LESCARDEN INC - FORM 10-Q

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file	filename
EX-31 - CERTIFICATION - LESCARDEN INC	lcar_ex31.htm
EX-32 - CERTIFICATION - LESCARDEN INC	lcar_ex32.htm

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 28, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE Act of 1934

For the transition period from ______________________________________to

Commission file number 0-10035

LESCARDEN INC.

(Exact name of small business issuer as specified in its charter)


New York		13-2538207
(State or other jurisdiction of		(I.R.S Employer
incorporation or organization)		Identification No.)

420 Lexington Ave. Ste 212, New York		10170
(Address of principle executive office)		(Zip Code)


	212-687-1050
	Issuer’s telephone number

(Former name, former address and former fiscal year, if changed since last report)

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨

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 ¨ No þ

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class		Outstanding April 9, 2010
Common Stock $.001 par value		30,943,450

Item Number		Page Number
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements.		2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.		6
Item 4T.	Controls and Procedures		7
	PART II OTHER INFORMATION

Item 6.	Exhibits.		8

ITEM 1. FINANCIAL STATEMENTS.

LESCARDEN INC.

CONDENSED BALANCE SHEETS

	February 28, 2010			May 31, 2009
	(UNAUDITED)			(AUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	9,079		$	40,265
Accounts receivable		225,082			23,150
Inventory		100,023			163,278
Total current assets		334,184			226,693

Deferred income tax asset, net of valuation allowance of $1,476,000 and $1,485,000 at February 28, 2010 and May 31, 2009

Total assets	$	334,184		$	226,693

LIABILITIES AND STOCKHOLDERS' EQUITY

Currents liabilities:
Accounts payable and accrued expenses	$	299,970		$	219,963
Shareholder loan		274,000			189,000
Deferred revenue		5,240			7,640
Deferred license fees		27,701			110,804
Total liabilities		606,911			527,407


Stockholders' deficit
Convertible preferred stock (92,000 shares issued and outstanding)		1,840			1,840
Common stock (30,943,450 shares issued and outstanding)		30,943			30,943
Additional paid-in capital		16,617,615			16,617,615
Accumulated deficit		(16,923,125	)		(16,951,112	)
Stockholders' deficit		(272,727	)		(300,714	)
Total liabilities and stockholders' deficit	$	334,184		$	226,693

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF OPERATIONS

	(UNAUDITED) For the three months Ended February 28,				(UNAUDITED) For the nine months Ended February 28,
Revenues	2010		2009		2010		2009
Product sales	$	321,174	$	98,450	$	426,754	$	240,342
License fees		27,701		39,086		83,103		117,258
Total revenues		348,875		137,536		509,857		357,600

Costs and expenses:
Cost of sales		95,483		20,395		142,120		50,562
Salaries		27,719		18,769		68,386		135,189
Professional fees and consulting		30,559		17,237		116,242		117,154
Rent and office expense		38,932		22,936		104,190		81,632
Travel and meetings		-		8,306		-		14,378
Insurance		1,947		2,426		38,402		49,669
Other administrative expenses		6,878		5,341		12,530		17,099
Total costs and expenses		201,518		95,410		481,870		465,683

Net income (loss)	$	147,357	$	42,126	$	27,987	$	(108,083	)

Net loss per share – basic and diluted	$	0.00	$	0.00	$	0.00	$	(0.00	)

Weighted average number of common
Shares outstanding – basic and diluted		30,943,450		30,943,450		30,943,450		30,943,450

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF CASH FLOWS

	(UNAUDITED) For the nine months Ended February 28,
	2010			2009
Cash flow from operating activities:
Net income (loss)	$	27,987		$	(108,083	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Changes in operating assets and liabilities
Decrease in accounts receivable		(201,932	)		62,051
Decrease in inventory		63,255			22,181
Increase in accounts payable and accrued expenses		80,007			14,826
Decrease in deferred revenue		(2,400	)		(16,657	)
Decrease in deferred license fees		(83,103	)		(117,257	)
Net cash used in operating activities		(116,186	)		(142,939	)

Cash flow from financing activities:
Increase in shareholder loan		85,000			122,000
Cash provided by financing activities		85,000			122,000
Decrease in cash		(31,186	)		(20,939	)

Cash - beginning of period		40,265			38,867

Cash – end of period	$	9,079		$	17,928

See notes to financial statements

LESCARDEN INC.

(UNAUDITED) NOTES TO FINANCIAL STATEMENTS

February 28, 2010

Note 1 - General:

The accompanying unaudited financial statements include all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods. All such adjustments are of a normal recurring nature. The statements have been prepared in accordance with the requirements for Form 10-Q and, therefore, do not include all disclosures or financial details required by generally accepted accounting principles. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended May 31, 2009. The results of operations for the interim periods are not necessarily indicative of results to be expected for a full year's operations.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability of assets and the satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern. As shown in the financial statements, the Company has a stockholders’ deficiency and a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s major stockholder has committed to provide loan to the Company as needed to fund operating expenses until the Company can return to profitability.

In November 2008, management implemented a workforce reduction and other cost cutting initiatives. Upon completion of the regulatory recertification of its new packaging facility, the Company resumed the production and sale of Catrix in February 2010. The resumption of production and distribution of Catrix to its European licencee in February 2010 is expected to provide the Company with sufficient cash flow from operations to fund sales growth in existing markets. Based on existing purchase orders, management anticipates continued sales growth and profitability through the fiscal year-end.

The Company’s assets and liabilities that qualify as financial instruments under ASC Topic 825 ”Disclosures About Fair Value of Financial Instruments” approximate their carrying amounts presented in the balance sheet based upon the short-term nature of the accounts at February 28, 2010.

At February 28, 2010, inventory was comprised primarily of raw materials.

The Company has evaluated the financial statements for subsequent events through the date of the filing of this quarterly report on Form 10-Q.

LESCARDEN INC.

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

Management's Discussion and Analysis of Financial Condition

And Results of Operations

February 28, 2010

Results of Operations:

The results of operations for the nine months ended February 28, 2010 reflect the Company’s completion of the transfer of its Catrix packaging process to a new facility and successful regulatory recertification of the new facility. The Company began the process of transferring its packaging process to a new facility in November 2008 in response to the decision by the Company’s former packager to discontinue involvement with animal source products. The Company reached an agreement with its former packager in November 2008 to accept non-recurring payments of $30,000 during the second quarter and $50,000 payable during the third quarter in full settlement of the business interruption and resulting product fulfillment delay brought about by its decision to discontinue packaging the Company’s products. The evaluation of regulatory compliance at the new packaging facilities delayed shipment of Catrix to its European licensees until the current fiscal quarter.

Nine months ended February 28, 2010 compared to February 28, 2009

The Company’s revenues increased by 43% or $152,257 during the nine months ended February 28, 2010 compared to February 28, 2009 due to increased product sales of Catrix to its licensees in Europe, offset by a decrease in other income and domestic skin care sales of $78,000 and $34,029 respectively. License fees decreased by $34,155 or 29% due to the termination of certain license agreements in Europe.

Total costs and expenses during the nine months ended February 28, 2010 were 3% or $16,187 higher than those of the prior period. The increase was principally due to the increased cost of sales associated with costs of regulatory recertification and testing of its new packaging facility, and rent and office expenses, offset by decreases in salaries, travel and meeting and insurance expenses.

Three months ended February 28, 2010 compared to February 28, 2009

The Company’s revenues increased in the fiscal quarter ended February 28, 2010 compared to February 28, 2009 by 154% or $211,339 due to increased product sales of Catrix to its licensees in Europe, offset by a decrease in other income and domestic skin care sales of $48,000 and $20,339 respectively. License fees decreased by $11,385 or 29% due to the termination of certain license agreements in Europe.

Total costs and expenses during the three months ended February 28, 2010 were 111% or $106,108 higher than those of the prior period. The increase was principally due to increases in cost of sales and professional fees associated with costs of regulatory recertification and testing of its new packaging facility. With the completion of the regulatory recertification and testing of the Company’s new packaging facility, gross margins are expected to return to historic levels.

Liquidity and Capital Resources

As of February 28, 2009, the Company’s current assets exceeded its accounts payable and accrued expenses by $34,214. The Company’s cash and cash equivalents balance decreased by $31,186 during the nine months ended February 28, 2010 to $9,079. The company’s major shareholder has loaned the Company $274,000 and committed to provide additional loans to the Company as needed to fund operations until the company returns to profitability. The Company has no material commitments for capital expenditures at February 28, 2010.

ITEM 4T. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Company’s management, including its Chief Executive and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, including the Chief Executive and Chief Financial Officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on such evaluation, the Company’s Chief Executive and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective as of the end of the period covered by this quarterly report on Form 10Q.

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this quarterly report on Form 10-Q.

LESCARDEN INC.

Part II - Other Information

ITEM 6. EXHIBITS

(A) Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended February 28, 2010.

INDEX TO EXHIBITS

31 Certification pursuant to Exchange Act Rule 13a – 14 (a)/15d-14(a)

32 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LESCARDEN INC. (Registrant)

Date: April 9, 2010	By:	/s/ William E. Luther
		William E. Luther
		Chief Executive and Chief Financial Officer

LESCARDEN INC - FORM 10-Q - April 9, 2010

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LESCARDEN INC Reports