UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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ü | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
| ACT OF 1934 |
For the quarterly period ended: August 31, 2009 | |
or | |
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| 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
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LESCARDEN, INC.
(Exact name of registrant as specified in its charter)
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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)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the | ||||||||||
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. | ü | Yes |
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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, | ||||||||||
and post such files). |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. | ||||||||||
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Large accelerated filer |
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| Accelerated filer |
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Non-accelerated filer |
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| Smaller reporting company | ü |
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| reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | ||||||||||
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| Yes | ü | No | ||||||
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. | ||||||||||
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Class |
| Outstanding October 13, 2009 | ||||||||
Common Stock $.001 par value |
| 30,943,450 | ||||||||
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements.
LESCARDEN INC.
CONDENSED BALANCE SHEETS
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| August 31, 2009 (UNAUDITED) |
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| May 31, 2009 (AUDITED) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 70,873 |
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| $ | 40,265 |
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Accounts receivable |
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| 20,617 |
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| 23,151 |
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Inventory |
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| 158,261 |
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| 163,278 |
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Total current assets |
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| 249,751 |
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| 226,693 |
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Deferred income tax asset, net of valuation allowance of $1,504,000 and $1,485,000 at August 31, 2009 and May 31, 2009, respectively |
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| — |
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| — |
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Total assets |
| $ | 249,751 |
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| $ | 226,693 |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: |
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Accounts payable and accrued expenses |
| $ | 231,437 |
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| $ | 219,963 |
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Shareholder loan |
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| 209,000 |
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| 189,000 |
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Deferred revenue |
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| 80,563 |
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| 7,640 |
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Deferred license fees |
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| 83,103 |
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| 110,804 |
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Total liabilities |
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| 604,103 |
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| 527,407 |
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Stockholders' deficit: |
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Convertible preferred stock - Authorized 2,000,000 shares, issued and outstanding 92,000 shares |
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| 1,840 |
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| 1,840 |
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Common stock - Authorized 200,000,000 issued and outstanding 30,943,450 shares |
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| 30,943 |
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| 30,943 |
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Additional paid-in capital |
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| 16,617,615 |
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| 16,617,615 |
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Accumulated deficit |
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| (17,004,750 | ) |
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| (16,951,112 | ) |
Stockholders' deficit |
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| (354,352 | ) |
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| (300,714 | ) |
Total liabilities and stockholders' deficit |
| $ | 249,751 |
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| $ | 226,693 |
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See notes to financial statements
1
LESCARDEN INC.
CONDENSED STATEMENTS OF OPERATIONS
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| (UNAUDITED) For the Three Months Ended August 31, |
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| 2009 |
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| 2008 |
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Revenues: |
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Product sales |
| $ | 52,632 |
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| $ | 81,301 |
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License fees |
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| 27,701 |
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| 39,086 |
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Total revenues |
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| 80,333 |
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| 120,387 |
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Costs and expenses: |
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Cost of sales |
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| 31,981 |
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| 17,999 |
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Salaries |
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| 20,368 |
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| 67,878 |
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Professional fees and consulting |
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| 39,146 |
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| 44,307 |
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Rent and office expenses |
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| 34,439 |
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| 31,743 |
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Travel and meetings |
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| — |
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| 4,728 |
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Insurance |
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| 5,341 |
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| 7,278 |
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Other administrative expenses |
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| 2,696 |
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| 7,102 |
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Total costs and expense |
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| 133,971 |
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| 181,035 |
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Net loss |
| $ | (53,638 | ) |
| $ | (60,648 | ) |
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Net loss per share – basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
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Weighted average number of common shares outstanding – basic and diluted |
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| 30,943,450 |
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| 30,943,450 |
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See notes to financial statements
2
LESCARDEN INC.
CONDENSED STATEMENTS OF CASH FLOWS
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| (UNAUDITED) For the Three Months Ended August 31, |
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| 2009 |
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| 2008 |
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Cash flows from operating activities: |
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Net loss |
| $ | (53,638 | ) |
| $ | (60,648 | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Changes in operating assets and liabilities |
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Decrease in accounts receivable |
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| 2,534 |
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| 63,456 |
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Decrease in inventory |
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| 5,016 |
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| 2,036 |
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Increase (decrease) in accounts payable and accrued expenses |
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| 11,474 |
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| (13,360 | ) |
Increase (decrease) in deferred revenue |
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| 72,923 |
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| (34,030 | ) |
Decrease in deferred license fees |
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| (27,701 | ) |
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| (39,085 | ) |
Net cash provided by (used in) operating activities |
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| 10,608 |
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| (81,631 | ) |
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Cash flows from financing activities: |
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Increase in shareholder loan |
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| 20,000 |
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| 92,000 |
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Cash provided by financing activities |
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| 20,000 |
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| 92,000 |
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Increase in cash |
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| 30,608 |
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| 10,369 |
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Cash - Beginning of Period |
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| 40,265 |
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| 38,867 |
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Cash – End of Period |
| $ | 70,873 |
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| $ | 49,236 |
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See notes to financial statements
3
LESCARDEN INC .
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
August 31, 2009
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, 2009.
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 quarter ended August 31, 2009, has a stockholders’ deficiency and a working capital deficiency. The Company’s major stockholder has committed to provide loan to the Company as needed to fund operating expenses until the Company can return to profitability. 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 successful regulatory certification of its new packager which will enable the Company to grow revenue through existing and new lines of business. There can be no assurance that the Company will be able to grow revenues or secure sufficient additional financing to meet future obligations.
The results of operations for the interim periods are not necessarily indicative of results to be expected for a full year's operations.
Effective June 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109." FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits.
Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence; it is more likely than not such benefits will be realized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in selling, general and administrative expenses. No interest and penalties related to uncertain tax positions were accrued at May 31, 2009.
The tax years 2005 through 2008 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax positions within the next twelve months.
The Company’s assets and liabilities that qualify as financial instruments under SFAS No. 107 ”Disclosures About Fair Value of Financial Instruments” approximate their carrying amounts presented in the balance sheet based upon the short term nature of the accounts at August 31, 2009.
At August 31, 2009, inventory was comprised primarily of raw materials.
The Company has evaluated the financial statements for subsequent events through the date of the filing of this quarterly report on Form 10-Q on October 15, 2009.
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations--Three months ended August 31, 2009 compared to August 31, 2008
The Company’s revenues decreased in the fiscal quarter ended August 31, 2009 compared to August 31, 2008 by 33% or $40,054 due to decreased sales of PolyNag to its licensees in Asia. The Company is in the final stages of regulatory certification of its new packaging facility and anticipates resuming the production and sale of Catrix wound dressing during the second fiscal quarter. Cost of sales increased by $13,982 or 78% due to the non-recurring costs associated with the transfer of its packaging process to a new facility and the associated regulatory recertification expenses.
Total costs and expenses during the three months ended August 31, 2009 were 26% or $47,064 lower than those of the comparative prior year period. The decrease was principally due to a decrease in payroll expenses of $47,510.
Liquidity and Capital Resources
The Company had a net loss of $53,638 for the three months ended August 31, 2009 principally as the result of decreased revenues.
As of August 31, 2009, the Company’s current assets exceeded its accounts payable and accrued expenses by $18,313. The Company’s cash and cash equivalents balance increased by $30,608 in the quarter ended August 31, 2009 to $70,873.
The Company has no material commitments for capital expenditures at August 31, 2009.
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 Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, including the Chief Executive Officer 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 Officer 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 Officer 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 10Q.
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.
Not required for smaller reporting company.
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 |
| 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, 2009
| LESCARDEN INC. | |
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| By: | /s/ WILLIAM E. LUTHER |
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| William E. Luther |
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| President and Chief Executive Officer |
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