LESCARDEN INC - FORM 10-Q - April 12, 2012

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - LESCARDEN INC	Financial_Report.xls
EX-32 - CERTIFICATION - LESCARDEN INC	lcar_ex32.htm
EX-31 - CERTIFICATION - LESCARDEN INC	lcar_ex31.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 29, 2012

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	Smaller reporting company	þ
(Do not check if a smaller reporting company)

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 12, 2012
Common Stock $.001 par value		40,076,783

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.		3

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.		10

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

LESCARDEN INC.

CONDENSED BALANCE SHEETS

	February 29, 2012			May 31, 2011
	(UNAUDITED)			(AUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	3,819		$	10,780
Accounts receivable		240,656			49,287
Inventory		106,892			97,720
Total current assets		351,367			157,787
Deferred income tax asset, net of valuation allowance of $1,759,000 and $1,721,000 at February 29, 2012 and May 31, 2011

Total assets	$	351,367		$	157,787

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	308,889		$	221,106
Shareholder loan		232,000			37,000
Deferred revenue		31,051			4,075
Deferred license fees		18,000			22,500
Total liabilities		589,940			284,681



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, issued and outstanding 40,076,783 shares		40,077			40,077
Additional paid-in capital		16,882,481			16,882,481
Accumulated deficit		(17,162,971	)		(17,051,292	)
Stockholders' deficit		(238,573	)		(126,894	)
Total liabilities and stockholders' deficit	$	351,367		$	157,787

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three months ended					Nine months ended
	February 29, 2012		February 28, 2011			February 29, 2012			February 28, 2011
Revenues:
Product sales	$	285,356	$	129,251		$	330,334		$	448,095
License fees		1,500		1,500			4,500			4,500
Total revenues		286,856		130,751			334,834			452,595

Costs and expenses:
Cost of sales		91,375		41,705			110,177			150,396
Salaries		21,431		41,559			55,681			86,107
Professional fees and consulting		25,323		25,253			120,850			110,286
Rent and office expense		30,378		26,661			85,950			83,519
Insurance		7,348		6,420			40,622			37,436
Commissions		14,417		8,142			14,417			20,256
Other administrative expenses		9,087		6,078			18,816			13,422
Total costs and expenses		199,359		155,818			446,513			501,422

Net income (loss)	$	87,497	$	(25,067	)	$	(111,679	)	$	(48,827	)

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		40,076,783		40,076,783			40,076,783			34,637,077

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine months ended
	February 29, 2012			February 28, 2011

Cash flows from operating activities:
Net loss	$	(111,679	)	$	(48,827	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities
Increase in accounts receivable		(191,369	)		(4,709	)
Increase in inventory		(9,172	)		(35,662	)
Decrease in prepaid expense		—			6,800
Increase in accounts payable and accrued expenses		87,783			26,660
Increase (decrease) in deferred revenue		26,976			(29,059	)
Decrease in deferred license fees		(4,500	)		(4,500	)
Net cash used in operating activities		(201,961	)		(89,297	)

Cash flows from financing activities:
Increase in shareholder loan		195,000			36,000
Cash provided by financing activities		195,000			36,000

Decrease in cash		(6,961	)		(53,297	)

Cash - beginning of period		10,780			137,928

Cash – end of period	$	3,819		$	84,631

Non-cash financing activities
Increase in common stock resulting from loan conversion		—			9,134
Increase in paid-in capital resulting from loan conversion		—			264,866
Decrease in shareholder loan		—			(274,000	)

See notes to financial statements

LESCARDEN INC .

(UNAUDITED) NOTES TO FINANCIAL STATEMENTS

February 29, 2012

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, 2011. 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 incurred a loss from operations for the nine months ended February 29, 2012, 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 successful regulatory certification of its new packager, which will enable the Company to grow revenue through existing and new lines of business. There can be no assurance that the Company will be able to grow revenues or secure sufficient additional financing to meet future obligations.

At February 29, 2012, inventory of $106, 892 consisted of $47,253 of finished goods and $59,639 of raw materials.

The Company’s assets and liabilities that qualify as financial instruments under SFAS No. 107 ”Disclosures About Fair Value of Financial Instruments” (ASC 825-10-50) approximate their carrying amounts presented in the balance sheet based upon the short-term nature of the accounts at February 29, 2012.

The Company has evaluated the financial statements for subsequent events through the date of the filing of this quarterly report on Form 10-Q on April 12, 2012.

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

Results of Operations:

The results of operations for the nine months ended February 29, 2012 reflect decreased sales volume in both Europe and Asian markets despite the completion of regulatory recertification and commencement of product packaging at the Company’s new facility. Decreased sales of Caty-S to Asian markets offset by regional increases in sales of US skin care also contributed to decreased product sales. The Company has yet to approve in excess of $500,000 of purchase orders for Catrix due to increased lead-time required by a supplier of raw materials.

Nine months ended February 29, 2012 compared to February 28, 2011

The Company’s revenues decreased 26% or $117,761 during the nine months ended February 29, 2012 compared to February 28, 2011 due to a decrease in sales to European and Asian licensees. Total costs and expenses during the nine months ended February 29, 2012 were 11% or $54,909 lower than those of the comparative prior year period due to a decrease in salaries of 35% or $30,426 and a decrease in commission expense of $5,839, offset by an increase in insurance expense of $3,186 and an increase in other administrative expenses of $5,394 resulting from increased state and local taxes, increased printing and reproduction expenses and increased shipping costs.

Three months ended February 29, 2012 compared to February 28, 2011

The Company’s revenues increased in the fiscal quarter ended February 29, 2012 compared to February 28, 2011 by 119% or $156,105 due to the completion of regulatory recertification of the Cmpany's new packager and commencement of production operations. Total costs and expenses during the three months ended February 29, 2012 were 28% or $43,541 higher than those of the comparative prior year period. The increase was principally due to increases in cost of sales and commission expense of $49,670 and $6,275, offset by a decrease in salaries of $20,128.

Liquidity and Capital Resources

As of February 29, 2012, the Company’s current assets exceeded its accounts payable and accrued expenses e by $42,478. The Company’s cash and cash equivalents balance decreased by $6,961 in the nine months ended February 29, 2012 to $3,819. On November 10, 2010, the Company completed conversion of a $274,000 shareholder loan into common stock. Pursuant to the Loan Conversion and Stock Purchase agreement dated November 8, 2011, the Company issued 9,133,333 shares of common stock in exchange for the extinguishment of a $274,000 shareholder loan.

The Company has no material commitments for capital expenditures at February 29, 2012.

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 Loan Conversion and Stock Purchase Agreement with Charles T. Maxwell (incorporated by reference from our Current Report on Form 8-K filed on November 10, 2010)

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

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 12, 2012	By:	/s/ William E. Luther
		William E. Luther
		Chief Executive and Chief Financial Officer

LESCARDEN INC - FORM 10-Q - April 12, 2012

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LESCARDEN INC Reports