U.S. Securities and Exchange Commission
                         Washington, D.C. 20549

                              Form 10-KSB

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 [Fee required]

For the fiscal year ended May 31, 2006
                          ------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 [No fee required]

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 of           (I.R.S. Employer
 incorporation or organization)            Identification No.)

420 Lexington Avenue, New York Suite 212           10170
----------------------------------------  --------------------
(Address of principle executive offices)       (Zip Code)

Issuer's telephone number (212) 687-1050
                          --------------

Securities registered under Section 12(b) of the Act: None
                                                      ----

Securities registered under Section 12(g) of the Act:
             Common Stock $.001 par value

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 [ ]

Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[X]



Issuers revenues for its most recent fiscal year were $ 1,570,718. The
aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on July 14, 2006 was approximately
$6,249,323.

The number of shares of registrant's Common Stock outstanding as of
August 16, 2006 was 31,057,418.

ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [X]   No [ ]

          DOCUMENTS INCORPORATED BY REFERENCES: None
                                                ----

Transitional Small Business Disclosure Format (Check one): Yes
: No X





                                 PART I

ITEM 1. Business


     The Company, a New York Corporation, has been in business since 1960.
From the onset, the Company has devoted its resources to fund research and
development of proprietary biologic materials with a focus on wound healing,
clinical skin care, osteoarthritis and cancer applications.  Significant
studies substantiated the ability of Catrix(R), Lescarden's proprietary
cartilage powder, to function as a biological response modifier, by
stimulating the body's immune system.  Further studies indicated that,
Catrix could also be effective against diseases such as arthritis,
scleroderma, psoriasis and even cancer.

     Due to the amount of capital required to conduct ongoing research for
new product development, as well as the large scale testing necessary to
secure regulatory approvals, the Company in recent years has a strategy of
pursuing marketing and licensing opportunities for fully developed products
that have received patents and are ready for commercialization.

     The Company's product line is led by CATRIX(R) Wound Dressing, a powder
derived from bovine cartilage that has been shown to be effective in the
management of chronic lesions and burns, and especially helpful when
applied to non-healing wounds such as decubitus ulcers, venous stasis
ulcers, and diabetic ulcers.  The product has been approved for sale by the
FDA and the Spanish Health Ministry for distribution throughout the
European Union.

     Lescarden also derives revenue from a line of Catrix-based skin care
products targeting the Plastic Surgery, Dermatology and Medical Spa markets.
Sales of two nutritional supplements, BIO-CARTILAGE(R) and POLY-Nag(R), a
patented glucosamine polymer, also contribute to the Company's overall
sales.


                           Catrix Wound Care

Background

     In the early 1950's, the Company's founders discovered that cartilage
powder significantly hastened the healing of surgical wounds in animals.
Early clinical studies by the Company, supported by extensive product
testing and refinement, led to the creation of a proprietary process for
purifying bovine cartilage to produce a sterile white powder that could be
used to optimize healing. The resulting product was given the brand name
Catrix(R).

     The Company believes there is persuasive evidence that Catrix(R)
functions in the body as a biological response modifier, regulating the
components of the immune system.  Some observed effects of Catrix(R) on
the body include:

     - acceleration of wound healing;

     - inhibition of excessive vascularization of certain tissues;

     - inhibition of proliferation of malignant cells;

     - moderation of excessive collagen synthesis by fibroblast cells



                         Chronic Wound Market

     It is estimated that the global market for wound care products is
approximately $10 Billion. This is likely to increase due to several factors:

     - Demographic trends confirm that the world's population is living
       longer, a significant plus factor for the Company's Wound Dressing
       since it is the elderly who are especially at risk for the various
       ulcers and non-healing lesions for which the product provides therapy.

     - There is also a steady worldwide increase in the incidences of
       diabetes which affects a wide range of age groups who are at increase
       risk of developing non-healing wounds.

     - There is at present no effective treatment for non-healing wounds
       and this represents a growing problem for hospitals, out- patient
       centers and long-term care facilities. The best treatment protocols
       generally focus on proper wound cleaning and preparation (removal of
       dead tissue around the wound), maintaining an environment that is
       conducive to proper healing and good nutrition.

A product such as Catrix(R), which appears to promote wound healing, will,
the Company believes, be of great value to the medical community.


               Human Clinical Trial Conducted With Catrix

Decubitus Ulcers

     In 2004 a clinical study was performed in Spain by the senior nursing
professionals associated with the Spanish Ulcer and Chronic Wound Advisory
Panel. The purpose of the study was to demonstrate that Catrix(R) Wound
Dressing could achieve a significant healing effect on pressure ulcers
(bed sores) and other chronic wounds that had failed to respond after
months of standard wound healing treatment. The 101 lesions included in the
study had resisted healing for an average treatment time of 155 days. 51 of
the lesions were Stage III, or serious, while 32 lesions were deemed to be
Stage IV, very serious (total loss of the skin thickness with extensive
destructions, necrosis of tissue in muscle, bone or support structure.)

     The conclusions of the study were emphatically positive for Catrix(R)
Wound Dressing: after 49 days of treatment with the Dressing, 38.4% of all
lesions had healed completely. Another 34.7% showed significant improvement.
Of the 32 most serious Stage IV lesions 7 had healed completely, while
another 11 had improved to Stage II condition (partial loss of the skin
thickness the epidermis, dermis, or both.)

In their Summary, the administrators of the Study stated:

  "...treatment with Catrix is effective in the treatment of pressure ulcers
      that did not heal after the application of one of several standard
      treatments..."

  "...these results prove that the treatment with Catrix significantly
      reduces the treatment length, and therefore leads to a reduction in
      the sanitary cost in this kind of patient."

  "...it is difficult to state the reasons why Catrix was so effective in
      this study. Although this study does not compare Catrix with other
      scarring products, we must take into account that all the included
      pressure ulcers were previously treated with other products, vastly
      used and considered necessary for the treatment of pressure ulcers
      at the centres where the patients came from. The cures with these
      other products were proven to be inefficient, and sometimes to even
      cause wound deterioration. In all the cases, the only change from the
      previous treatment was the application of Catrix. We can therefore
      conclude that the obtained results were due to Catrix."

In comparing the estimated cost of treating the wounds that healed,
including the nursing time and materials, the investigators determined that
Catrix(R) reduced the average cost by 40%.


Radiation Dermatitis

     In May 2004 a study was undertaken to compare the efficacy of Catrix
with that of hydrocolloid dressings, the standard therapy used on cancer
patients treated with radiation therapy. Skin injuries caused by repeated
exposure to radiation are a frequent side effect in oncology treatments.
If wounds persist they not only bring discomfort and risk of infection to
the patient, but can even force suspension of the radiation treatments.

     Results of the study demonstrated that Catrix(R) is more effective than
hydrocolloid dressings in the treatment of wounds caused by radiodermatitis
(average healing time with Catrix: 4.9 days, vs. an average of 9.0 days with
hydrocolloid dressings). Both the nursing staff and patient groups gave
Catrix(R) a higher evaluation in the study.


Diabetic and Venous Ulcers

     This observational study, was published in November 2004, examined the
effectiveness and safety of Catrix in the treatment of diabetic and venous
ulcers compared to standard treatments. 54.8% of the wounds healed in the
20 week timeframe with the average healing time being 9.3 weeks. The
conclusion was that Catrix was well tolerated and effective in treating these
types of lower extremity wounds.

Burns

     In a recent pilot study of 22 pediatric burn patients at the Bestian
Burn Center in Seoul, Korea, Catrix(R) Wound Dressing achieved remarkably
good results. Subjects in the study, all under 5 years of age, would
normally becandidates for skin grafts to assist in the healing process.
Results of thestudy showed that Catrix Wound Dressing could facilitate
healing that was comparable to that attained by grafting without the need
for this surgical procedure.

Final detailed results of the study are being withheld pending the
publication of the entire study in a scientific journal.


                          Catrix Skin Care

     Catrix(R) powder is formulated into a line of skin care products
designed to meet the needs of plastic surgeons, cosmetic dermatologists
and their patients. The demonstrated ability of Catrix to expedite healing,
reduce inflammation and enhance patient comfort following aesthetic
procedures fills a unique niche in the rapidly growing market for cosmetic
and anti-aging procedures. These products are especially valued for their
ability to provide anti-inflammatory benefits without the use of steroids
which can adversely affect the skin when used for extended periods of time.
According to The American Society of Aesthetic Plastic Surgery the market
for cosmetic procedures in the US totaled $12.4 billion in 2005.

     The Catrix(R) Ointment product, containing 10% Catrix(R) Powder, is
intended for the use by patients following laser surgery, chemical peels
or other aesthetic procedures.

     In April 2002, Lescarden announced that another study, published in The
Journal of The American Academy of Dermatologic Surgery, had concluded that
Lescarden's Catrix 10 Ointment facilitates faster healing than conventional
treatments following cosmetic surgery procedures.  The study was conducted
by a team headed by Maritza Perez, M.D., director of cosmetic dermatology
as St. Lukes-Roosevelt Hospital Center in New York.

     The Perez study focused on patients who, after completing laser
resurfacing treatments on their faces, were randomly assigned to receive
Catrix 10 Ointment on one side of their faces and a widely utilized
over-the-counter ointment; on the other side for eight consecutive days.
At the completion of the test period researchers evaluated their data and
were able to confirm that facial areas with Catrix 10 Ointment healed much
faster.

    "Since the Catrix 10 Ointment facilitates quicker healing, in theory
patients treated with it were at less risk for the complications that
open wounds imply," said Dr. Perez.  "Although the mechanism by which
bovine cartilage accelerates wound healing is not completely understood,
we think it may enhance and accelerate the skin's own healing process."

     The Company has also developed a 5% Catrix(R) Rejuvenation Cream and a 5%
Catrix(R) Lip Balm.  The Cream is intended for daily use as a rejuvenating
moisturizer while it is also effective in relieving symptoms associated with
psoriasis, dermatitis and other skin anomalies. Domestically, sales of these
products have occurred principally through dispensing physicians, skin care
professionals, independent representatives, specialty retailers and via the
internet.


                              Poly-NAG

     Derived from specially processed crustacean shells, Poly-NAG is a
polymeric form of glucosamine (Poly-N-Acetyl-D-Glucosamine) that is
marketed by Lescarden in the anti-arthritic market as a treatment for
osteoarthritis. The product has demonstrable advantages over the numerous
products that compete in the glucosamine marketplace because it remains
active in the body longer than competitive products.

6<page>

     In clinical trials at the University of North Texas Health Science
Center,orally administered Poly-NAG was shown to be absorbed by the body
and metabolized into glucosamine, which was measurably present in subjects'
blood serum. In addition, the tests confirmed that serum levels of
glucosamine remained higher for a longer time in subjects receiving
Poly-NAG, compared to subjects receiving plain NAG.

     In effect, Poly-NAG offers the arthritis sufferer a form of glucosamine
that has "staying power" in the bloodstream. Based on these results, the
Company was awarded a US Patent for Poly-NAG in September, 2000. A European
patent was awarded in April, 2005.

     Additional studies have been conducted in the past year to demonstrate
Poly-NAG's bioavailability properties with animals to enhance the product's
introduction into the veterinary market.

     The Company is currently in discussions with several domestic and
foreign distribution partners in both the human and animal health markets.


                             Distribution

Europe

     In August 2004 the Company entered into a license agreement with ICN
Pharmaceuticals Switzerland (IPS), headquartered in Basel, Switzerland,
for the exclusive distribution of Catrix Wound Dressing throughout Europe.
IPS is a subsidiary of Valeant Pharmaceuticals International, a
research-based pharmaceutical company that specializes in dermatology.
Under an exclusive license, Valeant Pharmaceuticals International is
currently marketing Catrix Wound Dressing in the European Market countries
, and is awaiting regulatory approval to commence commercialization in
Russia, the Balkan States and the CIS States.

     In July 2006 the Company approved a sub-license agreement between
Valeant and Smith & Nephew for distribution of Catrix Wound Dressing in
Spain. Smith & Nephew, a global leader in the development and distribution
of wound care products will take over the distribution of Catrix to the
hospital and acute care markets and will add significantly to the field
sales representation in Spain. Smith and Nephew will commence sales of
Catrix immediately in this market.


Korea

     Sales of Catrix based skin care products in Korea have increased by
over 20% from last year to $176,000 in fiscal year ended May 31, 2006. This
is a result of the continuing marketing efforts of our distributor BioAlpha
and the general increase in the market for clinical skin care products.
Currently there are over 500 dermatologists using Catrix-based skin care
products in Korea.

     In December 2004, Lescarden entered into a definitive license agreement
with Daewoong Pharmaceuticals, headquartered in Seoul, South Korea to market
Catrix Wound Dressing. This company is the largest producer and marketer of
over-the counter and ethical pharmaceutical products in Korea. For the
fiscal year ended 2004 Daewoong's total revenues exceeded $175 million.

Daewoong is well established in the diabetic foot ulcer segment of the Korean
wound care market. Catrix Wound Dressing will provide Daewoong with a
broader range of product indications to serve that market.  Daewoong
expects to receive marketing approval from the Korean FDA for Catrix Wound
Dressing Powder by the end of the third quarter 2006. With this approval,
Daewoong hopes to launch Catrix to the hospital and clinical market by
October 2006.

Philippines

     In December 2005, Lescarden announced that it had signed a distribution
agreement with Pascual Laboratories, a leading distributor of prescription
and non-prescription products in the Philippines. Under the terms of the
agreement, Altermed, a subsidiary of Pascual, will commercialize Lescarden's
patented anti-arthritic product, Poly-NAG in the Philippines.

     Pascual Laboratories Inc. is a privately held pharmaceutical company
with headquarters in Quezon City, Philippines. Pascual Labs, including its
subsidiaries and affiliates, is the 2nd largest Filipino pharmaceutical
conglomerate and ranks 12th largest among all pharmaceutical companies
operating in the Philippines. Altermed's presence as a leader in the
commercialization of over the counter products will provide marketing and
distribution efficiencies with respect to the introduction of Poly-NAG.


                           Government Regulation

     Since the 1996 FDA approval of the Company's 510(k) application for the
use of Catrix(R) in the management of a variety of skin ulcerations, wounds
and burns, the Company has focused on the development of a distribution
network for its family of proprietary, market-ready products. This strategy
envisions a network of licensing and distribution agreements in addition to
Lescarden's own direct marketing efforts.  The plan includes a complete
marketing program for Catrix(R) powder, as well as for Catrix(R) Skin Care
Products, which are being offered to cosmetic dermatologists, plastic
surgeons and skin care specialists.  Looking to the future, the Company
believes that the observed effects of Catrix(R) (including acceleration of
wound healing, tumor inhibition and reduction, inhibition of excessive
vascularization and modulation of immune system functions) coupled with an
absence of toxicity, present additional promising avenues of investigation

     The production and marketing of the Company's products and its research
and development activities are subject to comprehensive regulation by various
federal, state and local authorities in the United States and governmental
authorities of other countries in which we conduct business.  Among others,
the FDA, HPB and the SHM exercise regulatory authority over the development,
testing, formulation, manufacture, labeling, storage, record keeping,
quality control, advertising and promotion of the Company's products.

     A new drug or device may not be marketed in the United States until it
has satisfied rigorous testing procedures established and approved by the
FDA.  The drug may then be marketed only for the specific indications, uses,
formulation, dosage, forms, and strengths approved by the FDA.  Similar
requirements are imposed by foreign regulators upon the marketing of a new
drug in their respective countries.

     All of the Company's contract manufacturing facilities will be subject
to periodic inspections by the FDA and comparable agencies from other
countries.  If violations of applicable regulations are discovered during
these inspections, the Company may be restrained from continued marketing
of the manufactured products.  Such facilities are also subject to
regulation regarding, among other things, occupational safety, laboratory
practices, the use and handling of radio-isotopes and hazardous chemicals,
prevention of illness and injury, environmental protection and hazardous
substance control.

     The Company also will be subject to foreign regulatory authorities with
respect to clinical trials and pharmaceutical sales.  Whether or not the
FDA approval has been obtained, approval of a product by the comparable
regulatory authorities of foreign countries must be obtained prior to
commencement of marketing of the product in those countries.  The approval
process varies from country to country and the time required may be longer
or shorter than that required for FDA approval.


                      Raw Materials and Manufacturing

     Catrix(R) is manufactured for the Company by contract manufacturers.
Thesemanufacturers must be FDA-approved pharmaceutical manufacturing
facilities. Likewise, foreign government agencies, in countries where
marketing approval is sought, must also approve all such manufacturers.
The Company's food supplement cartilage material, BIO-CARTILAGE(R), and its
Poly-NAG(R) are manufactured in the United States and Iceland. An additional
manufacturer is also being developed in the Western Pacific Area.

Raw Materials

     Catrix(R) is prepared from animal cartilage tissue. The most accessible
and easily processed source is bovine tracheas collected from normal healthy
beef cattle, subsequent to slaughter.  Tracheas are cleaned, flash frozen
and delivered to qualified pharmaceutical manufacturing facilities.  The
cattle from which the tracheas are harvested are certified free of BSE
(Bovine Spongiform Encephalitis) and the only cattle herds used as source
material are located in New Zealand.

Regulatory Review

     All Catrix(R) and production procedures have been submitted in
extensive detail to the FDA, the HPB in Canada, and the Spanish Health
Ministry in Spain, and accepted as part of the review of the Company's
official submissions with respect to studying Catrix(R) in patients.


                  Patents and Proprietary Technology

     The Company was granted and owns, by assignment, several United States
patents, some of which have expired.  The most recent patents granted were
for the use of cartilage-based agents as an anti-tumor agent and method
(U.S. Patent #4,827,607), and for Poly-NAG(R) for use as an
anti-inflammatory. In April 2005, a similar patent was granted in Europe.

     In addition, the Company also holds several patents or pending patents
in various foreign countries.


                                Competition

     Competition in the wound healing and clinical skin care markets is
based primarily on:  product performance, including efficacy, safety, ease
of use and adaptability to various modes of administration; patient
compliance; price; acceptance by physicians; marketing; and distribution.
The availability of patent protection and the ability to obtain government
approval for testing, manufacturing and marketing are also critical factors.
See "Business-Government Regulation."

     The markets are highly segmented with multi-national and regional
companies competing in both the wound and skin care markets. Our focus is
to align ourselves with organizations that have established distribution
networks and solid reputations in the particular specialty.

     A key factor to our success will be our ability to continue to expand
our distribution network and production capabilities while we continue to
enhance our existing product and technologies. Where possible we will
continue to pursue patent and trademark protection concerning the products
and processes we design and develop.


                              Human Resources

Employees and Consultants

     At August 1, 2006, the Company had three full time employees, and
retains several consultants to assist in the administration of the Company and
coordinating its ongoing research and clinical trials.


Item 2. Properties

     The Company owns no real property.  Its executive offices in New York
City, occupying approximately 2,200 square feet, are currently leased
under a seven year lease ending January 31, 2011.  Management considers
that its leased premises are well maintained and sufficient for its
present operations.

Item 3. Legal Proceedings

		NONE

Item 4. Submission of Matters to a Vote of Security Holders

		NONE



                                PART II


Item 5. Market for Common Equity and Related Stockholder Matters


     The Common Stock of the Company is traded in the over-the counter
market under the symbol "LCAR".  The following table sets forth, for the
periods indicated, the high and low bid quotations for the Common Stock as
reported by the National Quotation Bureau.



Fiscal Year Ending May 31, 2006

                     High            Low

     Fourth Quarter  0.38            0.23
      Third Quarter  0.35            0.25
     Second Quarter  0.41            0.25
      First Quarter  0.45            0.31

Fiscal Year Ending May 31, 2005

                     High            Low

     Fourth Quarter  0.40            0.30
     Third Quarter   0.43            0.34
     Second Quarter  0.33            0.20
      First Quarter  0.24            0.19



     On July 14, 2006 the closing bid price per share of Common Stock, as
reported by the National Quotation Bureau, was $.39.  As of May 31, 2006
there were 421 holders of record of the Company's Common stock.




Item 6.  Management's Discussion and Analysis of Operations


                         Results of Operations

Overview

     Since its inception in 1960, Lescarden has devoted its resources to
fund research and development of proprietary biologic materials with a focus
on wound healing, skin care, osteoarthritis and cancer applications. In the
ensuing years, significant studies substantiated the ability of Catrix(R),
Lescarden's proprietary cartilage powder, to function as a biological
response modifier, by stimulating the body's immune system.  Further studies
indicated that, Catrix could also be effective against diseases such as
arthritis, scleroderma, psoriasis and even cancer.

     Due to the amount of capital required to conduct ongoing research for
new product development, as well as the large scale testing necessary to
secure regulatory approvals, the Company in recent years has shifted its
focus to pursuing marketing and licensing opportunities for fully developed
products that have received patents and are ready for commercialization.

     The Company's product line is led by CATRIX(R) Wound Dressing, a powder
derived from bovine cartilage that has been shown in clinical tests to be
effective, when topically applied, in the management of an array of chronic
lesions and burns, including decubitus ulcers, venous stasis ulcers,and
diabetic ulcers.  The product has been approved for sale by the FDA and the
Spanish Health Ministry.  Under an exclusive license, Valeant
Pharmaceuticals International is currently marketing Catrix Wound Dressing
in the European Market countries, and is awaiting regulatory approval to
commence commercialization in Russia, the Balkan States and the CIS States.

     Lescarden also derives revenue from a line of Catrix-based skin care
products targeting the Plastic Surgery, Dermatology and Spa markets.  Sales
of two nutritional supplements, BIO-CARTILAGE(R) and a patented glucosamine
polymer, Poly-Nag(R), also contribute to the Company's overall sales.


Europe

     In August 2004 Lescarden entered into a license agreement with ICN
Pharmaceuticals Switzerland (IPS) headquartered in Basel, Switzerland, for
the exclusive distribution of Catrix Wound Dressing throughout Europe. IPS
is a subsidiary of Valeant Pharmaceuticals International, a research-based
pharmaceutical company that specializes in dermatology. Valeant had total
revenues in 2004 of $683 million. European sales of Catrix Wound Dressing
totaled $336,000 for the quarter ended February 28, 2006. Overall progress
in the market has been steady and is expected to improve with the
regulatory approval and government reimbursement in key markets.

     In July 2006, the Company approved a sub-license agreement between
Valeant and Smith and Nephew for distribution of Catrix Wound Dressing in
Spain. Smith and Nephew, a global leader in development and distribution of
wound care products will be focusing on the distribution of Catrix to the
hospital and acute markets and will add significantly to the field sales
representation in Spain.


Korea

     Sales of Catrix based skin care products in Korea have increased by
over 20% from last year to $175,653 in the fiscal year ended May 31, 2006.
This is a result of the continuing marketing efforts of our distributor
BioAlpha and the general increase in the market for clinical skin care
products. Currently there are over 500 dermatologists using Catrix-based
skin care products in Korea.

     In December 2004, Lescarden entered into a definitive license
agreement with Daewoong Pharmaceuticals, headquartered in Seoul, South
Korea. This company is the largest producer and marketer of over-the counter
and ethical pharmaceutical products in Korea. For the fiscal year ended 2004
Daewoong's total revenues exceeded $175 million. Daewoong is well
established in the diabetic foot ulcer segment of the Korean wound care
market. Catrix Wound Dressing will provide Daewoong with a broader range of
product indications to serve that market.  Daewoong expects to receive
marketing approval from the Korean FDA for Catrix Wound Dressing Powder by
the end of the third quarter 2006. With this approval, Daewoong hopes to
launch Catrix to the hospital and clinical market in October 2006.


Philippines

In December 2005, Lescarden announced that it has signed a distribution
agreement with Pascual Laboratories, a leading distributor of prescription
and non-prescription products in the Philippines. Under the terms of the
agreement, Altermed, a subsidiary of Pascual, will commercialize
Lescarden's patented anti-arthritic product, Poly-NAG the Philippines.

Pascual Laboratories Inc. is a privately held pharmaceutical company with
headquarters in Quezon City, Philippines. Pascual Labs, including its
subsidiaries and affiliates, is the 2nd largest Filipino pharmaceutical
conglomerate and ranks 12th largest among all pharmaceutical companies
operating in the Philippines. Altermed's presence as a leader in the
commercialization of over the counter products will provide marketing and
distribution efficiencies with respect to the introduction of Poly-NAG.


                             Clinical Studies

Lescarden has been awarded US and European patents for Poly-NAG, a polymeric
form of glucosamine that is derived from crustacean shells.  Clinical trials
on humans in the US have shown that Poly-NAG remains active in the body
for a significantly longer period than competitive products, suggesting that
it has good potential as an anti-arthritic.

Lescarden recently engaged in two further clinical studies of Poly-NAG 's
effect in animals.  The purpose was to enhance the marketability of
Poly-NAG for veterinary applications, a market where North American sales
of anti-arthritic remedies are over $400 million a year.

More clinical tests are planned on animals to further document Poly-NAG 's
extended bio-availability advantages.


                      Critical accounting policies

Our discussion and analysis of our financial condition are based upon our
financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosure of contingent liabilities.
On an on going basis, we evaluate our estimates, including those related
to inventories and deferred income taxes. We based our estimates on our
historical experience, knowledge of current conditions and our beliefs of
what could occur in the future considering available information. Actual
results may differ from these estimates under different assumptions or
conditions. The Company believes the following critical accounting
policies affect its more significant judgments and estimates used in the
preparation of its financial statements.

Revenue recognition

Revenue from product sales is recognized upon shipment of the product when
title to the property transfers to the buyer as does the risk of loss and
collectibility of the sales price is reasonably assured.

Deferred license fees relate to license fees received from the company's
licenses which are amortized over the term of the license agreements.

Inventory Valuation

Inventories are valued at lower of cost, using first in first out method,
or market. We routinely evaluate the composition of our inventory and
identify slow-moving, excess, obsolete or otherwise impaired inventories.
Inventories identified as impaired are evaluated to determine if reserves
are required. Our evaluation is primarily based upon forecasted short-term
demand for the product.

Deferred Taxes

The Company records a valuation allowance to reduce its deferred tax assets
to the amount that is more likely than not to be realized. While we consider
historical levels of income, expectations and risks associated with
estimates of future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for the valuation allowance, in
the event that we determine that we would be able to realize deferred tax
assets in the future an adjustment to the deferred tax asset would
increase income in the period such determination was made.


       Fiscal year ended May 31, 2006 compared to May 31, 2005

The Company's revenues decreased in the year ended May 31, 2006 compared to
May 31, 2005 by $861,026 primarily due to decreased sales of CATRIX(R)
Wound Dressing to its licensees and decreased territorial license fees.

In Europe, the decrease in product sales was attributed to significant
inventory quantities acquired at the end of fiscal 2005 and the inability
of our key licensee to penetrate larger segments of the wound care market.

Total costs and expenses during the year ended May 31, 2006 were 26% or
$534,503 lower than those of the comparative prior year. The decrease was
principally due to lower, cost of product sales of $460,835, commissions
of $207,539 and, interest expense of $24,437 which were partially offset
by higher rent and office expenses of $27,644, travel and meetings of
$23,747, insurance expense of $38,845 and professional fees and consulting
of $27,542.


                    Liquidity and Capital Resources

Overview

The Company earned net income of $67,524 in the year ended May 31, 2006.
In addition, net cash flows increased by $64,658 in the fiscal year ended
May 31, 2006 which included $52,500 from the proceeds from the issuance of
common stock upon the exercise of a warrant.


Present Liquidity

As of May 31, 2006, the Company's current assets exceeded its accounts
payable and accrued expenses by $1,279,430.

The Company's cash balance increased by $64,658 in the year ended
May 31, 2006 compared to $1,024,053 in the year ended May 31, 2005. The
Company received net license fees of $375,000 in the year ended May 31,
2006 compared to $810,000 in the year ended May 31, 2005.

The material direct costs related to the Catrix(R) Wound Dressing product
were incurred in periods prior to those presented. The estimated costs
necessary to support the product's development, other than to finance
significant inventory levels, is not expected to be significant.

The Company has no material commitments for capital expenditures at
May 31, 2006.


Item 7.	 Financial Statements and Supplementary Data

         See page F-1 for Lescarden Inc. Index to Financial Statements.


Item 8.	 Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

         None.


Item 8a. Disclosure 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 the 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 the Company's 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 annual report on Form 10KSB.

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 annual report on Form 10-KSB.


                              Part III

Item 9.	Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act


The executive officers and directors of the Company are as follows:


Name                       Position

William E. Luther	   President and Chief Executive
                           Officer, Director.

George E. Ehrlich, M.D.    Director.

Charles T. Maxwell	   Director.

Russell O. Wiese	   Director.

Xavier Gras Balaguer	   Director.


Mr. Luther (age 46) came to Lescarden in 1997, serving as Marketing Director
for the CATRIX(R) Wound Care and Skin Care lines. He was promoted to Vice
President of Marketing in 1998 and then promoted to President and Chief
Executive in October 2002. Mr. Luther was elected to the Board in April
2003. Mr. Luther is a graduate of the Boston University School of
Management.

Dr. Ehrlich (age 77) is the President of George E. Ehrlich Associates,
International Consultant Firm, a position he has held for more than the
past five years.  He became a Director of the Company on March 2, 1995.
Dr. Ehrlich is a graduate of Harvard University and received his medical
degree from Chicago Medical School.

Mr. Maxwell (age 74) was the Vice Chairman and Senior Energy Strategist of
C.J. Lawrence Inc., a member firm of the New York Stock Exchange, for more
than twenty-five years, until his retirement in 1997.  Mr. Maxwell has
acted as a consultant to various oil companies and the United States
Government on oil policy matters.  He became a Director and Executive Vice
President of the Company in July 1997 and in April 2000 Mr. Maxwell became
Senior Energy Analyst with Weeden & Co., Greenwich, Connecticut.  Mr.
Maxwell is a graduate of Princeton University and Oxford University.

Mr. Wiese (age 40) is the Chief Marketing Officer of Davis Advisors, L.P.,
an Investment Advisor that manages over $35 billion. He has held this
position since 1994. Prior to joining Davis Advisors, L.P., Mr. Wiese
worked for Merck & Co., Inc. where he held positions in sales, sales
management, and product management. Mr. Wiese is a graduate of the
University of California, Berkley and the Stern School of Business, New
York University.

Mr. Balaguer (age 53) has for more than the past five years owned a company
devoted to giving advice on strategy and project development to
pharmaceutical companies. Since 1998 he has been a representative of the
Company in Europe. Mr. Balaguer received his license in Medicine from the
Autonomous University of Barcelona, Spain and his MD at the School of
Medicine from the University of Barcelona.


Item 10.   Executive Compensation


                        Annual Compensation          Long-Term
                                                     Compensation Awards


Name and principle      Fiscal Year
position                Ended May 31,   Salary $     Warrants(#)
-------------------------------------------------------------------------
William E. Luther       2006            $138,542          -
		        2005            $119,333       100,000
                        2004	        $109,440       100,000


Aggregated Option and Warrant Exercises in Last Fiscal Year and FY End Option
and Warrant Values


                Shares                        Number of       Value of
                Acquired                      Unexercised     Unexercised
                on              Value         Options/        In-the-money
                Exercise        Realized      Warrants        Options
                                              at FY End (#)   Warrants
                                                              at FY End ($)
Name            (#)             ($)           Exercisable     Exercisable
-----------------------------------------------------------------------------
W.E. Luther                                   Warrants        Warrants
                                              210,000            -


Item 11.	Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth, as of May 31, 2006 the ownership of the
Company's Common Stock by (i) each person who is known by the Company to
own Shares of record or beneficially, more that (5%) of the Company's
Common Stock, (ii) each of the Company's directors and executive officers
and (iii) all directors and executive officers as a group.  Except as
otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.


Title of       Name and Address of      Number of Shares       Percent of
Class (1)      Beneficial Owner         beneficially Owned     Class

Common Stock   Charles T. Maxwell
               420 Lexington Ave.
               Suite 212
               New York, NY 10170           12,733,512          41.00%

               George Ehrlich (2)
               420 Lexington Ave.
               Suite 212
               New York, NY 10170              150,000           0.48%

               William Luther (2)
               420 Lexington Ave.
               Suite 212
               New York, NY 10170              310,000		 0.99%

               Russel O. Wiese
               420 Lexington Ave.
               Suite 212
               New York, NY 10170            2,000,000           6.44%

               Xavier Gras Balaguer
               420 Lexington Ave.
               Suite 212
               New York, NY 10170              150,000           0.48%

               Directors and Officers
               as a Group
               (2) 5 persons                15,343,512          48.92%



	(1) The percentages are calculated on the basis of 31,057,418
            shares of Common Stock outstanding.  For the purpose of
            calculating the percentage of shares of the Company's Common
            Stock owned by any person, the shares issuable upon the
            exercise of rights to acquire, owned by such a person if
            exercisable within 60 days of May 31, 2006 redeemed outstanding,
            but such shares are not deemed outstanding for the purpose of
            calculating the percentage of Common Stock owned by any other
            person.  All share ownership is direct unless otherwise
            indicated.

	(2) Includes, 100,000 and 210,000 warrants to purchase the Company's
            Common Stock held by, Dr. Ehrlich and  Mr. Luther, respectively.


Item 12. Certain Relationships and Related Transactions.

		None.

Item 13. Exhibits and Reports on Form 8-K

         (a) (1) Exhibit

         Exhibit Number

         Description of Exhibit


2.1      Plan of Reorganization dtd. January 15, 1997 (and
         Amended Disclosure Statement dtd. March 12,
         1997).****

3.1      Certificate of Incorporation of Registrant, as
         amended.*

3.2      By-Laws of Registrant, as amended.*

22.1     Subsidiaries of the Registrant.*

23.      Notice of annual meeting of shareholders and Proxy
         Statement for Annual Meeting of shareholders held
         October 19, 1992.**

31.      Certification pursuant to Exchange Act Rule 13a-14(a)
         / 15d-14(a)

99.1     Award of the Arbitrator in the Matter of the
         Arbitration between John F. Prudden, M.D. and the
         Registrant dated September 6, 1995.***

99.2     Certification pursuant to 18 U.S.C. Section 1350
         as adopted pursuant to section 906 of the
         Sarbanes-Oxley Act of 2002


*        Incorporated by reference to Registrant's Form S-1
        (Registration no. 33-50743) filed August 12, 1992.

**       Incorporated by reference to Registrant's Form 10-KSB
         for the fiscal year ended May 31, 1993.

***      Incorporated by reference to Registrant's Form 8K
         dated September 6, 1995.

****     Incorporated by reference to Registrant's Form 10-
         KSB for the fiscal year ended May 31, 1998.


(b)          Reports on Form 8-K


There were no reports on Form 8-K filed by the Company during the fourth
Quarter at the year ended May 31, 2006.





SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.


By:     S/William E. Luther
          William E. Luther, President
          August 24, 2006


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


By:     S/William E. Luther
          William E. Luther
          August 24, 2006

          President, Principal Executive
          Officer, Principal Financial
          Officer, Principal Accounting
          Officer and Director


By:     S/George E. Ehrlich
          George E. Ehrlich
          August 24, 2006

          Director


By:     S/Charles T. Maxwell
          Charles T. Maxwell
          August 24, 2006

          Director


By:     S/Russell O. Wiese
          Russell O. Wiese
          August 24, 2006

          Director


By:     S/Xavier Gras Balaguer
          Xavier Gras Balaguer
          August 24, 2006

          Director





Report of Independent Registered Public Accounting Firm              F-2

Balance Sheet as of May 31, 2006                                     F-3

Statement of Income for the Years Ended May 31, 2006 and 2005	     F-4

Statement of Stockholders' Equity for the Years Ended
May 31, 2006 and 2005                                                F-5

Statement of Cash Flows for the Years Ended May 31, 2006 and 2005    F-6

Notes to Financial Statements                                     F-7 - F-13


<page>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of
Lescarden Inc.


     We have audited the accompanying balance sheet of Lescarden Inc. (the
"Company") as of May 31, 2006, and the related  statements of income, stock
holders' equity, and cash flows for each of the two years in the period
then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Lescarden Inc.
as of May 31, 2006, and the results of its operations and its cash flows
for each of the two years in the period then ended in conformity with
United States generally accepted accounting principles.



GOLDSTEIN GOLUB KESSLER LLP
New York, New York

July 12, 2006



                                BALANCE SHEET
                                -------------
<table>
May 31, 2006
---------------------------------------------------------------------------------------
ASSETS
<S>                                                                       <C>
Current Assets:
  Cash and cash equivalents                                              $    1,094,677
  Accounts receivable 	                                                         68,823
  Inventory	                                                                202,466
---------------------------------------------------------------------------------------
      Total current assets                                                    1,365,966

Deferred Income Tax Asset, net of valuation allowance of $1,687,000	           -
---------------------------------------------------------------------------------------
      Total Assets                                                       $    1,365,966
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses                                  $       86,536
  Deferred license fees 	                                              1,143,500
---------------------------------------------------------------------------------------
      Total liabilities                                                       1,230,036
---------------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity:
  Convertible preferred stock - $.02 par value; $1.50 liquidation value
   (aggregating $138,000); authorized 2,000,000 shares, issued and
   outstanding 92,000 shares	                                                  1,840
  Common stock - $.001 par value; authorized 200,000,000 shares, issued
   and outstanding 31,057,418 shares	                                         31,057
  Additional paid-in capital	                                             16,634,596
  Accumulated deficit	                                                    (16,531,563)
---------------------------------------------------------------------------------------
      Stockholders' equity	                                                135,930
---------------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Equity                         $    1,365,966
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</table>



                                STATEMENT OF INCOME
                                -------------------
<table>
<CAPTION>
Year ended May 31,                                                  2006           2005
---------------------------------------------------------------------------------------
<S>                                                        <C>            <C>

Revenue:
  Product sales                                            $   1,379,700  $   2,077,258
  License fees	                                                 178,908        353,625
  Interest income	                                          12,100            861
---------------------------------------------------------------------------------------
Total revenue	                                               1,570,718      2,431,744
---------------------------------------------------------------------------------------

Costs and expenses:
  Cost of product sales                                          590,045      1,050,880
  Salaries:
    Officer	                                                 138,542        119,333
    Office	                                                  96,732         82,898
  Interest	                                                    -            24,437
  Professional fees and consulting	                         230,448        202,906
  Commissions	                                                  57,461        265,000
  Research and development 	                                  20,397         11,735
  Rent and office expenses 	                                 126,378         98,734
  Travel and meetings	                                         126,551        102,804
  Payroll and other taxes	                                  19,144         16,422
  Insurance 	                                                  62,199         23,354
  Other administrative expenses	                                  35,297         39,194
---------------------------------------------------------------------------------------
Total costs and expenses                                       1,503,194      2,037,697
---------------------------------------------------------------------------------------
Net income (loss)	                                    $     67,524   $    394,047
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Net income (loss) per common share - basic and diluted      $        .00   $        .01
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Weighted-average number of common shares outstanding:
  Basic		                                              30,919,918     30,099,726
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
  Diluted                                                     31,176,151     30,600,512
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</table>
 <table>

                                 STATEMENT OF STOCKHOLDERS' EQUITY
                                 ---------------------------------

CAPTION>
                                    Convertible
                                  Preferred Stock                Common Stock         Additional                   Stockholders'
                               Number of    Par Value       Number of    Par Value     Paid-in     Accumulated         Equity
                                 Shares      Amount           Shares     Amount        Capital     Deficit          (Deficiency)
---------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>       <C>             <C>          <C>        <C>             <C>              <C>

Balance at May 31, 2004	         92,000	  $1,840      29,830,495       $29,830      $16,288,109	    $(16,993,134)   $(673,355)
Issuance of common stock
 upon exercise of warrants	   -        -          1,076,923	 1,077          278,923	            -         280,000
Imputed interest on advances
 from related parties	           -        -               -             -              15,214             -          15,214
Net loss                           -        -               -             -     	   -             394,047      394,047
---------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 2005   	 92,000    1,840      30,907,418        30,907       16,582,246	     (16,599,087)      15,906

Issuance of common stock
 upon exercise of warrant
                                   -        -            150,000           150           52,350              -         52,500

Net income                         -        -               -              -                -             67,524       67,524
---------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 2006	         92,000	   $1,840     31,057,418       $31,057      $16,634,596     $(16,531,563)   $ 135,930
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</table>

<TABLE>

                                       STATEMENT OF CASH FLOWS
                                       -----------------------

<CAPTION>
Year ended May 31,                                                        2006             2005
-----------------------------------------------------------------------------------------------
<S>                                                                 <C>              <C>


Cash flows from operating activities:
  Net income                                                         $  67,524       $  394,047
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Imputed interest on advances from stockholder                          -             15,214
    Changes in operating assets and liabilities:
       Increase accounts receivable                                    (58,253)         (10,570)
       Decrease (increase) in prepaid expense                            2,959           (2,959)
       (Increase) decrease in inventory                               (100,025)          52,779
       Decrease in accounts payable and accrued expenses              ( 95,922)         (55,833)
       Increase in deferred license fee                                195,875          721,375
-----------------------------------------------------------------------------------------------
	Net cash provided by operating activities                       12,158        1,114,053
-----------------------------------------------------------------------------------------------

Cash flows from financing activities:
  Advances from stockholder and related parties                           -              30,000
  Repayment of advances from stockholders                                 -            (120,000)
  Proceeds from issuance of common stock                                52,500             -
-----------------------------------------------------------------------------------------------
	Net cash provided by (used in) financing activities             52,500          (90,000)
-----------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                               64,658        1,024,053

Cash at beginning of year                                            1,030,019            5,966
-----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                           $ 1,094,677      $ 1,030,019
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------

Supplemental schedule of noncash financing activity:

  Conversion of advances received from related parties
   to common stock                                                       -          $   280,000
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:

  Cash paid during the year for interest                                 -          $     9,223
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>


1.   OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:

     Lescarden Inc. (the "Company") is engaged in the research, testing and
development of medications for the control and cure of various diseases and
the licensing of its technologies for commercialization by other companies.
In its research and testing to date, the Company has discovered and is
primarily investigating Catrix(R), a complex of mucopolysaccharides derived
from bovine cartilage. The Company is currently selling products using
CATRIX(R) materials and is licensing its technologies in Canada, Europe
and Korea.

     Revenue from product sales is recognized upon shipment of the product
when title to the property and risk of loss transfers to the buyer,  and
collectibility of the sales price is reasonably assured.

     The deferred license fees of $1,143,500 stated on the balance sheet
relate to license fees received from the Company's licensees in Canada,
Europe and Korea which are being amortized straight line over the term of
the license agreements.

     Due to the materiality of the sales of its cosmetics product and food
supplements in addition to the Company's CATRIX(R) Wound Dressing product,
the Company believes it has one business segment for financial reporting
purposes.

     Accounts receivable are reported at their outstanding unpaid principal
balances reduced by an allowance for doubtful accounts.  The Company
estimates doubtful accounts based on historical bad debt, factors related
to specific customers' ability to pay and current economic trends.  The
Company writes off accounts receivable against the allowance when a
balance is determined to be uncollectible.

     Research and development costs are charged to costs and expenses in
the year incurred.

     For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents.

     The Company maintains cash in bank deposit accounts which, at times,
exceed federally insured limits.  The Company has not experienced any
losses on these accounts.

     Basic earnings per share is net income per common share divided by
the weighted-average number of common shares outstanding during the year.
Diluted earnings per share for the year ended May 31, 2006 and 2005 is
computed by dividing net income by the weighted-average number of common
stock and potential common stock (176,733 and 431,177 common stock warrants,
respectively and 92,000 shares of preferred stock, respectively).

     Inventory, consisting principally of Catrix(R) and BIO-CARTILAGE(R)
supplies and Catrix(R) topical wound treatment creams and solutions, is
stated at the lower of cost, determined by the first-in, first-out method,
or market.


     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
use of estimates by management.  Actual results could differ from those
estimates.

     In December 2004, the Financial Accounting Standards Board issued SFAS
No. 123 (revised 2004), Share-Based Payment, ("SFAS 123(R)") which
superceded SFAS No. 123, Accounting for Stock-Based Compensation. and APB
Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No.
123 (R) requires the recognition of stock-based compensation expense in
the financial statements.

     Effective June  1, 2006, the Company adopted SFAS No. 123 (R) utilizing
the modified prospective method.  The implementation of SFAS 123 (R) will
have no impact for the year ended May 31, 2007 since there was no stock
options outstanding at May 31, 2006.

     Under the modified prospective method, the provisions of SFAS No. 123 (R)
apply to all awards granted or modified after the date of adoption. In
addition, the unrecognized expense of awards not yet vested at the date of
adoption, determined under the original provisions of SFAS 123, "Accounting
for Stock Based Compensation", shall be recognized in net earnings in the
periods after the date of adoption.  Stock options are expected to be granted
to employees at exercise prices equal to the fair market value of the Company's
stock at the dates of grant.  Compensation expense for stock options will be
recognized over the period for each separately vesting portion of the stock
option award.

     There is no impact on the basic and diluted earnings per share on the
statement of income. For the 2005 fiscal year the Company elected to apply
Accounting Principles Board ("APB") Opinion No. 25 and related
interpretations in accounting for its stock-based compensation granted to
employees and has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123.  Had the Company elected
to recognize compensation cost based on the fair value of the warrants
granted at the grant date, as prescribed by SFAS No. 123, the Company's
net income and net income per common share would have been as follows:

Year ended May 31,                                          2005
------------------------------------------------------------------

Net income, as reported                                 $ 394,047
Deduct:  Total stock-based employee
 compensation expense determined under
 fair-value-based method for all awards                    (8,905)
-------------------------------------------------------------------

Pro forma net income		                        $ 385,142
-------------------------------------------------------------------
-------------------------------------------------------------------

Income per share, as reported                           $     .01
-------------------------------------------------------------------
-------------------------------------------------------------------

Pro forma                                               $     .01
-------------------------------------------------------------------
-------------------------------------------------------------------

     The fair value of each option granted prior to June 1 , 2006 was
estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for the year
ended May 31, 2005: expected volatility of 262%; risk-free interest rates
of 3.83%; and expected lives of 5 years. There were no options outstanding
at May 31, 2006.

     Recent accounting pronouncements. In July 2006, the Financial
Accounting Standards Board ("FASB") issued FASB Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109 ("FIN 48"), which provides criteria for the recognition,
measurement, presentation and disclosure of uncertain tax positions. A tax
benefit from an uncertain position may be recognized only if it is "more
likely than not" that the position is sustainable based on its technical
merits. The provisions of FIN 48 are effective for fiscal years beginning
after December 15, 2006. The Company does not  expect FIN 48 will have a
material effect on its financial condition or results of operations.

     The Company does not believe that any other recently issued, but not
yet effective accounting standards will have a material effect on the
Company's consolidated financial position, results of operations or cash
flows.

2.   INVENTORY:     Inventory at May 31, 2006 consists of the following:

                      Finished goods                             $ 82,461
                      Raw materials                               120,005
--------------------------------------------------------------------------
                                                                 $202,466
--------------------------------------------------------------------------
--------------------------------------------------------------------------


3.   STOCK OPTIONS AND WARRANTS:

     In the year ended May 31, 1993, the Company approved the "1992
Employee Incentive Stock Plan" (the "1992 Plan").  The 1992 Plan authorized
the issuance of stock options, restricted shares of stock and stock bonus
awards to eligible participants.  The 1992 Plan provides for the reservation
and availability of 2,000,000 shares of common stock, subject to adjustment
for future stock splits, dividends, reorganizations and other similar events,
at exercise prices not less than the fair market value at the date of grant.
Options are exercisable from 12 months after the date of grant and expire 10
years from the date of grant.  At May 31, 2006, no options were granted
under the 1992 Plan.

     The following is a summary of transactions relating to warrants which
are granted at the discretion of the board of directors:

                                                        Weighted-
                                 Number of              average
                                  Warrants            Exercise Price
                                 Exercisable            Per Share
--------------------------------------------------------------------------

Balance at June 1, 2004	         5,726,614               $ 1.14
Granted                            226,149                  .32
Expired                         (1,812,219)                 .35
--------------------------------------------------------------------------

Balance at May 31, 2005          4,140,544                 1.11
Exercised                         (150,000)                 .35
Expired                         (3,137,778)                1.33
--------------------------------------------------------------------------

Balance at May 31, 2006            852,766                $ .24
--------------------------------------------------------------------------
--------------------------------------------------------------------------



     The following table summarizes the information about warrants
outstanding at May 31, 2006:

Warrants Outstanding and Exercisable
--------------------------------------------------------------------------

                                               Weighted-
                                                average      Weighted-
                                               Remaining      average
                  Range of        Number       Contractual    Exercise
               Exercise Price  Outstanding    Life (Years)      Price
------------------------------------------------------------------------

               $  .15               100,000        4.83       $  .15
                  .15625 - .29      362,766        1.38	         .18
                  .30 - .34         390,000        1.58	         .32
------------------------------------------------------------------------
               $  .15 - $2.00	    852,766                   $  .24
------------------------------------------------------------------------
------------------------------------------------------------------------


4.   MAJOR CUSTOMERS AND SUPPLIER:

     During the year ended May 31, 2006 and May 31 2005, sales to two
customers accounted for approximately 57% and 92% of net product sales
respectively.

     Substantially all of the Company's purchases of its primary raw
material for the Company's principal merchandise inventory for the years
ended May 31, 2006 and 2005 were from one vendor.


5.   COMMITMENTS AND CONTINGENCIES:

     The Company has a noncancelable lease with an unrelated third party
to rent office space.  The lease, which expires on January 31, 2011, is
subject to real estate tax escalations and electrical inclusions.  The
aggregate minimum rental payments under this lease are as follows:

Year ending May 31,


        2007                   64,145
        2008                   65,428
        2009                   68,182
        2010                   72,435
        2011                   48,930
--------------------------------------------
	                     $319,120
--------------------------------------------
--------------------------------------------

     Rent expense charged to operations for the years ended May 31, 2006
and 2005 amounted to approximately $85,000 and $71,000, respectively.

     In March 1999, the Company entered into a 10-year license agreement
in which it designated a company located in Spain (a subsidiary of ICN
Pharmaceuticals USA ("ICN")) as a licensee (the "Licensee") of Catrix(R)
Wound Dressing (the "Product").  Upon the signing of the license agreement,
the Company received 50% of an up-front fee it is charging for
distributorship rights.  The balance was paid during the fiscal year ended
May 31, 2001, upon the Company having secured registration and marketing
approval for the Product from the Spanish Health Ministry as required
under the agreement.

     In November 2002, the Company and ICN entered into an agreement,
whereby the Company granted ICN the exclusive license for the Product in
Portugal, Greece and Cyprus for $100,000.  Payment was made by offsetting
this amount against an advance payment from ICN to the Company for Product
that was not shipped.  This amount is being amortized over the remaining
life of the license (six years).  In the accompanying May 31, 2006 balance
sheet, $34,375 is included in deferred license fees.

     On June 4, 2002, the Company announced that it had entered into a
license agreement with another entity related to ICN granting this entity
a 10-year exclusive license to market the Product in Canada. All of the
license fees were paid in the fiscal year ended May 31, 2003, upon the
Company having secured registration and marketing approval for the Product
from the Canadian Health Authorities and are being amortized over the life
of the license.  In the accompanying May 31, 2006 balance sheet, $130,000
is included in deferred license fees.

     On September 16, 2004, the Company announced that it had entered into
a license agreement with Valeant Pharmaceuticals International (formerly
ICN Iberica) granting Valeant a 10-year exclusive license to market
Lescarden's proprietary product, Catrix(R) Wound Dressing throughout Europe.
This agreement expands the current relationship between the two companies.
Valeant Iberica (formerly ICN Iberica), a division of Valeant
Pharmaceuticals International, currently distributes Catrix in Spain,
Portugal, Greece, Cyprus and Malta. The new license agreement expands the
distribution to include the 25 European Union member countries as well as
the Balkan countries, Russia and the other member countries of the
Commonwealth of Independent States. Sales of Catrix(R) commenced in the EU
countries in November and December 2004. In the accompanying May 31, 2006
balance sheet, $928,125 of license fees received from this agreement is
included in deferred license fees.

     On December 22, 2004, the Company announced that it had entered into
a license agreement with Daewoong Pharmaceutical Co. Ltd. of Seoul, Korea
granting Daewoong a 10-year exclusive license to market Lescarden's
proprietary product Catrix(R) Wound Dressing in South Korea. Daewoong is the
fourth largest pharmaceutical manufacturer and distributor in Korea.
Implementation of this agreement is contingent upon securing marketing
approval for the product by the Korean FDA. In the accompanying May 31, 2006
balance sheet, $51,000 of license fees received from this agreement is
included in deferred license fees.

     A revised agreement with a former chairman, which is for a period of
20 years, provides for a minimum annual consultancy fee/pension payment of
$25,000 to be paid in any year in which the Company's net worth is in
excess of $2,500,000 or pretax profits of $500,000 are achieved.  In the
event of the death of this former chairman, any amounts due under this
agreement will be payable to his estate.  Additionally, the agreement
provides for the issuance of nonqualified stock options to purchase 100,000
shares of the Company's common stock.  Under the agreement,  costs cannot
be reasonably estimated principally because the conditions required to
create a  liability do not exist at May 31, 2006 and are not anticipated
in the foreseeable future.


6.   STOCKHOLDERS' EQUITY:

     The convertible preferred stock has a preference upon liquidation of
$1.50 per share; is convertible, at the option of the holder, into one
share of the Company's common stock for each share of preferred stock;
and is callable, at the option of the Company at such time as its net
worth exceeds $3,000,000, for $1.50 per share.  Additionally, holders of
preferred stock are entitled to vote for directors of the Company on a one
-share/one-vote basis.


7.   INCOME TAXES:

     The Company has net operating loss carryforwards of approximately
$4,963,000 available to reduce future taxable income which expire in
various years through 2024.

     The utilization of net operating loss carryforwards may be limited as
a result of cumulative changes in the Company's stock ownership.

     Deferred income taxes reflect the impact of net operating loss
carryforwards.  In recognition of the uncertainty regarding the ultimate
amount of income tax benefits to be derived from the Company's net
operating loss carryforwards, the Company has recorded a valuation
allowance for the entire deferred tax asset.

The deferred income tax asset is comprised of the following at
May 31, 2006:

Net operating loss carryforwards      $ 1,687,000
---------------------------------------------------
Gross deferred tax assets               1,687,000
Valuation allowance                    (1,687,000)
---------------------------------------------------

   Net deferred income tax asset      $   - 0 -
---------------------------------------------------
---------------------------------------------------

A reconciliation of the effective income tax rate to the statutory rate is
as follows:

Year ended May 31,                          2006        2005
---------------------------------------------------------------
Tax benefit at federal statutory rate       (34)%       (34)%
Increase in valuation allowance              34          34
---------------------------------------------------------------
                                          - 0 - %      - 0 -%
---------------------------------------------------------------
---------------------------------------------------------------