LESCARDEN INC - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - LESCARDEN INC	Financial_Report.xls
EX-31 - CERTIFICATION - LESCARDEN INC	lcar_ex31.htm
EX-32 - CERTIFICATION - LESCARDEN INC	lcar_ex32.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

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

For the quarterly period ended: February 28, 2014

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 registrant as specified in its charter)

———————

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

420 Lexington Ave. Ste 212, New York 10170

(Address of Principal Executive Office) (Zip Code)

(212) 687-1050

(Registrant’s telephone number, including area code)

———————

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.
				þ	Yes	o	No

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).
				o	Yes	o	No

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	o		Accelerated filer			o
Non-accelerated filer	o	(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).
				o	Yes	þ	No

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

Class		Outstanding April 1, 2014
Common Stock $.001 par value		48,722,316

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page
Item 1	Financial Statements.	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	7
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	8
Item 4.	Controls and Procedures.	8
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	9
Item 1A.	Risk Factors.	9
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	9
Item 3.	Defaults Upon Senior Securities.	9
Item 4.	Submission of Matters to a Vote of Security Holders.	9
Item 5.	Other Information.	9
Item 6.	Exhibits.	9

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

LESCARDEN INC.

CONDENSED BALANCE SHEETS

	February 28, 2014			May 31, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,566		$	84,562
Accounts receivable		42,570			26,801
Inventory		117,113			148,432
Total current assets		173,249			259,795
Deferred income tax asset, net of valuation allowance of $1,538,000 and $1,504,000 at February 28, 2014 and May 31, 2013 respectively		—			—

Total assets	$	173,249		$	259,795

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	191,440		$	267,303
Shareholder loan		447,000			347,000
Deferred revenue		—			4,782
Deferred license fees		6,000			10,500
Total liabilities		644,440			629,585

Stockholders' deficit
Convertible preferred stock - $.02 par value, authorized 2,000,000 shares, issued and outstanding 92,000 shares		1,840			1,840
Common stock - $.001 par value, authorized 200,000,000 shares, 48,722,316 issued and outstanding at February 28, 2014 and May 31, 2013		48,722			48,722
Additional paid-in capital		17,073,836			17,073,836
Accumulated deficit		(17,595,589	)		(17,494,188	)
Stockholders' deficit		(471,191	)		(369,790	)
Total liabilities and stockholders' deficit	$	173,249		$	259,795

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF OPERATIONS

	(UNAUDITED)						(UNAUDITED)
	Three months ended February 28,						Nine months ended February 28,
	2014			2013			2014			2013
Revenues:
Product sales	$	61,689		$	125,448		$	379,616		$	409,589
License fees		1,500			1,500			4,500			4,500
Total revenues		63,189			126,948			384,116			414,089

Costs and expenses:
Cost of sales		33,825			62,654			170,422			161,431
Salaries		28,536			28,267			85,622			69,279
Professional fees and consulting		12,461			62,325			61,703			139,970
Rent and office expense		29,729			29,880			87,469			82,436
Insurance		9,656			4,390			40,281			32,173
Commission		—			6,632			20,689			19,481
Other administrative expenses		8,313			9,016			19,331			26,183
Total costs and expenses		122,520			203,164			485,517			530,953

Operating loss		(59,331	)		(76,216	)		(101,401	)		(116,864	)

Other income		—			44,581			—			44,581

Net loss	$	(59,331	)	$	(31,635	)	$	(101,401	)	$	(72,283	)

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		48,722,316			48,722,316			48,722,316			48,722,316

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF CASH FLOWS

	(UNAUDITED)
	Nine months ended
	February 28,
	2014			2013

Cash flows from operating activities:
Net loss	$	(101,401	)	$	(72,283	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Increase in accounts receivable		(15,769	)		(11,113	)
Decrease (increase) in inventory		31,319			(46,204	)
Decrease in accounts payable and accrued expenses		(75,863	)		(20,683	)
Decrease in deferred revenue		(4,782	)		(4,075	)
Decrease in deferred license fees		(4,500	)		(4,500	)
Net cash used in operating activities		(170,996	)		(158,858	)

Cash flows from financing activities:
Proceeds from shareholder loan		100,000			115,000
Proceeds from the sale of common stock		—			200,000
Cash provided by financing activities		100,000			315,000


Increase (decrease) in cash		(70,996	)		156,142

Cash - beginning of period		84,562			42,617

Cash – end of period	$	13,566		$	198,759

Supplemental disclosures of cash flow information

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

See notes to financial statements

LESCARDEN INC .

(UNAUDITED) NOTES TO FINANCIAL STATEMENTS

February 28, 2014

Note 1 - General:

The accompanying condensed 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, 2013. The results of operations for the interim periods are not necessarily indicative of results to be expected for a full year's operations.

Note 2 – Going Concern:

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 incurred a loss from operations for the nine months ended February 28, 2014, 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 plan and ability to continue as a going concern is primarily dependent upon its ability to maintain consistent production volumes to fulfill existing sales orders. Production lead time has increased at the Company’s primary raw material supplier and alternative sources of supply are being evaluated so that manufacturing and production disruptions can be minimized. There can be no assurance that the Company will be able to establish an alternative source of supply and maintain consistent production volumes to meet demand. The financial statements do not include any potential contingent liabilities associated with the establishment of an alternative source of supply due to the uncertainties associated with the regulatory, logistic and financial issues, but it is likely that mill construction, testing and regulatory certification will necessitate at least six months before production commences.

Note 3 – Inventory:

At February 28, 2014, inventory of $117,113 consisted of $41,640 of finished goods and $75,473 of raw materials

Note 4 – Related Party Transactions:

In August 2013, the Company received an additional loan of $100,000 from its’ Chairman. Pursuant to an agreement with a director of the Company, sales commission expense of $20,689 for services rendered in connection with the sale of Citrix in Europe was paid during the nine months ended February 28, 2014.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations:

Ongoing raw material production delays have resulted in order fulfillment lead times of greater than six months and increasing backorders in both new and existing markets. The Company has been unable to reach an agreement with its existing supplier to continue production until an alternative means of supply is established and prospective suppliers have provided estimates of a year or more before an alternative means of production is operational and significant increases in the unit cost of raw material.

Three months ended February 28, 2014 compared to February 29, 2013

The Company’s revenues decreased in the fiscal quarter ended February 28, 2014 compared to February 28, 2013 by 51% or $63,759. . Cost of sales as a percent of sales was 55%% for the three months ended February 28, 2014 reflecting non-recurring set-up costs of $7,989 associated with the Company’s efforts to secure alternative sources of raw material supply.

Non-direct costs and expenses during the three months ended February 28, 2014 were 37% or $51,815 lower than those of the comparative prior-year period due to a $49,864 decrease in quality control expenses associated with a viral clearance study and a decrease in commissions expense of $6,632 offset by an increase in insurance expense of $5,266.

Nine months ended February 28, 2014 compared to February 29, 2013

The Company’s revenues decreased by $29,973 or 7% for the nine months ended February 28, 2014 due to ongoing production delays. Cost of sales as a percent of sales was 44.9% for the nine months ended February 28, 2014 reflecting the increased cost of raw materials.

Non-direct costs and expenses during the nine months ended February 28, 2014 were 14.7% or $54,427 lower than those of the comparative prior-year period due to decreases in professional fees and other administrative expenses of $78,267 and $6,852 respectively offset by increased payroll and insurances expenses of $16,343 and $8,108 respectively.

Liquidity and Capital Resources

As of February 28, 2014, the Company’s accounts payable and accrued expenses exceeded its current assets by $18,191. The Company’s cash and cash equivalents balance decreased by $70,996 in the nine months ended February 28, 2014 to $13,566.

The Company has no material commitments for capital expenditures at February 28, 2014.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required for smaller reporting company.

Item 4. 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 10-Q.

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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

See Stock Purchase Agreement with Charles T. Maxwell (incorporated by reference from our Current Report on Form 8-K filed on September 24, 2012)

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.		Description
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

LESCARDEN INC - FORM 10-Q - April 4, 2014

Attached files

LESCARDEN INC Reports