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 February 28, 1999.
[ ] 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.
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(Exact name of small business issuer as specified in its charter)
New York 13-2538207
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
420 Lexington Avenue, New York Suite 2025 10170
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(Address of principle executive offices) (Zip Code)
Issuer's telephone number (212) 687-1050
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_______________________________________________________________________.
(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 February 28, 1999
- ---------------------------- --------------------------------
Common Stock $.001 par value 19,509,238
<PAGE>
LESCARDEN INC.
<TABLE>
(UNAUDITED)
CONDENSED BALANCE SHEET
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February 28, 1999
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<CAPTION>
ASSETS
------
<S> <C>
Current Assets:
Cash $ 5,756
Inventory 140,847
Total currents assets 146,603
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Security Deposit 3,080
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Total Assets $ 149,683
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Currents Liabilities:
Accounts Payable and Accrued Expenses $ 141,668
Advances from Stockholders 150,000
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Total liabilities 291,668
Stockholders' Deficiency:
Convertible Preferred Stock 1,840
Common Stock 19,509
Additional Paid-In Capital 13,989,371
Accumulated Deficit (14,152,705)
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Stockholder's Deficiency (141,985)
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Total Liabilities and Stockholders' Deficiency $ 149,683
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</TABLE>
<PAGE>
LESCARDEN INC.
<TABLE>
(UNAUDITED)
CONDENSED STATEMENTS OF OPERATIONS
----------------------------------
<CAPTION>
For The Three Months For the Nine Months
Ended February 28, Ended February 28,
-------------------- -------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
Total Revenues $ 13,475 $ 203 $ 16,502 $ 359
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Costs and Expenses:
Cost of Sales 10,209 - 12,163 -
Salaries - Officer 39,332 37,749 117,997 116,552
Salaries - Office 3,369 1,566 11,723 6,835
Professional Fees and Consulting 51,461 21,091 152,051 98,390
Research and Development 41,507 - 48,915 10,252
Rent and Office Expenses 22,171 15,122 56,755 44,676
Travel and Meetings 12,016 2,080 19,750 16,809
Taxes - Other - 51 680 746
Insurance 252 518 818 1,487
Other Administrative Expenses 7,173 8,017 10,581 73,842
----------- ----------- ----------- -----------
Total Costs and Expenses 187,490 86,194 431,433 369,589
----------- ----------- ----------- -----------
Net (Loss) $ (174,015) $ (85,991) $ (414,931) $ (369,230)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net (Loss) Per Share $ ( .01) $ ( .01) $ (.02) $ (.02)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average Number of
Common Shares Outstanding 19,509,238 16,611,513 18,550,530 16,368,415
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
LESCARDEN INC.
<TABLE>
(UNAUDITED)
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
February 28,
-------------------------
1999 1998
---- ----
Cash Flows (Used in) Operations:
Net (Loss) $ (414,931) $ (369,230)
Adjustments to reconcile net (loss)
to net cash used in operations:
Changes in operating assets and liabilities:
(Increase) Decrease in inventory (105,781) 1,500
Increase in accounts payable
and accrued expenses 32,000 20,000
(Decrease) Increase in advances from
stockholders (115,225) 122,000
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Net Cash (Used In) Operations (603,937) (225,730)
----------- -----------
Cash Flows Provided By Financing Activities:
Proceeds from exercise of common stock
purchase warrants and financing costs 2,160 143,405
Proceeds from the conversion of Advances
from stockholders into common stock 575,225 -
Cash Flows Provided By Financing ----------- -----------
Activities 577,385 143,405
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(Decrease) in cash (26,552) (82,325)
Cash- Beginning of period 32,308 115,340
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Cash - End of period $ 5,756 $ 33,015
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<PAGE>
LESCARDEN INC.
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(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
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February 28, 1999
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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, 1998.
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.
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Management's Discussion and Analysis of Financial Condition
and Results of Operations
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February 28, 1999
-----------------
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 , to a food supplement distributor
for sale through nutritional food supplement stores in the U.S. In the
current fiscal year, the company began direct sales to consumers of a line of
cosmetic products, which include the company's proprietory bovine cartilage
material. The Company has sustained net losses of approximately $14 million
from inception to February 28, 1999. The Company has primarily financed its
research and development activities through a public offering of Common Stock,
and private placements of equity securities and in recent years, revenues from
license fees and product sales.
Three Months and Nine Months ended February 28, 1999 compared to the Three
Months and Nine Months ended February 28, 1998.
- --------------------------------------------------------------------------
Total costs and expenses during the three months ended and nine months
ended February 28, 1999 were 118% and 17% higher, respectively, than those
of the comparative periods of the prior year principally due to higher
Professional Fees and Consulting, and Research and Development expenses.
Other administrative expenses in fiscal 1998 includes $37,000 of fees which
were paid with the issuance of 92,500 shares of restricted Common Stock of
the Company. Professional Fees and Consulting, and Research and Development
expenses have increased in the current fiscal year with additional
professionals and outside services required to assist the company in
promotion, regulatory and commercial development matters. Revenues
increased in the current fiscal year as compared to the prior fiscal year
due to increased revenues from the sale of BIO-CARTILAGE and the Company's
cosmetic cream products.
Liquidity and Capital Resources
- -------------------------------
Overview
- --------
The Company has had losses from operations in each of the five years ended
May 31, 1998. 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 more recent quarters, from
revenues from licensing fees and product sales.
During the current fiscal year $575,225 of Advances from Stockholders were
exchanged for 2,876,125 shares of the Company's Common Stock.
Present Liquidity
- -----------------
The Company's present liquidity position is critical. As of February 28,
1999 the Company's total liabilities exceeded its total assets by $141,985.
The Company will require additional product sales or funding during, or shortly
after the end of, the current fiscal quarter ending May 31, 1999, 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, 1998 of ($484,860), 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, 1997 and 1998 contain an explanatory
paragraph indicating that the Company may be unable to continue in existence.
The Company began to sell a line of cosmetic products and plans to continue
to implement plans to sell BIO-CARTILAGE<F1> to the over-the-counter food
supplement market and may also introduce a second product in the same
marketplace in the near future. In addition, the Company continues to seek to
obtain either a new licensee, or distributors, for its CATRIX<F1> product, in
powder form only, for topical wound healing purposes. If successful, the
Company may increase cash flow in order to allow the Company to meet its
obligations and sustain its operations. The Company also plans to try to
obtain financing from additional advances from stockholders and sales of
unregistered shares of common stock.
On March 16, 1999, the Company announced that it had entered into an
agreement with ICN IBERICA, S.A. ("ICNI", a wholly owned subsidiary of ICN
Pharmaceuticals, USA) of Barcelona, Spain whereby ICNI acquired the exclusive
rights to distribute and market the Company's CATRIX<F1> WOUND CARE DRESSING
in Spain for a period of ten years.
Implementation of this Agreement is contingent upon securing marketing
approval for the product by the Spanish Health Ministry. Such approval has
been under review by the Ministry for several months, and final inspections
of Lescarden's facilities are expected in mid-April 1999 after which marketing
approval will be decided by the Ministry.
The Agreement with ICNI also contains terms granting it the exclusive
right, for a limited period of time, to negotiate with the Company for the
expansion of its exclusive territory to include all of the countries in the
European Union. Additionally, the Agreement gives ICNI the exclusive right,
for a similarly limited period of time, to negotiate with the Company for the
inclusion of CATRIX<F1> 10 OINTMENT in its product line for distribution
within the countries covered by the Agreement.
The Company has no material commitments for capital expenditures at
February 28,1999.
The Company has conducted a review of its computer systems to identify
the systems that could be affected by the Year 2000 Issue. The Company
presently believes that, with new conversions to new software, if required,
the Year 2000 problem will not pose significant operational problems.
<F1>
A registered trademark of Lescarden Inc.
<PAGE>
LESCARDEN INC.
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Part II - Other Information
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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 February 28, 1999.
INDEX TO EXHIBITS
27-Financial Data Schedule
<PAGE>
Signatures
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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.
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(Registrant)
Date: March 24, 1999 s/Gerard A. Dupuis
------------------
Gerard A. Dupuis
Chairman of the Board
Chief Executive Officer
<S> <C>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LESCARDEN
INC'S FEBRUARY 28, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 5,756
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 140,847
<CURRENT-ASSETS> 146,603
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 149,683
<CURRENT-LIABILITIES> 291,668
<BONDS> 0
0
1,840
<COMMON> 19,509
<OTHER-SE> (163,334)
<TOTAL-LIABILITY-AND-EQUITY> 149,683
<SALES> 16,502
<TOTAL-REVENUES> 16,502
<CGS> 12,163
<TOTAL-COSTS> 431,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (414,931)
<INCOME-TAX> 0
<INCOME-CONTINUING> (414,931)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (414,931)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
