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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
———————
FORM 10-Q10–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,August 31, 2016
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,Suite 300, 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 SecuritiestheSecurities 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✓ 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).
 þ 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 filero 
Non-accelerated filero (Do not check if a smaller Smaller reporting companyþ✓ 
   reporting company)    
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 o Yesþ✓ 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 AprilOctober 14, 2016
Common Stock $.001 par value 63,622,316
 

 
 
TABLE OF CONTENTS

 
Page
PART I – FINANCIAL INFORMATION

Item 1.      Financial Statements.1
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations.5
4
Item 3.      Quantitative and Qualitative Disclosures About Market Risk.6
5
Item 4.      Controls and Procedures.65
PART II – OTHER INFORMATION
Item 1.      Legal Proceedings.7
6
Item 1A.   Risk Factors.7
6
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds.7
6
Item 3.      Defaults Upon Senior Securities.7
6
Item 4.      Submission of Matters to a Vote of Security Holders.7
(Removed and Reserved).6
Item 5.      Other Information.7
6
Item 6.      Exhibits.6
SIGNATURES  
7
SIGNATURES8


 
 
PART I -– FINANCIAL INFORMATION
Item 1. Financial Statements.
LESCARDEN INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
 
 
February 29,
2016
  
May 31,
2015
 
      
 
August 31,
2016
 
 
May 31,
2016
 
ASSETS      
 
 
 
 
 
 
Current assets:      
 
 
 
Cash and cash equivalents $36,039  $37,207 
 $27,299 
 $4,252 
Accounts receivable  1,513   48,902 
  294,647 
  1,279 
Inventory  157,944   83,586 
  47,526 
  197,978 
Total current assets  195,496   169,695 
  369,472 
  203,509 
Deferred income tax asset, net of valuation allowance of $1,657,000 and $1,630,000 at February 29, 2016 and May 31, 2015 respectively  ––   –– 
        
    
    
Total assets $195,496  $169,695 
 $369,472 
 $203,509 
        
    
LIABILITIES AND STOCKHOLDERS' DEFICIT        
    
    
Current liabilities:        
    
Accounts payable and accrued expenses $276,925  $172,846 
Accounts payable
 $304,973 
 $309,403 
Shareholder loan  268,765   268,765 
  328,765 
  278,765 
Total liabilities  545,690   441,611 
  633,738 
  588,168 
        
    
Stockholders' deficit        
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 February 29, 2016 and May 31, 2015  63,622   63,622 
Additional paid-in capital  17,505,936   17,505,936 
Common stock - $.001 par value, authorized 200,000,000 shares, issued and outstanding 63,622,316 shares
  63,622 
  63,622 
Additional paid–in capital
  17,505,936 
  17,505,936 
Accumulated deficit  (17,921,592)  (17,843,314)
  (17,835,664)
  (17,956,057)
Stockholders' deficit  (350,194)  (271,916)
  (264,266)
  (384,659)
Total liabilities and stockholders' deficit $195,496  $169,695 
 $369,472 
 $203,509 
    

See notes to unaudited financial statements
 
1
1
 

LESCARDEN INC.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
 

 
 
For the three months ended
August 31,
 
 
 
2016
 
 
2015
 
Revenues:
 
 
 
 
 
 
Product sales
 $349,835 
 $32,097 
Total revenues
  349,835 
  32,097 
 
    
    
Costs and expenses:
    
    
Cost of sales
  159,247 
  1,405 
Salaries
  64 
  20,733 
Professional fees and consulting
  28,571 
  39,465 
Insurance
  14,148 
  12,947 
Commission
  19,434 
  –– 
Rent and office expenses
  2,894 
  3,391 
Other administrative expenses
  5,084 
  3,469 
Total costs and expenses
  229,442 
  81,410 
Net income (loss)
 $120,393 
 $(49,313)
 
    
    
Net income (loss) per share – basic and diluted
 $0.00 
 $(0.00)
 
    
    
Weighted average number of common shares outstanding
    
    
Basic
 63,622,316  
 63,622,316  
Diluted
 63,714,316  
 63,622,316  
  
For the three months
Ended February 29,
  
For the three months
Ended February 28,
  For the nine months
Ended February 29,
  
For the nine months
Ended February 28,
 
  2016  2015  2016  2015 
Revenues:            
Product sales $69,902  $23,396  $112,421  $194,667 
License fees  ––   1,500   ––   4,500 
Total revenues  69,902   24,896   112,421   199,167 
                 
Costs and expenses:                
Cost of sales  4,655   5,816   7,471   49,124 
Salaries  7,088   30,329   48,347   71,428 
Professional fees and consulting  26,970   15,501   76,135   75,711 
Rent and office expense  3,721   27,445   12,667   89,845 
Insurance  5,780   6,131   25,905   30,933 
Commission  2,675   —   2,675   10,743 
Other administrative expenses  12,663   1,413   17,499   14,623 
Total costs and expenses  63,552   86,635   190,699   342,407 
                 
Net income (loss) $6,350  $(61,739) $(78,278) $(143,240)
                 
Net income (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   63,622,316   63,622,316   63,622,316 

See notes to unaudited financial statements
 
2
2
 
 
LESCARDEN INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

  
For the nine months
Ended February 29,
  
For the nine months
Ended February 28,
 
  2016  2015 
       
Cash flows from operating activities:      
Net loss $(78,278) $(143,240)
Adjustments to reconcile net loss to net cash used in operating activities:        
Changes in operating assets and liabilities        
Decrease (increase) in accounts receivable  47,389   (1,250)
(Increase) decrease in inventory  (74,358)  23,557 
Increase in accounts payable and accrued expenses  104,079   80,820 
Decrease in deferred license fees  —   (4,500)
Net cash used in operating activities  (1,168)  (44,613)
         
Cash flows from financing activities:        
Proceeds from shareholder loan  —   154,000 
Cash provided by financing activities  —   154,000 
         
         
(Decrease) increase in cash  (1,168)  109,387 
         
Cash - beginning of period  37,207   10,432 
         
Cash – end of period $36,039  $119,819 
 
 
For the three months ended
August 31,
 
 
 
2016
 
 
2015
 
Cash flows from operating activities:
 
 
 
 
 
 
Net income (loss)
 $120,393 
 $(49,313)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
    
    
Changes in operating assets and liabilities:
    
    
(Increase) decrease in accounts receivable
  (293,368)
  2,326 
Decrease in inventory
  150,452 
  1,405 
(Decrease) increase in accounts payable and accrued expenses
  (4,430)
  13,952 
Net cash used in operating activities
  (26,953)
  (31,630)
 
    
    
Cash flows from financing activities:
    
    
Proceeds from shareholder loan
  50,000 
  –– 
Cash provided by financing activities
 50,000
  –– 
 
    
    
Increase (decrease) in cash
  23,047 
  (31,630)
 
    
    
Cash – Beginning of Period
  4,252
  37,207
 
    
    
Cash – End of Period
 $27,299 
 $5,577 
Tax and Interest paid for the period
    
    
 
See notes to unaudited financial statements
 
3
3
 

LESCARDEN INC .INC.
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
February 29,August 31, 2016
Note 1 - General:
The accompanying condensedunaudited 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-Q10–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-K10–K for the year ended May 31, 2015. The results of operations for the interim periods are not necessarily indicative of results to be expected for a full year's operations.
2016.
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 29, 2016 of $78,278 and has a stockholders’ deficiency of $350,194.and a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
concern as there can be no assurance that the Company will be able to restore production operations, grow revenues or secure sufficient additional financing to meet future obligations. The Company’s plan and ability to continue as a going concern is primarily dependent upon itsthe majority shareholder’s ability to establish and maintain consistentfund operating losses until production volumes to fulfill existing sales orders.  Alternative sourcesoperations are restored. The results of supply continueoperations for the interim periods are not necessarily indicative of results 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.expected for a full year's operations.
Note 3 –- Inventory:
At February 29,August 31, 2016, inventory of $157,944$47,526 consisted of $31,497$31,105 of finished goods and $126,447$16,421 of raw materials.
Note 4 –- Related Party Transactions:
 
PursuantDuring the three months ended August 31, 2016, an officer/director of the Company provided a loan to an agreement withthe Company of $50,000. The loan is non-interest bearing and is due upon demand. During the three months ended August 31, 2016, a sales commission of $19,434 was paid to a director of the Company sales commission expense of $2,675 for services rendered in connection with the sale of CitrixCatrix in Europe was paid during the nine months ended February 29, 2016.Europe.
 
4

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 nineOperations--Three months ended February 29, 2016 reflect an ongoing production outage, which has delayed fulfillment of customer purchase orders.
Three months ended February 29,August 31, 2016 compared to February 28,August 31, 2015
The Company’s revenuesCatrix sales increased in the fiscal quarter ended February 29, 2016 by $45,006 or 181%$277,632 due to the shipmentsuccessful recovery, repackaging and sale of repurposedrecycled product with an inventory cost value of zero, which reduced cost of sales as a percent of sales to 7% for the three months ended February 29, 2016 compared with 23% during the three months ended February 28, 2015.
Non-direct costs and expenses during the three months ended February 29, 2016 were 27% lower than those of the comparative prior-year periodEuropean licensee. Skin care revenues increased $17,652 or 60% due to decreasesincreased sales in salaries and rent expenses offset by increases in other administrative expenses associated with shipping and professional fees associated with accounting expenses which returned to historical monthly averages after a 45% decrease during the quarter ended February 28, 2015.
Nine months ended February 29, 2016 compared to February 28, 2015
The Company’s revenues decreased in the nine months ended February 29, 2016 compared to February 28, 2015 by 43% or $86,746 due to the Company’s inability to reestablish production operations.Asia. Cost of sales as a percent of sales decreased to 7% for the ninethree months ended February 29,August 31, 2016 increased to 45.5% from 25% for4.4% in the nine months ended February 28, 2015comparative prior period due to the bulk sale in 2015 of inventory quantities on hand that had been written off for accounting purposes and the use of repurposedspecial order raw materials that were more than double the historical per unit costs.
Professional fees decreased by almost 28% or $10,894 due to decreases in quality assurance and accounting costs of $5,529 and $4,700 respectively. The decrease in payroll expenses of $20,668 was offset by an increase in commission expense of $19,434 associated with the fulfillment of $277,632 of back-ordered Catrix wound dressing to European licensees.
The Company began testing and evaluations of samples produced at a third-party facility in connection with the ongoing effort to reestablish ongoing production operations for order fulfillment during the nine months ended February 29, 2016.wound dressing.
 
Liquidity and Capital Resources
The use of cash in operating activities of $26,953 offset by an increase in shareholder loan, resulted in an increase in cash of $23, 047 for the period ended August 31, 2016. As of February 29,August 31, 2016, the Company’s liabilities exceeded its current assets by $350,194. The Company’s cash and cash equivalents balance decreased by $1,168 in the nine months ended February 29, 2016 to $36,039.$264,266.
 
The Company has no material commitments for capital expenditures at February 29,August 31, 2016.
 
5

 
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required for a 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 not effective as of the end of the period covered by this quarterly report on Form 10-Q.
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.10–Q.
 
6

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.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.(Removed and Reserved)
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
 


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.
 
Date: October 14, 2016
         
LESCARDEN INC.
  
   
 
By:  
Date: April 14, 2016
By:/s/ William WilliamE. LutherLuther
  William E. Luther
  Chief Executive and Chief Financial Officer

 
 
 7
8