10-Q 1 lcar_10q.htm QUARTERLY REPORT Blueprint
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
———————
FORM 10–Q
———————
 
✓
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 
 ACT OF 1934
For the quarterly period ended: August 31, 2016
or
 
 
 
 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. 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 theSecurities 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.
✓
 Yes
 
 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).
 
 Yes
 
 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
✓
 
 
 
 reporting company)
 
 
 
 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
 
 Yes
✓
 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 October 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.
4
Item 3.      
Quantitative and Qualitative Disclosures About Market Risk.
5
Item 4.      
Controls and Procedures.
5
PART II – OTHER INFORMATION  
Item 1.      
Legal Proceedings.
6
Item 1A.   
Risk Factors.
6
Item 2.      
Unregistered Sales of Equity Securities and Use of Proceeds.
6
Item 3.      
Defaults Upon Senior Securities.
6
Item 4.      
(Removed and Reserved).
6
Item 5.      
Other Information.
6
Item 6.      
Exhibits.
6
SIGNATURES  
7
 
 
 
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
LESCARDEN INC.
CONDENSED BALANCE SHEETS (UNAUDITED)
 
 
 
August 31,
2016
 
 
May 31,
2016
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 $27,299 
 $4,252 
Accounts receivable
  294,647 
  1,279 
Inventory
  47,526 
  197,978 
Total current assets
  369,472 
  203,509 
 
    
    
Total assets
 $369,472 
 $203,509 
 
    
    
LIABILITIES AND STOCKHOLDERS' DEFICIT
    
    
 
    
Current liabilities:
    
    
Accounts payable
 $304,973 
 $309,403 
Shareholder loan
  328,765 
  278,765 
Total liabilities
  633,738 
  588,168 
 
    
    
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 63,622,316 shares
  63,622 
  63,622 
Additional paid–in capital
  17,505,936 
  17,505,936 
Accumulated deficit
  (17,835,664)
  (17,956,057)
Stockholders' deficit
  (264,266)
  (384,659)
Total liabilities and stockholders' deficit
 $369,472 
 $203,509 
 
    
    
 
 
 
See notes to unaudited financial statements
 
 
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  
 
 
See notes to unaudited financial statements
 
 
2
 
 
LESCARDEN INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 
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
 
LESCARDEN INC.
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
August 31, 2016
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, 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 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 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 ability to continue as a going concern is primarily dependent upon the majority shareholder’s ability to fund operating losses until production operations are restored. The results of operations for the interim periods are not necessarily indicative of results to be expected for a full year's operations.
Note 3 - Inventory:
At August 31, 2016, inventory of $47,526 consisted of $31,105 of finished goods and $16,421 of raw materials.
Note 4 - Related Party Transactions:
 
During the three months ended August 31, 2016, an officer/director of the Company provided a loan to the 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 for services rendered in connection with the sale of Catrix in Europe.
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations--Three months ended August 31, 2016 compared to August 31, 2015
Catrix sales increased by $277,632 due to the successful recovery, repackaging and sale of recycled product to European licensee. Skin care revenues increased $17,652 or 60% due to increased sales in Asia. Cost of sales as a percent of sales for the three months ended August 31, 2016 increased to 45.5% from 4.4% in the comparative 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 special 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 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 August 31, 2016, the Company’s liabilities exceeded its current assets by $264,266.
 
The Company has no material commitments for capital expenditures at August 31, 2016.
 
 
4
 
 
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.
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.
 
 
5
 
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. (Removed and Reserved)
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
 
 
6
 

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:  
/s/ William E. Luther
 
 
William E. Luther
 
 
Chief Executive and Chief Financial Officer
 
 
 7