LESCARDEN INC - FORM 10-Q - April 10, 2015

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 28, 2015

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 of incorporation or organization)		(I.R.S. Employer Identification No.)

420 Lexington Ave. Ste 400, 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). þ 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). þ Yes o 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 10, 2015
Common Stock $.001 par value		63,622,316

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page

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.	7

Item 4.	Controls and Procedures.	7

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	8

Item 1A.	Risk Factors.	8

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	8

Item 3.	Defaults Upon Senior Securities.	8

Item 4.	Submission of Matters to a Vote of Security Holders.	8

Item 5.	Other Information.	8

Item 6.	Exhibits.	8

SIGNATURES		9

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

LESCARDEN INC.

CONDENSED BALANCE SHEETS

	February 28, 2015			May 31, 2014
	(UNAUDITED)			(AUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	119,819		$	10,432
Accounts receivable		3,338			2,088
Inventory		90,015			113,572
Total current assets		213,172			126,092
Deferred income tax asset, net of valuation allowance of $1,613,000 and $1,564,000 at February 28, 2015 and May 31, 2014 respectively		––			––

Total assets	$	213,172		$	126,092

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	301,412		$	220,592
Shareholder loan		154,000			—
Deferred license fees		––			4,500
Total liabilities		455,412			225,092

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, 63,622,316 issued and outstanding		63,622			63,622
Additional paid-in capital		17,505,936			17,505,936
Accumulated deficit		(17,813,638	)		(17,670,398	)
Stockholders' deficit		(242,240	)		(99,000	)
Total liabilities and stockholders' deficit	$	213,172		$	126,092

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

	For the three months Ended February 28,						For the nine months Ended February 28,
	2015			2014			2015			2014
Revenues:
Product sales	$	23,396		$	61,689		$	194,667		$	379,616
License fees		1,500			1,500			4,500			4,500
Total revenues		24,896			63,189			199,167			384,116

Costs and expenses:
Cost of sales		5,816			33,825			49,124			170,422
Salaries		30,329			28,536			71,428			85,622
Professional fees and consulting		15,501			12,461			75,711			61,703
Rent and office expense		27,445			29,729			89,845			87,469
Insurance		6,131			9,656			30,933			40,281
Interest expense		144			496			144			496
Commission		—			—			10,743			20,689
Other administrative expenses		1,269			7,817			14,479			18,835
Total costs and expenses		86,635			122,520			342,407			485,517

Net loss	$	(61,739	)	$	(59,331	)	$	(143,240	)	$	(101,401	)

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		63,622,316			48,722,316			63,622,316			48,722,316

See notes to financial statements

LESCARDEN INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the nine months Ended February 28,
	2015			2014

Cash flows from operating activities:
Net loss	$	(143,240	)	$	(101,401	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities
Increase in accounts receivable		(1,250	)		(15,769	)
Decrease in inventory		23,557			31,319
Increase (decrease) in accounts payable and accrued expenses		80,820			(75,863	)
Decrease in deferred revenue		—			(4,782	)
Decrease in deferred license fees		(4.500	)		(4,500	)
Net cash used in operating activities		(44,613	)		(170,996	)

Cash flows from investing activities:		—			—

Cash flows from financing activities:
Proceeds from shareholder loan		154,000			100,000
Cash provided by financing activities		154,000			100,000


Increase (decrease) in cash		109,387			(70,996	)

Cash - beginning of period		10,432			84,562

Cash – end of period	$	119,819		$	13,566

Supplemental Disclosures of Cash Flow Information
Cash paid for interest	$	-	$	-
Cash paid for taxes	$	380	$	380

See notes to financial statements

LESCARDEN INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

February 28, 2015

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, 2014. 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, 2015 of $143,240, and has a stockholders’ deficiency and a working capital deficiency of $242,240. 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 establish and maintain consistent production volumes to fulfill existing sales orders. Alternative sources of supply continue to be evaluated so that manufacturing and production disruptions can be minimized in the future. There can be no assurance that the Company will be able to establish an alternative source of supply to meet demand. The establishment of an alternative source of supply may require additional expenditures given the uncertainties associated with the regulatory and financial issues involved.

Note 3 – Inventory:

At February 28, 2015, inventory of $90,015 consisted of $34,629 of finished goods and $55,386 of raw materials.

Note 4 – Related Party Transactions:

The Company received additional unsecured loans aggregating $154,000 from its Chairman during the nine months ended February 28, 2015. The loans are interest bearing at the internal revenue service short-term applicable federal rate and due upon demand. Pursuant to an agreement with a director of the Company, sales commission expense of $10,743 for services rendered in connection with the sale of Citrix in Europe was paid during the nine months ended February 28, 2015.

Note 5- Commitments and Contingencies:

At February 28, 2015, the Company is obligated under a non-cancellable lease with an unrelated third party to rent office space which expires on January 31, 2016. The Company is currently negotiating a termination of this lease. At February 28, 2015, the Company owes $105,151 under this lease and has minimum future rental payments due on this lease of $82,627.

There have been no other significant subsequent developments relating to the commitments and contingencies reported on the Company’s latest Annual Report on Form 10-K.

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

Results of Operations:

The results of operations for the three and nine months ended February 28, 2015 reflect an ongoing production outage, which has delayed fulfillment of customer purchase orders.

Three months ended February 28, 2015 compared to February 28, 2014

The Company’s revenues decreased in the fiscal quarter ended February 28, 2015 by $38,293 or 61% due to the ongoing delays in the resumption of raw material production. Cost of sales as a percent of sales was 25% for the three months ended February 28, 2015 reflecting lower raw material costs of discounted raw material purchases from the Company’s former supplier.

Non-direct costs and expenses during the three months ended February 28, 2015 were 9% lower than those of the comparative prior-year period due to decreases in other administrative expenses and insurance expense of $6,900 and $3,525 offset by increased professional fees and salaries of $3,040 and $1,793 respectively.

Nine months ended February 28, 2015 compared to February 28, 2014

The Company’s revenues decreased in the nine months ended February 28, 2015 compared to February 28, 2014 by 48% or $184,949 due to the Company’s inability to reestablish production operations. Cost of sales as a percent of sales decreased from 45% for the nine months ended February 28, 2014 to 25% for the nine months ended February 28, 2015, reflecting the acquisition of discounted raw material from the Company’s former supplier and the costs of exploring alternative sources of supply during the comparative prior year period.

Liquidity and Capital Resources

As of February 28, 2015, the Company’s liabilities exceeded its assets by $242,240. The Company’s cash and cash equivalents balance increased by $109,387 in the nine months ended February 28, 2015 to $119,819.

The Company has no material commitments for capital expenditures at February 28, 2015.

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.

None

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 10, 2015



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

LESCARDEN INC - FORM 10-Q - April 10, 2015

Attached files

LESCARDEN INC Reports