts payable that were reduced to resolve disputed claims by undisclosed parties.

Mera, which has lost $5.4 million since coming out of bankruptcy, listed $54,779 in cash and cash equivalents at the end of July, up from $20,466 during the same period a year ago.

Kowal also said Mera expects to reach a settlement over a previously disclosed patent infringement lawsuit against Mera that was filed by Fuji Health Science Inc. on June 2 in U.S. District Court for the District of New Jersey, Camden Vicinage. Fuji claims it has a patent that says no one else but the company can say that astaxanthin prevents muscle soreness.

Kowal said attorneys from both sides are talking about an out-of-court settlement and that Mera expects it would need to change its advertising or marketing. Kowal said that if there were a financial settlement, it would not be significant.