U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB - Quarterly or Transitional Report
(Added by 34-30968, eff. 8/13/93, as amended)
(Mark One)
[X] Quarterly Report Under Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 31, 1996.
[ ] Transition Report Under 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 small business issuer as specified in its charter)
New York 13-2538207
- ------------------------------ -------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
420 Lexington Avenue, New York Suite 2025 10170
- ----------------------------------------- -------------------
(Address of principle executive offices) (Zip Code)
Issuer's telephone number (212) 687-1050
______________________________________________________________________.
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X] No [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at August 31, 1996
- --------------------------- ------------------------------
Common Stock $.001 par value 11,872,010
<PAGE>
<TABLE>
LESCARDEN INC.
(Debtor-In-Possession)
(Unaudited)
CONDENSED BALANCE SHEET
-----------------------
AUGUST 31, 1996
---------------
<CAPTION>
ASSETS
------
<S> <C>
Current Assets:
Cash $ 1,274
Accounts receivable 25,000
Inventory 11,616
Prepaid expenses 767
------
Total currents assets 38,657
------
Security Deposit 3,080
------
Total Assets 41,737
------
------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Currents Liabilities:
Accounts Payable and Accrued Expenses $ 12,000
Liabilities subject to compromise:
Trade and other miscellaneous claims 862,092
Trade and other miscellaneous claims - related parties 315,509
Notes payable 517,000
Notes payable - related parties 496,000
---------
Total liabilities 2,206,601
---------
---------
Stockholders' Deficiency:
Convertible Preferred Stock 1,840
Common Stock 11,872
Additional Paid-In Capital 10,787,627
Accumulated Deficit (12,966,203)
------------
Stockholder's Deficiency (2,164,864)
------------
Total Liabilities and Stockholders' Deficiency $ 41,737
------------
------------
</TABLE>
<PAGE>
<TABLE>
LESCARDEN INC.
(Debtor-in-Possession)
(Unaudited)
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
<CAPTION>
For the Three Months Ended
August 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Total Revenues $ 25,121 $ 237,399
---------- ---------
Costs and Expenses:
Cost of Product Sales - 74,387
Salaries - Officer 25,222 24,000
Salaries - Office 3,440 4,509
Professional Fees and Consulting 32,936 20,942
Research and Development 2,524 1,822
Rent and Office Expenses 14,760 15,043
Travel and Meetings - 4,194
Taxes - Other 1,316 1,441
Insurance 103 5
Interest - 15,787
Interest to Related Parties - 14,944
Other Administrative Expenses 3,627 3,280
---------- ---------
Total Costs and Expenses 83,928 180,354
---------- ----------
Net Income (Loss) $(58,807) $ 57,045
---------- ----------
---------- ----------
Net Income (Loss) Per Share $.00 $(.00)
---- ------
---- ------
Weighted Average Number of
Common Shares Outstanding 11,872,010 11,822,010
---------- ----------
---------- ----------
</TABLE>
<PAGE>
<TABLE>
LESCARDEN INC.
(Debtor-in-Possession) (Unaudited)
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months Ended
August 31,
--------------------------
1996 1995
<S> <C> <C>
Cash Flows Provide By (Used In) Operations:
Net Income (Loss) $ (58,807) $ 57,045
Adjustments to reconcile net income (loss)
to net cash used by operations:
Changes in operating assets and liabilities:
Decrease in inventory 2,240 2,100
(Increase) decrease in accounts receivable (25,000) 4,139
Decrease in prepaid expenses 16,906 -
Increase in accounts payable and
accrued expenses 12,000 22,822
(Decrease) increase in accounts payable and
accrued expenses-related parties - (56)
--------- ----------
Net Cash Provided By (Used In) Operations (52,661) 86,050
--------- -----------
Increase (Decrease) in Cash (52,661) 86,050
Cash- Beginning of Period 53,935 40,246
--------- -----------
Cash - End of Period $ 1,274 $ 126,296
--------- -----------
</TABLE>
<PAGE>
LESCARDEN INC. (Unaudited)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 1996
--------------
Note 1 - General:
The accompanying unaudited financial statements include all
adjustments which are, in the opinion of management, necessary for
a fair statement of the results for the interim periods. The
statements have been prepared in accordance with the requirements
for Form 10-QSB 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-KSB for the year
ended May 31, 1996.
During the interim period the Company has continued as
Debtor-in-Possession under Chapter 11 of the U.S. Bankruptcy code.
The results of operations for the interim periods are not
necessarily indicative of results to be expected for a full year's
operations.
<PAGE>
LESCARDEN INC.
(Debtor-in-Possession)
Management's Discussion and Analysis of Financial Condition
and Results of Operations
-----------------------------------------------------------
Results of Operations
- ---------------------
Overview
- --------
Since its inception the Company has primarily devoted its
resources to fund research, drug discovery and development. In
addition, the Company licenses its technology for commercialization
by other companies and in the fiscal year ended May 31, 1995, the
Company began sales of its proprietary bovine cartilage material,
BIO-CARTILAGE<F2>, to a food supplement distributor for sale through
nutritional food supplement stores in the U.S. The Company has
sustained net losses of approximately $13 million from inception to
August 31, 1996. The Company has primarily financed its research
and development activities through a public offering of Common
Stock, private placements of debt and equity securities and in
recent years, revenues from license fees and product sales. On May
7, 1996, the Company filed a petition for reorganization under
Chapter 11 of the U.S. bankruptcy code and continues as Debtor-in-Possession.
Three Months ended August 31, 1996 compared to August 31, 1995.
The Company generates revenues primarily by selling
BIO-CARTILAGE<F2> and Catrix<F1> and from royalties and license fees.
The Company's revenues decreased in the quarter ended August
31, 1996 from the comparative period of 1995 primarily due to sales
of BIO-CARTILAGE<F2> to food supplement distributors, for sale through
nutritional food supplement stores in the U.S., in the quarter
ended August 31, 1995 as compared to no such sales in the quarter
ended August 31, 1996. The Company's revenues in the quarter ended
August 31, 1996 include $25,000 of license fees from Orphan Medical
Inc. ("Orphan") Orphan is developing the Company's proprietary
bovine cartilage material, CATRIX<F1> , in powder form only, for
topical wound healing purposes. Total costs and expenses during the
three months ended August 31, 1996 were 53% lower than those of the
comparative period of the prior year principally due to the cost
of product sales related to sales of BIO-CARTILAGE<F2> in the quarter
ended August 31, 1995 and the absence of interest expense on the
Company's Notes payable in the quarter ended August 31, 1996 in
accordance with accounting rules for Company's operating under
Debtor-In-Possession.
Liquidity and Capital Resources
- -------------------------------
Overview
- --------
The Company has had losses from operations in each of the five
years ended May 31, 1996. This trend may continue in the
foreseeable future. Working capital has been provided since the
Company's inception primarily from the sale of equity securities or
from borrowings from its officers, directors and shareholders and
from outside investors, and in recent quarters, from revenues from
licensing fees and product sales.
Present Liquidity
- -----------------
The Company's present liquidity position is critical. As of
August 31, 1996 the Company's total liabilities exceeded its total
assets by, $2,164,864. The Company will require additional product
sales or funding during, or shortly after, the fiscal quarter,
ending November 30, 1996, to sustain its operations.
As a result of the history of losses incurred by the Company,
the net loss during the year ended May 31, 1996 of ($419,394), and
the limited amount of funds currently available to finance the
Company's operations, the report of the Company's independent
Certified Public Accountants on the Company's Financial Statements
as of May 31, 1995 and 1996 contain an explanatory paragraph
indicating that the Company may be unable to continue in existence.
The Company's Chapter XI proceeding is in progress and a
Creditor's Committee of seven is in place. The Company intends to
propose a fair reorganization plan during the quarter ending
November 30, 1996 and to submit the plan to all creditors and
shareholders for approval. It is reasonable to anticipate that the
Company may be discharged from bankruptcy around the end of this
calendar year 1996. Assuming acceptance of the reorganization
plan, upon discharge, the Company's balance sheet would reflect no
significant debt.
The Company plans to continue to implement plans to sell BIO-CARTILAGE<F2>
to the over-the- counter food supplement market and may
also introduce a second product in the same marketplace in the near
future. If successful, the Company may increase cash flow in order
to allow the Company to continue to meet its obligations and
sustain its operations.
The Company has no material commitments for capital
expenditures at August 31, 1996.
<F1>
A registered trademark of Lescarden Inc.
</F1>
<F2>
A trademark of Lescarden Inc.
</F2>
<PAGE>
LESCARDEN INC.
(Debtor-in-Possession)
Part II - Other Information
---------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits: EX-27.
(b) Reports on Form 8-K: There were no reports on Form 8-K
filed for the three months ended August 31, 1996.
INDEX TO EXHIBITS
27- Financial Data Schedule
<PAGE>
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)
Date: October 11, 1996 s/Gerard A. Dupuis
Gerard A. Dupuis
Chairman of the Board
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LESCARDEN
INC'S AUGUST 31, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 1,274
<SECURITIES> 0
<RECEIVABLES> 25,000
<ALLOWANCES> 0
<INVENTORY> 11,616
<CURRENT-ASSETS> 38,657
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 41,737
<CURRENT-LIABILITIES> 2,206,601
<BONDS> 0
0
0
<COMMON> 11,872
<OTHER-SE> (2,176,736)
<TOTAL-LIABILITY-AND-EQUITY> (2,164,864)
<SALES> 25,121
<TOTAL-REVENUES> 25,121
<CGS> 0
<TOTAL-COSTS> 83,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (58,807)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58,807)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,807)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
<FN>
<F1>
</FN>
</TABLE>
