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EX-31 - CERTIFICATION - LESCARDEN INClcar_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 28, 2013
or
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
     
Accelerated filer
   
Non-accelerated filer
 
 (Do not check if a smaller
 
Smaller reporting company
þ  
   
 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, 2013
Common Stock $.001 par value
 
48,722,316
 
 
 
 
 
 
TABLE OF CONTENTS
 

 
Item 1.         Financial Statements.
 
LESCARDEN INC.
CONDENSED BALANCE SHEETS
 

   
February 28,
2013
   
May 31,
2012
 
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 198,759     $ 42,617  
Accounts receivable
    65,820       54,707  
Inventory
    150,870       104,666  
Total current assets
    415,449       201,990  
Deferred income tax asset, net of valuation allowance of $1,809,000 and $1,784,000 at February 28, 2013 and May 31, 2012 respectively
           
                 
Total assets
  $ 415,449     $ 201,990  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable and accrued expenses
  $ 236,313     $ 256,996  
Shareholder loan
    347,000       232,000  
Deferred revenue
    4,782       8,857  
Deferred license fees
    12,000       16,500  
Total liabilities
    600,095       514,353  
                 
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 and 40,076,783 shares issued and outstanding at February 28, 2013 and May 31, 2012 respectively
    48,722       40,077  
Additional paid-in capital
    17,073,836       16,882,481  
Accumulated deficit
    (17,309,044 )     (17,236,761 )
Stockholders' deficit
    (184,646 )     (312,363 )
Total liabilities and stockholders' deficit
  $ 415,449     $ 201,990  

See notes to financial statements
 
 
 
1

 

LESCARDEN INC.
CONDENSED STATEMENTS OF OPERATIONS
 

   
Three months ended
   
Nine months ended
 
   
February 28,
2013
   
February 29,
2012
   
February 28,
2013
   
February 29,
2012
 
Revenues:
                       
Product sales
  $ 125,448     $ 285,356     $ 409,589     $ 330,334  
License fees
    1,500       1,500       4,500       4,500  
Total revenues
    126,948       286,856       414,089       334,834  
                                 
Costs and expenses:
                               
Cost of sales
    62,654       91,375       161,431       110,177  
Salaries
    28,267       21,431       69,279       55,681  
Professional fees and consulting
    62,325       25,323       139,970       120,850  
Rent and office expense
    29,880       30,378       82,436       85,950  
Insurance
    4,390       7,348       32,173       40,622  
Commission
    6,632       14,417       19,481       14,417  
Other administrative expenses
    9,016       9,087       26,183       18,816  
Total costs and expenses
    203,164       199,359       530,953       446,513  
                                 
Operating income (loss)     (76,216 )     87,497       (116,864 )     (111,679 )
                                 
Other income     44,581             44,581        
                                 
Net (loss) income
  $ (31,635 )   $ 87,497     $ (72,283 )   $ (111,679 )
                                 
Net (loss) income 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       40,076,783       45,067,036       40,076,783  

See notes to financial statements
 
 
2

 
LESCARDEN INC.
CONDENSED STATEMENTS OF CASH FLOWS

   
Nine months ended
 
   
February 28,
2013
   
February 29,
2012
 
             
Cash flows from operating activities:
           
Net loss
  $ (72,283 )   $ (111,679 )
Adjustments to reconcile net loss to net cash
used in operating activities:
               
Changes in operating assets and liabilities:
               
Increase in accounts receivable
    (11,113 )     (191,369 )
Increase in inventory
    (46,204 )     (9,172 )
(Decrease) increase in accounts payable and accrued expenses
    (20,683 )     87,783  
(Decrease) increase in deferred revenue
    (4,075 )     26,976  
Decrease in deferred license fees
    (4,500 )     (4,500 )
Net cash used in operating activities
    (158,858 )     (201,961 )
                 
Cash flows from financing activities:
               
Increase in shareholder loan
    115,000       195,000  
Issuance of common stock
    200,000        
Cash provided by financing activities
    315,000       195,000  
                 
                 
Increase (decrease) in cash
    156,142       (6,961 )
                 
Cash - beginning of period
    42,617       10,780  
                 
Cash – end of period
  $ 198,759     $ 3,819  

See notes to financial statements
 
 
3

 

LESCARDEN INC .
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
 
February 28, 2013
 
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, 2012. 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 28, 2013, 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.
 
At February 28, 2013, inventory of $150,870 consisted of $42,745 of finished goods and $108,125 of raw materials.
 
During the nine months ended February 28, 2013, the Chairman of the Board and a major shareholder advanced the Company $115,000. The loan accrues interest at the applicable federal rates published by the IRS, is unsecured and has no specific repayment date.
 
Pursuant to a stock purchase agreement dated August 10, 2012, the Company agreed to sell and issue 8,645,533 shares of common stock for an aggregate purchase price of $200,000 to its Chairman of the Board. The sale was completed on September 24, 2012.
 
 
4

 
 
Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Results of Operations:
 
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 results of operations for the nine months ended February 28, 2013 reflect partial fulfillment of  customer purchase orders and continuing uncertainty regarding production lead times and purchase order fulfillment.  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, 2013 compared to February 29, 2012
 
The Company’s revenues decreased in the fiscal quarter ended February 28, 2013 compared to February 29, 2012 by 56% or $159,908 due to the inability of the Company’s sole raw material supplier to fulfill outstanding purchase orders.  Sales to European and Korean distributors decreased by $99,000 and $64,000 respectively during the quarter ended February 28, 2013 offset by other income of $44,581 associated with the demutualization of the Company’s liability insurance carrier.  Cost of sales as a percent of sales was 49.9% for the three months ended February 28, 2013 reflecting almost $25,000 of raw material and packaging costs associated with the replacement of expired product for the Company’s European distributor.
 
Non-direct costs and expenses during the three months ended August 31, 2012 were 30% or $32,526 higher than those of the comparative prior-year period due to a $42,500 increase in quality control expenses associated with a viral clearance study offset by decreases in commissions and insurance expenses of $7,785 and $2,958 respectively.
 
Nine months ended February 28, 2013 compared to February 29, 2012
 
The Company’s revenues increased by $79,255 or 24% for the nine months ended February 28, 2013 due to the partial fulfillment of a purchase order submitted by the Company’s European distributor in March 2012.  Cost of sales as a percent of sales was 39.41% for the nine months ended February 28, 2013 reflecting the cost of replacement product shipped to the Company’s European distributor in December 2012. The Company also had Other income of $44,581 related to the demutualization of the company’s liability insurance carrier.
 
 
Non-direct costs and expenses during the nine months ended February 28, 2013 were 9.87% or $33,186 higher than those of the comparative prior-year period due to increases in professional fees, salaries and commissions of $19,120, $13,598 and $5,064 respectively and increased other administrative expenses of $5,064 associated with graphic design and product development costs.  Company relocated warehoused inventory to more cost effective facilities and implemented a tax favored high deductible health insurance benefit plan, yielding decreases in insurance and rent expenses of $8,449 and $3,514 respectively.
 
Liquidity and Capital Resources:
 
As of February 28, 2013, the Company’s current assets exceeded its accounts payable and accrued expenses by $179,136. The Company’s cash and cash equivalents balance increased by $156,142 in the nine months ended February 28, 2013 to $198,759. On September 24, 2012 the Company sold 8,645,533 shares common stock to its Chairman of the Board for $200,000 pursuant to the Stock Purchase agreement for the unregistered issuance of securities dated August 10, 2012, and received an additional $115,000 advance.
 
The Company has no material commitments for capital expenditures at February 28, 2013 and outstanding but unconfirmed purchase orders for raw material totaling $228,000.
 
 
5

 
 
 
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.
 
 
6

 
 
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
 
Certification pursuant to Exchange Act Rule 13a – 14 (a)/15d-14(a)
 
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
 
 
7

 

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, 2013
 
/s/ William E. Luther
 
William E. Luther
 
Chief Executive and Chief Financial Officer
 
   
 

8