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, 2007





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








**420
      Lexington Avenue, New York,
      NY****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 $ 1,062,806.













The
      aggregate market value of the registrant’s Common Stock held by nonaffiliates of
      the registrant on July 12, 2007 was approximately $2,339,991.





The
      number of shares of registrant’s Common Stock outstanding as of July 12, 2007
      was 30,943,450.




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





**Forward
      Looking Statements**





This
      annual report on Form 10-KSB contains predictions projections and other
      statements about the future that are intended to be forward-looking statements
      within the meaning of Section 21E of the Securities Exchange Act of 1934, as
      amended (collectively “forward-looking statements”).  Forward-looking
      statements involve risks and uncertainties.  A number of important
      factors could cause actual results to differ materially from those in the
      forward-looking statements.  In assessing forward-looking statements,
      readers are urged to read carefully all cautionary statements including those
      contained in other sections of this annual report on Form 10-KSB.





2





**PART
      I**





**ITEM
                1.**
            **BUSINESS**





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, clinical skin care,
      osteoarthritis and cancer applications.   In the ensuing years,
      significant studies substantiated the ability of Catrix®, Lescarden's
      proprietary cartilage powder, to function as a biological response modifier
      by
      stimulating the body's immune system. This response has significant,
      demonstrated benefits for chronic wound management, and has been investigated
      as
      a potential treatment for certain types of cancer. Further studies indicated
      that Catrix has potent anti-inflammatory properties that could also be effective
      against diseases such as arthritis, scleroderma and psoriasis.





With
      a
      solid clinical platform, the Company in recent years has focused its strategy
      toward 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® 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 with
      additional registration activities proceeding in Asia.





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® and POLY-Nag®, 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®.





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





3





**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. 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) and maintaining an environment that is conducive to proper
                healing.








**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® 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® 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 in 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.”*





4





*“...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® reduced
      the average cost by 40%.





Nine
      additional studies have been undertaken in Italy, Germany, Spain, Hungary and
      Poland to further establish the credibility of Catrix to heal chronic
      ulcerations.





**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® 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® 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
      February 2007 a pilot study was presented in Korea demonstrating the benefits
      of
      utilizing Catrix Wound Dressing with pediatric patients suffering from 2nd and 3rd
      degree burns. The
      purpose was to evaluate whether Catrix could provide caregivers with a viable
      alternative to skin grafting, the standard treatment for these severe
      burns.





The
      results will be published soon. They indicate that Catrix Wound Dressing can
      indeed provide a healing option comparable to graft surgery without the
      complications and expense associated with grafting. This approach will receive
      further study, but it appears to offer a new, non-invasive method for treating
      severe burns that is safer and more cost-effective.





Many
      plastic surgeons that provide primary care for burn patients are already
      familiar with the Catrix skin care line, which they utilize to aid in healing
      cosmetic surgical procedures. Since these surgeons are already part of
      Lescarden’s customer base, they would appear to be excellent prospects to
      purchase the Catrix Wound Dressing to treat burn patients. Lescarden intends
      to
      capitalize on this opportunity.





5





**Catrix
      Skin Care**





Catrix®
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
      Catrix-based 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.





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
      treated 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® Rejuvenation Cream and a 5% Catrix®
      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





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.





Lescarden
      recently engaged in two clinical studies of Poly-NAG’s effect in
      animals.  The purpose was to better define the marketability of
      Poly-NAG for veterinary applications, a market where North American sales of
      anti-arthritic remedies are over $400 million annually. The results of these
      laboratory animal studies were similar to those of the human tests, confirming
      that Poly NAG’s activity in the organism lasts longer than the effects with
      standard glucosamine.  This important point of differentiation should
      provide a meaningful market advantage when Poly-NAG is introduced into the
      veterinary marketplace





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








**Distribution**




**Europe**





In
      January 2007 the Company completed the termination of the license, originally
      signed in August 2004, with Valeant Pharmaceuticals Switzerland GmbH to market
      Catrix Wound Dressing in Europe. This decision was made due to Valeant shifting
      its focus away from the core market for Catrix, hospitals and primary care
      physicians, toward specialty markets such as immunology. Under the termination
      agreement, Valeant will continue to distribute its existing inventory of Catrix
      Wound Dressing in the markets it serves. By terminating the license, the Company
      is now free to pursue new license and distribution deals with partners better
      able to penetrate the wound care market.





In
      July
      2006 the Company took the first step toward rebuilding its European distribution
      when it 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 field sales representation of Catrix in Spain.


New
      orders from Smith and Nephew are expected in the forth quarter of
      2007.





**Korea**





Sales
      of
      Catrix based skin care products in Korea have increased by over 20% from last
      year to $230,000 in fiscal year ended May 31, 2007. 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
      450 dermatologists using Catrix-based skin care products in Korea.





7





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
      2006 Daewoong's total revenues exceeded $400 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 2007. With this approval, Daewoong hopes to commence
      the marketing of Catrix to the hospital and clinical market by the end of
      2007.





**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® 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® 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® (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 (Health Canada) and the
      SHM (Spanish Ministry of Health) exercise regulatory authority over the
      development, testing, formulation, manufacture, labeling, storage, record
      keeping, quality control, advertising and promotion of the Company's
      products.





8





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 are 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 is subject to foreign
      regulatory authorities with respect to clinical trials and pharmaceutical
      sales.  Whether or not 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®
is
      manufactured for the Company
      by contract manufacturers. These manufacturers 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®, and its Poly-NAG® are manufactured in the United States and
      Iceland. An additional manufacturer is being developed in the Western Pacific
      Area.





Catrix®
      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.****All Catrix® 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® in
      patients.








**Intellectual
      Property**





The
      Company was granted and owns, by
      assignment, several United States patents. There are similar patents or pending
      patents in various foreign countries. We also rely on trade secrets, know-how
      and continuing technological innovation to maintain our competitive position.
      We
      use other methods to protect our proprietary rights, including confidentiality
      agreements and proprietary information agreements with vendors, employees,
      consultants and others that may have access to proprietary
      information.





9





**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."





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





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








**Human
      Resources**





At
      August 12, 2007, the Company had
      three full time employees. We retain several consultants to assist in the
      administration of the Company and coordinate 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





10





**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, 2007**
            
            **High**
            
            
            **Low**Fourth
                Quarter
            
            
            0.20
            
            
            
            0.13Third
                Quarter
            
            
            0.25
            
            
            
            0.13Second
                Quarter
            
            
            0.28
            
            
            
            0.15First
                Quarter
            
            
            0.40
            
            
            
            0.26**Fiscal
                Year Ending May 31, 2006**
            
            **High**
            
            
            **Low**Fourth
                Quarter
            
            
            0.38
            
            
            
            0.23Third
                Quarter
            
            
            0.35
            
            
            
            0.25Second
                Quarter
            
            
            0.41
            
            
            
            0.25First
                Quarter
            
            
            0.45
            
            
            
            0.31








On
      July 12, 2007 the closing bid price
      per share of Common Stock, as reported by the National Quotation Bureau, was
      $0.15.  As of May 31, 2007 there were 416 holders of record of the
      Company's Common stock.





**ITEM
                6.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF
                OPERATIONS**








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®,
      Lescarden's proprietary cartilage powder, to function as a biological response
      modifier, by stimulating the body's immune system.  This response has
      significant demonstrated benefits for chronic wound management and has been
      investigated as a potential treatment for certain types of cancer. Further
      studies have indicated that Catrix has potent anti-inflammatory properties
      that
      could also be effective against diseases such as arthritis, scleroderma and
      psoriasis.





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® and a patented glucosamine polymer,
      Poly-Nag®, also contribute to the Company's overall sales.





11





**Review**





The
      fiscal year ending May 31, 2007 was a transitional year for Lescarden. Sales
      of
      Catrix Wound Dressing in Europe, our leading market for chronic wound sales
      to
      date, were curtailed by our decision to terminate our exclusive distribution
      agreement with Valeant Pharmaceuticals Switzerland GmbH. The termination was
      a
      response to Valeant’s shift in their strategic focus toward specialty markets
      such as dermatology and infectious diseases, and away from hospitals and primary
      care doctors.





Since
      the
      prime targets for the Wound Dressing, burns and chronic wounds, are typically
      treated by the hospital and primary care physicians, it became clear that
      Valeant would no longer be able to promote and sell the product to its full
      potential. Lescarden is now taking steps to rebuild its penetration of the
      European market. The Company is also expanding its presence in certain Asian
      markets which will help offset the reduction in European sales.





**Trends
      and Opportunities**





The
      core
      markets for our products continue to present significant opportunities for
      the
      Company. We believe the market for wound and burn treatment will continue to
      grow, driven by an aging population, an increase in obesity which is a cause
      of
      a higher incidence of diabetes, as well as the proven clinical benefits of
      Catrix to address the challenge of healing wounds that otherwise have proven
      difficult using standard treatment modalities.





The
      demand for clinical and cosmetic surgical and laser procedures continues to
      display double digit growth as baby boomers increasingly look to the medical
      profession to help them maintain a youthful appearance . Our Catrix skin care
      line can fill an important role in such procedures by speeding the recovery
      and
      reducing the inflammation without the use of topical steroids. The market for
      clinical skin care procedures has been particularly strong in Asia, where Catrix
      based skin care products have performed well.





In
      addition, the global community is demonstrating greater appreciation for the
      value of biologic products by the medical community; especially in the area
      of
      tissue regeneration and orthopedics. At the same time world-wide use of
      nutritional supplements and natural products is also expanding with a greater
      acceptance of non-traditional treatments and the wider availability of
      information supporting the potential benefits to patients We feel these trends,
      combined with the market opportunities already present, bodes well for the
      future of the Company.








Our
      own
      FDA is taking a tougher stance against products whose claims are difficult
      to
      substantiate and whose safety is uncertain. Our products in this market,
      Bio-Cartilage and Poly-NAG, have been clinically shown to be both safe and
      beneficial, so we feel we are effectively positioned for growth.





12





**Europe**





In
      February 2007 the Company announced that it had terminated its license agreement
      with Valeant Pharmaceuticals Switzerland GmbH as their exclusive European
      distributor of Catrix Wound Dressing. Despite the termination, we are continuing
      our presence the European market and promoting the value of the Wound Dressing
      as a valuable healing asset in the treatment of burns and chronic
      wounds.





Lescarden
      is currently pursuing new licensing partnerships with organizations that are
      more capable of servicing the primary care and hospital markets. In July 2006,
      Lescarden took the first step as it entered into an agreement with Smith &
Nephew, a leader in the wound care market, to distribute Catrix Wound Dressing
      in Spain. Smith & Nephew has extensive field experience and a solid
      reputation among physicians in the Spanish market.





We  believe
      this new arrangement will help increase Spanish sales of the Wound Dressing
      and
      enhance the product’s reputation as an exceptional wound and burn healing
      product. Smith & Nephew sales of the product have grown 12% in the last
      quarter as inventory inherited from Valeant is liquidated. We anticipate new
      orders from Smith & Nephew before the end of calendar 2007.




**Korea**





Catrix
      based skin care products in Korea continue to perform well, posting an increased
      of over 20% to $230,000 in the fiscal year ended May 31, 2007. This reflects
      the
      continuing marketing efforts of our distributor BioAlpha and the strength of
      Korean demand for clinical skin care products. Currently there are over 450
      dispensing skin care specialists who carry our Catrix-based product line. New
      line extensions are being introduced to meet demand in the Korean anti-aging
      market.








In
      December 2004, Lescarden entered into a definitive license agreement with
      Daewoong Pharmaceuticals, headquartered in Seoul, South Korea. Daewoong is
      the
      largest producer and marketer of over-the counter and ethical pharmaceutical
      products in Korea, with annual sales over $400.million. Already established
      in
      the diabetic foot ulcer segment of the market, Daewoong is enlarging its product
      line to cover all aspects of wound treatment. The addition of Catrix Wound
      Dressing enables Daewoong to target a broader range of clinical
      indications.





Obtaining
      marketing approvals from the Korean Food and Drug Administration (KFDA) has
      taken longer than expected. The delay has resulted from the KFDA designating
      Catrix as a class IV medical device. Once approved, this designation - which
      requires more extensive documentation and testing – should yield a higher level
      of reimbursement from the local authorities. The anticipated date for approval
      is September 2007 with product launch to follow.




**Philippines**





In
      December 2005, Lescarden announced that it has signed a distribution agreement
      with Pascual Laboratories, a leading marketer 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.





13





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 experience as a leader in the sales of over the counter products
      should provide marketing and distribution efficiencies as Poly-NAG enters the
      market.





The
      application for Poly-NAG’s marketing approval has been submitted the Bureau of
      Food and Drug. It is anticipated that the product will receive full approval
      by
      the end of 2007; with product launch commencing in the first quarter of
      2008.




In
      January 2007, the Company announced that it has signed an exclusive distribution
      agreement for Catrix skin care products with Newmed Distributors, Inc.. Newmed
      is an emerging Philippine Company whose principals have extensive experience
      in
      Pediatrics, Surgery, Dermatology and Oncology. Marketing approval sare expected
      soon from the local regulatory authorities, and Newmed has already placed its
      initial purchase orders with the Company. Marketing plans target a formal launch
      of theCatrix skin care line at the Philippine Dermatological Society annual
      meeting in November 2007.




**Significant
      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.





14





**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








**Results
      of Operations**


**Fiscal
      year ended May 31, 2007 compared to May 31, 2006**





The
      decrease of $510,206 in
      revenues during the year ended May 31, 2007 compared to May 31, 2006 was
      attributable to our European licensee’s decision to transition the distribution
      of Catrix in Europe to a sub-licensee that could better serve the critical
      care
      market for the Company’s product.  We believe that the existing
      sub-license agreement will allow sales of Catrix in Europe to return to
      historical levels by the end of the 2008 fiscal year.  The
      restructuring of our European license agreements and related reduction in sales
      in Europe were offset by significant increases in revenues from Korea and the
      Philippians. Also included in revenues for the year ended May 31 2007 was
      licensing fee income of $722,679 compared with $178,908 during the year ended
      May 31, 2006 which includes  $618,750  resulting from a
      termination of a license fee contract which resulted in recognition of the
      remaining non refundable deferred license fees.  We  are
      aggressively pursuing licensing and distribution agreements in other Asian
      countries and estimates that an increasing amount of sales growth for our
      products will come from this region in coming years.





The
      cost of sales during the year ended
      May 31, 2007 declined by 452,879 or 82% due to reduction in product sales and
      the costs of packaging and design changes brought about by the renegotiation
      of
      our European license agreements during the previous fiscal year.  We
      have taken steps to reduce the costs of packaging and design in the emerging
      Asian markets and anticipates further efficiencies as sales volume
      increases.  We have also structured our Asian license agreements to
      have the shipping costs paid by the licensees which resulted in a reduction
      of
      $34,355 in shipping costs for the year ended May 31, 2007.  The
      remainder of the decrease in cost of sales as a percent of sales was
      attributable to the $543,771 increase in licensing fee income.





Total  expenses
      excluding cost of sales during the year ended May 31, 2007 were 10% or $91,423
      lower than those of the comparative prior year. The decrease was principally
      due
      to lower professional fees and consulting of $35,626 and commissions of
      $28,361.





15





**Liquidity
      and Capital Resources**








The
      Company earned net income of $138,269 in the year ended May 31,
      2007.  However, net cash decreased by $681,108 in the fiscal year
      ended May 31, 2007. As of May 31, 2007, the Company’s current assets exceeded
      its accounts payable and accrued expenses by $677,925.


The
      Company’s cash balance decreased by $681,108 in the year ended May 31, 2007
      compared to an increase of $64,658 in the year ended May 31, 2006. The Company
      received no license fees in the year ended May 31, 2007 compared to $375,000
      in
      the year ended May 31, 2006.




The
      material direct costs related to the Catrix®
      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,
      2007.








**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  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.





16





The
      Company has carried out an evaluation, under the supervision and with the
      participation of the Company’s management, including the Company’s Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of the Company’s disclosure controls and procedures. Based
      on such evaluation, the Company’s Chief Executive Officer and Chief Financial
      Officer concluded that the Company’s disclosure controls and procedures are
      effective as of the end of the period covered by this 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
            PositionWilliam
                E. Luther
            President
                and Chief Executive Officer, Chief Financial Officer,
                Director.George
                E. Ehrlich, M.D.
            Director.Charles
                T. Maxwell
            Director.Russell
                O. Wiese
            Director.Xavier
                Gras Balaguer
            Director.




17





Mr.
      Luther (age 47) came to Lescarden
      in 1997, serving as Marketing Director for the CATRIX® 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 78) 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 75) 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 41) is the Chief
      Marketing Officer of Davis Advisors, L.P., an Investment Advisor that manages
      over $65 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 54) 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 AwardsName
                and principle position
            
            Fiscal
                Year EndedMay
                31,
            
            Salary
                $
            
            Warrants(#)William
                E. Luther
            
            2007
            
            $150,0002006
            
            $138,542
            
            -2005
            
            $119,333
            
            100,000




18




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


Shares
                Acquired on Exercise
            
            Value
                Realized
            
            Number
                of Unexercised Options/Warrants
                at FY End (#)
            
            Value
                of Unexercised In-the-money Options Warrants at FY End
                ($)Name
            
            (#)
            
            ($)
            
            Exercisable
            
            ExercisableW.E.
                Luther
            
            
            
            
            
            Warrants
            
            Warrants210,000
            
            -




**ITEM
                11.**
            **SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT**




The
      following table sets forth, as of
      May 31, 2007 the ownership of the Company's Common Stock by each person who
      is
      known by the Company to own Shares of record or beneficially, more that (5%)
      of
      the Company's Common Stock, as well as each of the Company’s directors and
      executive officers and 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 Class (1)
            
            Name
                and Address of Beneficial Owner
            
            Number
                of Shares beneficially Owned
            
            Percent
                of ClassCommon
                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%




19





(1)
      The percentages are calculated on
      the basis of 30,943,450 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, 2007 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**








**Exhibit
                Number**
            **Description
                of Exhibit**2.1
            Plan
                of Reorganization dated. January 15, 1997 (and Amended Disclosure
                Statement dated. 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.*31
            Certification
                pursuant to Exchange Act
                Rule  13a-14(a)/15d-14(a)32
            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,
                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,
      2007.




20




**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. LutherWilliam
                E. Luther, PresidentAugust
                28, 2007





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
                28, 2007
            President,
                Principal Executive
              Officer,
                Principal Financial
              Officer,
                Principal Accounting
              Officer
                and DirectorBy:
            S/George
                E. Ehrlich
              George
                E. Ehrlich
              August
                28, 2007
            DirectorBy:
            S/
                Charles T. Maxwell
              Charles
                T. Maxwell
              August
                28, 2007
            DirectorBy:
            S/
                Russell O. Wiese
              Russell
                O. Wiese
              August
                28, 2007
            DirectorBy:
            S/
                Xavier Gras Balaguer
            DirectorXavier
                Gras Balaguer
              August
                28, 2007




21




**LESCARDEN
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**





**LESCARDEN
                INC**
            **INDEX
                TO FINANCIAL STATEMENTS**





Report
                of Independent Registered Public Accounting Firm
            F-2Balance
                Sheet as of May 31, 2007
            F-3Statement
                of Income for the Years Ended May 31, 2007 and 2006
            F-4Statement
                of Stockholders' Equity for the Years Ended May 31, 2007 and
                2006
            F-5Statement
                of Cash Flows for the Years Ended May 31, 2007 and 2006
            F-6Notes
                to Financial Statements
            F-7
                – F-11









**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, 2007, and the related statements of income, stockholders' 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, 2007,
      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.





/s/
      Goldstein Golub Kessler LLP


**GOLDSTEIN
      GOLUB KESSLER LLP**


New
      York,
      New York





August
      23, 2007










**LESCARDEN
        INC.**


**BALANCE
                SHEET**May
                31, 2007**ASSESTS**Current
                AssetsCash
                and cash equivalents
            
            $
            413,569Accounts
                receivable
            
            
            86,374Inventory
            
            
            224,166**Total
                current assets**
            
            
            724,109Deferred
                Income Tax Asset, net of valuation allowance of $1,451,000**Total
                Assets**
            
            $
            724,109**LIABILITY
                AND STOCKHOLDERS’ EQUITY**Liabilities:Accounts
                payable and accrued expenses
            
            $
            46,184Deferred
                license fees
            
            
            420,821**Total
                liabilities**
            
            
            467,005Commitments
                and ContingenciesStockholders'
                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
            
            
            1,840Common
                stock - $.001 par value; authorized 200,000,000 issued and outstanding
                30,943,450 shares
            
            
            30,943Additional
                paid-in capital
            
            
            16,617,615Accumulated
                deficit
            
            
            (16,393,294
            )**Stockholders'
                equity**
            
            
            257,104**Total
                Liabilities and Stockholders' Equity**
            
            $
            724,109





See
      Notes
      to Financial Statements





F-3


**LESCARDEN
        INC.**


**STATEMENT
                OF INCOME****Year
                ended May 31,**
            
            **2007**
            
            
            **2006**Revenue:Product
                sales
            
            $
            325,723
            
            
            $
            1,379,700License
                fees
            
            
            722,679
            
            
            
            178,908Interest
                income
            
            
            14,404
            
            
            
            12,110Total
                revenue
            
            
            1,062,806
            
            
            
            1,570,718Costs
                and expenses:Cost
                of product sales
            
            
            102,811
            
            
            
            590,045Salaries:Officer
            
            
            150,000
            
            
            
            138,542Office
            
            
            101,378
            
            
            
            96,732Professional
                fees and consulting
            
            
            194,822
            
            
            
            230,448Commissions
            
            
            29,100
            
            
            
            57,461Research
                and development
            
            
            -
            
            
            
            20,397Rent
                and office expenses
            
            
            107,812
            
            
            
            126,378Travel
                and meetings
            
            
            144,359
            
            
            
            126,551Payroll
                and other taxes
            
            
            20,455
            
            
            
            19,144Insurance
            
            
            56,000
            
            
            
            62,199Other
                administrative expenses
            
            
            17,800
            
            
            
            35,297Total
                costs and expenses
            
            
            924,537
            
            
            
            1,503,194Net
                income
            
            $
            138,269
            
            
            $
            67,524Net
                income per common share - basic and diluted
            
            $
            .00
            
            
            $
            .00Weighted-average
                number of common shares outstanding:Basic
            
            
            31,038,423
            
            
            
            30,919,918Diluted
            
            
            31,038,423
            
            
            
            31,176,151





See
      Notes
      to Financial Statements





F-4




**LESCARDEN
        INC.**


**STATEMENT
                OF STOCKHOLDERS’ EQUITY**Convertible
                Preferred Stock
            
            
            Common
                StockNumber
                of Shares
            
            
            Par
                Value Amount
            
            
            Number
                of Shares
            
            
            Par
                Value Amount
            
            
            Additional
                Paid-in Capital
            
            
            Accumulated
                Deficit
            
            
            Stockholders’
                EquityBalance
                at May 31, 2005
            
            
            92,000
            
            
            $
            1,840
            
            
            
            30,907,418
            
            
            $
            30,907
            
            
            $
            16,582,246
            
            
            $
            (16,599,087
            )
            
            $
            15,906Issuance
                of common stock  upon exercise of warrant
            
            
            
            
            
            
            
            
            
            
            150,000
            
            
            
            150
            
            
            
            52,350
            
            
            
            
            
            
            
            52,500Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            67,524
            
            
            
            67,524Balance
                at May 31, 2006
            
            
            92,000
            
            
            
            1,840
            
            
            
            31,057,418
            
            
            
            31,057
            
            
            
            16,634,596
            
            
            
            (16,531,563
            )
            
            
            135,930Repurchase
                of common stock
            
            
            
            
            
            
            
            
            
            
            (113,968
            )
            
            
            (114
            )
            
            
            (16,981
            )
            
            
            
            
            
            
            (17,095
            )Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            138,269
            
            
            
            138,269Balance
                at May 31, 2007
            
            
            92,000
            
            
            $
            1,840
            
            
            
            30,943,450
            
            
            $
            30,943
            
            
            $
            16,617,615
            
            
            $
            (16,393,294
            )
            
            $
            257,104





See
      Notes
      to Financial Statements





F-5




**LESCARDEN
        INC.**


**STATEMENT
                OF CASH FLOWS****Year
                ended May 31,**
            
            **2007**
            
            
            **2006**Cash
                flows from operating activities:Net
                income
            
            $
            138,269
            
            
            $
            67,524Changes
                in operating assets and liabilities:Increase
                in accounts receivable
            
            
            (17,551
            )
            
            
            (58,253
            )Decrease
                in prepaid expense
            
            
            -
            
            
            
            2,959Increase
                in inventory
            
            
            (21,700
            )
            
            
            (100,025
            )Decrease
                in accounts payable and accrued expenses
            
            
            (40,352
            )
            
            
            (95,922
            )(Decrease)
                increase in deferred license fees
            
            
            (722,679
            )
            
            
            195,875**Net
                cash (used in) provided by operating activities**
            
            
            (664,013
            )
            
            
            12,158Cash
                flows from financing activities:Repurchase
                of common stock
            
            
            (17,095
            )
            
            
            -Proceeds
                from issuance of common stock
            
            
            -
            
            
            
            52,500**Net
                cash (used in) provided by financing activities**
            
            
            (17,095
            )
            
            
            52,500Net
                (decrease) increase in cash
            
            
            (681,108
            )
            
            
            64,658Cash
                and cash equivalents at beginning of year
            
            
            1,094,677
            
            
            
            1,030,019Cash
                and cash equivalents at end of year
            
            $
            413,569
            
            
            $
            1,094,677





See
      Notes
      to Financial Statements





F-6


**LESCARDEN
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**


**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®, a complex
      of
      mucopolysaccharides derived from bovine cartilage. The Company is currently
      selling products using CATRIX® 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 $420,821 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.





The
      Company believes it has one business segment for financial reporting purposes
      since it operates in the medical products industry.





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. No allowance was needed at May 31, 2007.





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 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, 2007 and 2006 is computed by dividing net income
      by the weighted-average number of common stock and potential common stock 0
      and
      176,733 common stock warrants, respectively.





Inventory,
      consisting principally of Catrix® and
      BIO-CARTILAGE®
      supplies and Catrix® 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.





F-7




**LESCARDEN
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**


In
      December 2004, the Financial Accounting Standards Board issued SFAS No. 123
      (revised 2004), *Share-Based Payment,* ("SFAS 123(R)") which
      superseded 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 ® had no
      impact on the statement of income for the years ended May 31, 2007 and 2006
      since there was no stock option expense recorded by the Company.




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.





*Recent
      accounting pronouncements.*




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.




In
      July 2006, the Financial Accounting Standards Board (“FASB”) issued
      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 the Company’s financial condition or results of
      operations.





F-8




**LESCARDEN
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**


**2.**
            **INVENTORY:**





Inventory
                at May 31, 2007 consists of the following:Finished
                goods
            
            $
            76,479Raw
                materials
            
            
            147,687$
            224,166








**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, 2007, 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:





Number
                of Warrants Exercisable
            
            
            Weighted-average
                Excise Price per ShareBalance
                at June 1, 2005
            
            
            4,140,544
            
            
            $
            1.11Exercised
            
            
            (150,000
            )
            
            
            .35Expired
            
            
            (3,137,778
            )
            
            
            1.33Balance
                at May 31, 2006
            
            
            852,766
            
            
            
            .24Expired
            
            
            (313,983
            )
            
            
            .16Balance
                at May 31, 2007
            
            
            538,783
            
            
            $
            .28





The
      following table summarizes the information about warrants outstanding at May
      31,
      2007:





Warrants
                Outstanding and ExercisableRange
                of Excise Price
            
            
            Number
                Outstanding
            
            
            Weighted-average
                Remaining Contractual life (years)
            
            
            Weighted
                –Average Excise Price$
            .15
            
            
            
            100,000
            
            
            
            3.83
            
            
            $
            .15****
            .25
                -.29
            
            
            
            48,783
            
            
            
            2.84
            
            
            
            .25.30
                -.34
            
            
            
            390,000
            
            
            
            .58
            
            
            
            .32$
            .15
                - $.34
            
            
            
            538,783
            
            
            
            
            
            
            $
            .28




F-9




**LESCARDEN
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**


**4.**
            **MAJOR
                CUSTOMERS AND SUPPLIER:**





During
      the year ended May 31, 2007 and May 31 2006, sales to three and two customers
      accounted for approximately 79% and 57% 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 year ended May 31, 2006 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 escalations based on real estate taxes and utilities.  The
      aggregate minimum rental payments under this lease are as follows:





Year
                ending May 31,2008
            
            $
            65,4282009
            
            
            68,1822010
            
            
            72,4352011
            
            
            48,930$
            254,975




Rent
      expense charged to operations for the years ended May 31, 2007 and 2006 amounted
      to approximately $74,000 and $85,000, respectively.





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, 2007 balance sheet, $110,000 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®Wound Dressing
      throughout Europe. This agreement expanded the
      existing relationship between the two companies. In July 2006, the company
      approved a sub-license agreement between Valent and Smith and Nephew for
      distribution of Catrix® wound dressing
      in
      Spain through June 15, 2009. The company terminated its agreements with Valent
      except for distribution in Spain which expires on June 15, 2009. In the
      accompanying May 31, 2007 balance sheet, $265,821 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®Wound Dressing
      in
      South Korea. Daewoong is the fourth largest pharmaceutical manufacturer and
      distributor in Korea. In the accompanying May 31, 2007 balance sheet, $45,000
      of
      license fees received from this agreement is included in deferred license
      fees.





F-10




**LESCARDEN
        INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**


**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 carry forwards of approximately $4,267,000
      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,
      2007:





Net
                operating loss carryforwards
            
            $
            1,451,000Gross
                deferred tax assets
            
            
            1,451,000Valuation
                allowance
            
            
            (1,451,000
            )**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,
            
            2007
            
            
            2006Tax
                benefit at federal statutory rate
            
            
            (34)%
            
            
            
            (34)%Increase
                in valuation allowance
            
            
            34
            
            
            
            34-0-%
            
            
            
            -0-%




F-11