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.
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Accelerated filer
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| Non-accelerated filer |
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Smaller reporting company
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| (Do not check if a smaller 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). o Yes þ No
LESCARDEN INC .
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
November 30, 2013
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, 2013. 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, 2013, 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.
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 financial statements do not include any potential contingent liabilities associated with the establishment of an alternative source of supply given the uncertainties associated with the regulatory, logistic and financial issues involved but it is likely that mill construction, testing and regulatory certification will necessitate at least six months before production commences.
At November 30, 2013, inventory of $136,160 consisted of $37,937 of finished goods and $98,223 of raw materials.
Note 4 – Related Party Transactions:
In August 2013, the Company received an additional loan of $100,000 from its’ Chairman. Pursuant to an agreement with a director of the Company, sales commission expense of $20,689 for services rendered in connection with the sale of Citrix in Europe was paid during the six months ended November 30, 2013.
Results of Operations:
The results of operations for the six months ended November 30, 2012 reflect ongoing production disruptions which has delayed fulfillment of purchase orders to European markets. Preliminary estimates from potential alternative suppliers of raw material supply indicate significant increases in the unit cost of raw material and there is ongoing uncertainty as to the fulfillment of outstanding purchase orders for raw materials.
Three months ended November 30, 2013 compared to November 30, 2012
The Company’s revenues decreased in the fiscal quarter ended November 30, 2013 compared to November 30, 2012 by 96% or $259,805 due to production delays at the Company’s sole raw material supplier. Revenues during the quarter ended November 30, 2013 were limited to sales of skin care products. Cost of sales as a percent of sales was 23% for the three months ended November 30, 2013 reflecting lower raw material costs of skin care inventory. Cost of sales for the three months ended November 30, 2012 included non-recurring setup and testing costs associated with the transfer of the Company’s packaging operations which departed from historical averages during the transition to the new facility.
Non-direct costs and expenses during the three months ended November 30, 2013 were 14% or $15,734 lower than those of the comparative prior-year period due to decreases professional fees and other administrative expenses of $11,646 and $6,205 offset by increased salaries and insurance of $7,397 and 4,124 respectively.
Six months ended November 30, 2013 compared to November 30, 2012
The Company’s revenues increased in the six months ended November 30, 2013 compared to November 30, 2012 by 12% or $33,786 due to fulfillment of backorders. Cost of sales as a percent of sales increased from 34.76% for the six months ended November 30, 2012 to 43% reflecting increased raw material cost.
Non-direct costs and expenses during the six months ended August 31, 2013 were 1% or $2,612 lower than those of the comparative prior-year period.
Liquidity and Capital Resources
As of November 30, 2013, the Company’s liabilities exceeded its assets by $411,860. The Company’s cash and cash equivalents balance increased by $34,389 in the six months ended November 30, 2013 to $118,951. On September 24, 2012 the Company sold 8,645,533 shares common stock to its Chairman of the Board for $200,000 pursuant to the Stock Purchase agreement for the unregistered issuance of securities dated August 10, 2012.
The Company has no material commitments for capital expenditures at November 30, 2013.
Not required for smaller reporting company.
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.