UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
———————
FORM 10-Q
———————

þü QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934
For the quarterly period ended: November 30, 20142015
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 York13-2538207
(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.
þü Yeso 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 Yeso 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 filero  Accelerated filer  
Non-accelerated filero (Do not check if a smaller Smaller reporting company
þ
ü		 
   reporting company)    
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  o Yesþü 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 January 12, 20152016
Common Stock $.001 par value 63,622,316

 
 
 
 
 
TABLE OF CONTENTS
Page
PART I – FINANCIAL INFORMATION
Item 1.         Financial Statements.31
Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.                                                                                                                                                                                74
Item 3.        Quantitative and Qualitative Disclosures About Market Risk. 86
Item 4.        Controls and Procedures.  86
PART II – OTHER INFORMATION
Item 1.         Legal Proceedings.  97
Item 1A.      Risk Factors.  97
Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds.97
Item 3.         Defaults Upon Senior Securities.  97
Item 4.        Submission of Matters to a Vote of Security Holders.  97
Item 5.         Other Information.  97
Item 6.         Exhibits.  9
SIGNATURES 7

 

 
2
 

PART I - FINANCIAL INFORMATION

Item 1.         Financial Statements.
 
LESCARDEN INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
 

 
November 30,
2014
  
May 31,
2014
  
November 30,
2015
  
May 31,
2015
 
 (UNAUDITED)  (AUDITED)       
ASSETS            
Current assets:            
Cash and cash equivalents $8,251  $10,432  $7,347  $37,207 
Accounts receivable  159,578   2,088   1,640   48,902 
Inventory  88,248   113,572   85,770   83,586 
Total current assets  256,077   126,092   94,757   169,695 
Deferred income tax asset, net of valuation allowance of $1,592,000 and $1,564,000 at November 30, 2014 and May 31, 2014 respectively  ––   –– 
Deferred income tax asset, net of valuation allowance of $1,659,000 and $1,630,000 at November 30, 2015 and May 31, 2015 respectively  ––   –– 
                
Total assets $256,077  $126,092  $94,757  $169,695 
                
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
Accounts payable and accrued expenses $306,078  $220,592 
Accounts payable $182,536  $172,846 
Shareholder loan  129,000   —   268,765   268,765 
Deferred license fees  1,500   4,500 
Total liabilities  436,578   225,092   451,301   441,611 
                
Stockholders' deficit                
Convertible preferred stock - $.02 par value, authorized 2,000,000 shares, issued and outstanding 92,000 shares  1,840   1,840   1,840   1,840 
Common stock - $.001 par value, authorized 200,000,000 shares, 63,622,316 issued and outstanding at November 30, 2014 and May 31, 2014  63,622   63,622 
Common stock - $.001 par value, authorized 200,000,000 shares, 63,622,316 issued and outstanding at November 30, 2015 and May 31, 2015  63,622   63,622 
Additional paid-in capital  17,505,936   17,505,936   17,505,936   17,505,936 
Accumulated deficit  (17,751,899)  (17,670,398)  (17,927,942)  (17,843,314)
Stockholders' deficit  (180,501)  (99,000)  (356,544)  (271,916)
Total liabilities and stockholders' deficit $256,077  $126,092  $94,757  $169,695 

See notes to financial statements
 
 
3
 

LESCARDEN INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
 

 
For the three months
Ended November 30,
  
For the six months
Ended November 30,
  
For the three months
Ended November 30,
  
For the six months
Ended November 30,
 
 2014  2013  2014  2013  2015  2014  2015  2014 
Revenues:                        
Product sales $165,023  $9,836  $171,270  $317,927  $10,422  $165,023  $42,519  $171,270 
License fees  1,500   1,500   3,000   3,000   ––   1,500   ––   3,000 
Total revenues  166,523   11,336   174,270   320,927   10,422   166,523   42,519   174,270 
                                
Costs and expenses:                                
Cost of sales  42,078   2,296   43,309   136,597   1,411   42,078   2,815   43,309 
Salaries  13,838   27,916   41,099   57,086   20,527   13,838   41,259   41,099 
Professional fees and consulting  24,297   19,597   60,209   49,241   9,700   24,297   49,165   60,209 
Rent and office expense  31,187   28,502   62,400   58,650   5,555   31,187   8,947   62,400 
Insurance  12,933   17,767   24,801   30,626   7,178   12,933   20,125   24,801 
Commission  10,743   —   10,743   20,689   ––   10,743   ––   10,743 
Other administrative expenses  12,464   4,693   13,210   10,108   1,366   12,464   4,836   13,210 
Total costs and expenses  147,540   100,771   255,771   362,997   45,737   147,540   127,147   255,771 
                                
Net income (loss) $18,983  $(89,435) $(81,501) $(42,070)
Net (loss) income $(35,315) $18,983  $(84,628) $(81,501)
                                
Net income (loss) per share – basic and diluted $0.00  $(0.00) $(0.00) $(0.00)
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
  63,622,316   48,722,316   63,622,316   48,722,316   63,622,316   63,622,316   63,622,316   63,622,316 

See notes to financial statements
 
 
4
 
 
LESCARDEN INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
For the six months
Ended November 30,
  
For the six months
Ended November 30,
 
 2014  2013  2015  2014 
            
Cash flows from operating activities:            
Net loss $(81,501) $(42,070) $(84,628) $(81,501)
Adjustments to reconcile net loss to net cash
used in operating activities:
                
Changes in operating assets and liabilities                
(Increase) decrease in accounts receivable  (157,490)  25,266 
Decrease in inventory  25,324   12,272 
Increase (decrease) in accounts payable and accrued expenses  85,486   (53,297)
Decrease in deferred revenue  —   (4,782)
Decrease (increase) in accounts receivable  47,262   (157,490)
(Increase) decrease in inventory  (2,184)   25,324 
Increase in accounts payable and accrued expenses  9,690   85,486 
Decrease in deferred license fees  (3,000)  (3,000)  —   (3,000)
Net cash used in operating activities  (131,181)  (65,611)  (29,860)  (131,181)
        
Cash flows from investing activities:  -   - 
                
Cash flows from financing activities:                
Proceeds from shareholder loan  129,000   100,000   —   129,000 
Cash provided by financing activities  129,000   100,000   —   129,000 
                
                
(Decrease) increase in cash  (2,181)  34,389 
Decrease in cash  (29,860)  (2,181)
                
Cash - beginning of period  10,432   84,562   37,207   10,432 
                
Cash – end of period $8,251  $118,951  $7,347  $8,251 
        
Supplemental Disclosures of Cash Flow Information        
Cash paid for interest $-   $-  
Cash paid for taxes $380  $380  

See notes to financial statements
 

 
5
 

LESCARDEN INC .
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 
November 30, 20142015
 
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, 2014.2015. 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 six months ended November 30, 2014 of $81,501,2015, has a stockholders’ deficiency of  $180,501 and a working capital deficiency of  $180,501.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.  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 establishment of an alternative source of supply may require additional future expenditures given the uncertainties associated with the regulatory, logistic and financial issues involved but it is likely that testing and regulatory certification will necessitate at least three months before production commences.
 
Note 3 – Inventory:
 
At November 30, 2014,2015, inventory of $88,248$85,770 consisted of $36,362$34,059 of finished goods and $51,886$51,711 of raw materials.
Note 4 – Related Party Transactions:
In August 2014, the Company received additional unsecured loans aggregating $129,000 from its Chairman. The loans are interest bearing 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 accrued during the three months ended November 30, 2014.
Note 5- Commitments and Contingencies:

At November 30, 2014, 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 November 30, 2014, the Company has minimum future rental payments due on this lease of $105,161.

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.
 
 
6
 


Item 2.         Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 six monthsmonth periods ended November 30, 2014 reflect decreased sales and operating losses due to an ongoing production disruptions,outage. Preliminary testing of product samples from an alternative supplier suggests that the Company will be able to resume production operations within the next six months.   Regulatory certification of the new suppler is required prior to product shipment which has delayedcould further delay the fulfillment of existing purchase orders to European markets.  Preliminary estimates from alternative suppliers of raw material supply indicate significant increases inafter the unit cost of raw material and there is ongoing uncertainty as to the timingresumption of production capabilityoperations.  Revenues for the six-months ended November 30, 2015 consisted solely of sales of skin-care and fulfillment of outstanding purchase orders.nutritional supplements
 
Three months ended November 30, 20142015 compared to November 30, 20132014
 
The Company’s revenues increased in the fiscal quarter ended November 30, 2014Skin care and nutritional supplement product sales decreased by $155,187 due to the production shipment of Catrix in November 2014.  Cost of sales as a percent of sales was 25%$1,130 or 9.78% for the three months ended November 30, 2014 reflecting lower raw material costs of discounted raw material purchases.2015 compared to November 30, 2014.
 
Non-direct costs and expenses during the three months ended November 30, 2014 were 7% higher$61,136 or 58% lower than those of the comparative prior-year period due to increasesdecreases in rent expense, professional fees, and commissions of $4,700 and $10,743 offset by decreased salariesother administrative expenses and insurance of $14,078$25,632, $14,597, $11,098 and $4,834 respectively.$5,755 respectively offset by increased payroll expenses of 48% or $6,689.
 
Six months ended November 30, 20142015 compared to November 30, 20132014
 
The Company’s revenues decreased in the six months ended November 30, 2014 compared to November 30, 2013 by 46% or $146,657 due to the Company’s inability to reestablish production operations. CostDecreased Catrix sales of sales as a percent of sales decreased from 43%$153,472 for the six months ended November 30, 2013 to 25% reflecting2015 resulted in an increase in the one-time acquisition of discounted raw material that decreased raw material cost.
Non-direct costs and expenses duringnet loss for the six months ended August 31, 2014 were 6% lower than thoseNovember 30, 2015 of the comparative prior-year period.$3,127 compared to November 30, 2014.
 
Liquidity and Capital Resources
 
As of November 30, 2014,2015, the Company’s liabilities exceeded its assets by $180,501.$356,544. The Company’s cash and cash equivalents balance decreased by $2,181$29,860 in the six months ended November 30, 20142015 to $8,251.$7,347.
 
The Company has no material commitments for capital expenditures at November 30, 2014.
2015.
 
 
7
 
 
Item 3.         Quantitative and Qualitative Disclosures About Market Risk.
Item 3.         Quantitative and Qualitative Disclosures About Market Risk.
 
Not required for smaller reporting company.
 
Item 4.         Controls and Procedures.
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.
 
 
8
 

PART II - OTHER INFORMATION
 

Item 1.         Legal Proceedings.
Item 1.         Legal Proceedings.
 
None.
 
Item 1A.      Risk Factors.
Item 1A.      Risk Factors.
 
None.
 
Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds.
Item 2.         Unregistered Sales of Equity Securities and Use of Proceeds.
 
None
 
Item 3.         Defaults Upon Senior Securities.
Item 3.         Defaults Upon Senior Securities.
 
None.
 
Item 4.         Submission of Matters to a Vote of Security Holders.
Item 4.         Submission of Matters to a Vote of Security Holders.
 
None.
 
Item 5.         Other Information.
Item 5.         Other Information.
 
None.
 
Item 6.         Exhibits.
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

 
 
9
 

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)
 (Registrant)
Date: January 12, 2016
 
  
 
Date: January 12, 2015By:/s/ William E. Luther
 William E. Luther
 
Chief Executive and Chief Financial Officer