U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended May 31, 2009

 ̈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 þNo  ̈

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-K or any amendment to this Form 10-K.   þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer   ̈     Accelerated filer   ̈      Non-accelerated filer   ̈     Smaller reporting company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). .   Yes  ̈No þ

Issuers revenues for its most recent fiscal year were $ 478,531.

The aggregate market value of the registrants Common Stock held by non-affiliates of the registrant on July 10, 2009 was approximately $623,998.

The number of shares of registrants Common Stock outstanding as of August 20, 2009 was 30,943,450.















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Forward Looking Statements

This annual report on Form 10-K 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-K.





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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

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.



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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.

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.



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Burns

In February 2007 a pilot study was presented in Korea demonstrating the benefits of utilizing Catrix Wound Dressing with pediatric patients suffering from 2 ndand 3 rddegree 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.

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.



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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 upcoming fiscal year.

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.

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.

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.



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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.

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.



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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, 2009, the Company had one full time employee. We retain several consultants to assist in the administration of the Company and coordinate ongoing research and clinical trials.

ITEM 1A.

RISK FACTORS

A description of the risks and uncertainties associated with our business is set forth below. You should carefully consider such risks and uncertainties, together with the other information contained in this report and in our other public filings. If any of such risks and uncertainties actually occurs, our business, financial condition or operating results could differ materially from the plans, projections and other forward-looking statements included in the section titled Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report and in our other public filings. In addition, if any of the following risks and uncertainties, or if any other risks and uncertainties, actually occurs, our business, financial condition or operating results could be harmed substantially, which could cause the market price of our stock to decline, perhaps significantly.

The recent changes in general economic conditions, and the resulting impact on consumer confidence and consumer spending, could adversely impact our results of operations.

Our financial performance is subject to changes in general economic conditions and the impact of such economic conditions on levels of consumer confidence and consumer spending. Recently, consumer confidence and consumer spending have deteriorated significantly, and could remain depressed for an extended period of time.  Consumer purchases of discretionary items, including our merchandise, generally decline during periods where disposable income is adversely affected, unemployment rates increase or there is economic uncertainty. The current economic environment could cause our vendors to go out of business or our banks to discontinue lending us money or it could cause us to undergo additional restructurings, any of which would adversely impact our business and operating results.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors views of us could be harmed.

We have evaluated and tested our internal controls in order to allow management to report on our internal controls, as required by Section 404 of the Sarbanes-Oxley Act of 2002. We expect to incur, significant expenses and a diversion of managements time to meet the requirements of Section 404 due to the need to have our auditors attest to our in the future. If we are not able to meet the requirements of Section 404 in a timely manner or with adequate compliance, we would be required to disclose material weaknesses if they develop or are uncovered and we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission. Any such action could negatively impact the perception of us in the financial market and our business. In addition, our internal controls may no prevent or detect all errors and fraud. A control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable assurance that the objectives of the control system will be met.



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As a public company, we will be required to have our auditors attest to the adequacy of internal controls and test compliance therewith for 2010 and future fiscal years.  Due to the limited number of full-time employees, it is likely that the Company will be required to modify certain aspects of its system of internal control to improve segregation of duties and avoid disclosing material weakness.  The costs associated with these requirements will significantly increase the cost of maintaining compliance with public company reporting requirements and may cause the board of directors to consider deregistration of its securities or going dark or other alternatives to avoid diverting management time and cash-flow from operations to comply with the current and future reporting requirements to continue as a registered public company.  Any changes to the Companys status as a registered public company may reduce the availability of public information about the Companys results of operations and negatively impact the market price and liquidity of the Companys stock.

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



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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, 2009 |  | High |      |  | Low | 
|Fourth Quarter                  |  |      | 0.05 |  |     |  | 0.01 | 
|Third Quarter                   |  |      | 0.10 |  |     |  | 0.02 | 
|Second Quarter                  |  |      | 0.08 |  |     |  | 0.01 | 
|First Quarter                   |  |      | 0.14 |  |     |  | 0.08 | 
|                                |  |      |      |  |     |  |      | 
|Fiscal Year Ending May 31, 2008 |  | High |      |  | Low | 
|Fourth Quarter                  |  |      | 0.12 |  |     |  | 0.07 | 
|Third Quarter                   |  |      | 0.12 |  |     |  | 0.08 | 
|Second Quarter                  |  |      | 0.19 |  |     |  | 0.09 | 
|First Quarter                   |  |      | 0.19 |  |     |  | 0.12 | 



On August 20, 2009 the closing bid price per share of Common Stock, as reported by the National Quotation Bureau, was $0.04. As of May 31, 2009 there were 416 holders of record of the Company's Common stock.

ITEM 6.

SELECTED FINANCIAL DATA

Not applicable to smaller reporting Companies.

ITEM 7.

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.  Since that time, 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 that are useful for a variety of plastic surgery, dermatology and medical-spa applications. Sales of two nutritional supplements, BIO-CARTILAGE® and a patented glucosamine polymer, Poly-Nag®, also contribute to the Company's overall sales.

Review

The results of operations for fiscal year ending May 31, 2009 were negatively affected by the need to relocate the packaging process of its core product. The decision by its former packager to discontinue involvement with animal source products necessitated a significant change in its production process and regulatory recertification of the new packager.  The Company received non-recurring payments totaling $80,183 from its former packager in settlement of any and all claims associated with the increased testing and certification costs brought about its decision to discontinue packaging the Companys products which was included in other income for the year ended May 31, 2009.

Trends and Opportunities

The Company continues to focus on both Asia and Europe to include new geographic territories that offer easy access to targeted market segments and reliable distribution partners that are well positioned to strengthen brand awareness and increase demand for the Companys products in growth markets. We believe the market for wound and burn treatment will continue to grow worldwide, 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.



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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.

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 through a sub-licensing agreement with Smith & Nephew signed in July 2007.

The arrangement with Smith & Nephew will help increase Spanish sales of the Wound Dressing and enhance the products reputation as an exceptional wound and burn healing product. The Company is pursuing several other distribution partnerships with established companies in the UK and Greece that, if finalized, will broaden the market size and sales growth potential for the Companys products in Europe.

Korea

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 which should yield a higher level of reimbursement from the local authorities.

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.

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.

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.



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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

Results of Operations

Fiscal year ended May 31, 2009 compared to May 31, 2008

The increase of $46,862 in revenues during the year ended May 31, 2009 compared to May 31, 2008 was attributable to other income of $80,183 associated with a non-recurring payment from the Companys former packager and an increase in Poly-Nag revenues of $99,000 offset by decreases in revenue from the sale of Catrix and skin care products of $61,346 and $53,452 respectively.

The cost of sales during the year ended May 31, 2009 increased by $29,317 or 43% due to a write-off of unsalable inventory of $22,140 and costs associated with the relocation of its packaging process and related testing and certification costs of obtaining regulatory compliance. The Company expects gross margin to return to historical levels upon completion of the testing and certification of its new packaging facility during the second fiscal quarter of 2010.

Total expenses excluding cost of sales during the year ended May 31, 2009 were 30.25% or $232,098 lower than those of the prior year. The decrease was principally due to lower salary expense of $109,460 and lower travel expenses of $103,734 and lower insurance expense of $15,304 associated with workforce reduction and decreased employee benefit costs.

Liquidity and Capital Resources

The Company incurred a net loss of $154,003 for the year ended May 31, 2009. Net cash increased by $1,398 for the fiscal year ended May 31, 2009 due to the excess of increase in loan from shareholder over cash used for operating activities. As of May 31, 2009, the Companys current assets exceeded its accounts payable and accrued expenses by $6,730 due to the excess of increase in loan from shareholder over cash used for operating activities.

The Company has no material commitments for capital expenditures at May 31, 2009.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.



12



---

ITEM 9A

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.

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 10K.

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-K.

Management's report on internal control over financial reporting.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on our financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management assessed the effectiveness of the Company's internal control over financial reporting as of May 31, 2009 based on the framework established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management concluded that, as of May 31, 2009, the Company's internal control over financial reporting was effective based on the criteria established in Internal ControlIntegrated Framework.

This Annual Report on Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting since temporary rules of the SEC permit the Company to provide only management's report on this Annual Report on Form 10-K.

(c)Changes in internal control over financial reporting.

As of the end of the period covered by this report, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended May 31, 2009 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



13



---

PART III



ITEM 10.

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, Chief Executive and Chief Financial Officer, Director.
|George E. Ehrlich, M.D. |  | Director.                                                        
|Charles T. Maxwell      |  | Director.                                                        
|Russell O. Wiese        |  | Director.                                                        
|Xavier Gras Balaguer    |  | Director.                                                        



Mr. Luther (age 49) 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 80) 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 77) 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 43) 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 56) 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 11.

EXECUTIVE COMPENSATION



|                  |  |                           |  |                     |  |                               
|----------------- |  | ------------------------- |  | ------------------- |  | ------------------------------
|                  |  |                           |  | Annual Compensation |  | Long-Term 
Compensation Awards
|Name              |  | Fiscal Year Ended May 31, |  | Salary $            |  | Warrants(#)                   
|William E. Luther |  | 2009                      |  | $100,000            |  |                             
|                  |  | 2008                      |  | $150,000            |  |                             
|                  |  | 2007                      |  | $150,000            |  |                             





14



---

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                                           |  | Exercisable                                                     
|W.E. Luther |  |                             |  |                |  | Warrants
210,000                                      |  | Warrants
                                                     



ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of May 31, 2009 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 Class
|                   |  |                                                                      |  |                                      |  |                 
|Common Stock       |  | Charles T. Maxwell
420 Lexington Ave.
Suite 212
New York, NY 10170   |  | 12,733,512                           |  | 41.15%          
|                   |  |                                                                      |  |                                      |  |                 
|                   |  | George Ehrlich
420 Lexington Ave.
Suite 212
New York, NY 10170       |  | 150,000                              |  | 0.48%           
|                   |  |                                                                      |  |                                      |  |                 
|                   |  | William Luther
420 Lexington Ave.
Suite 212
New York, NY 10170       |  | 310,000                              |  | 1.00%           
|                   |  |                                                                      |  |                                      |  |                 
|                   |  | Russel O. Wiese
420 Lexington Ave.
Suite 212
New York, NY 10170      |  | 2,000,000                            |  | 6.46%           
|                   |  |                                                                      |  |                                      |  |                 
|                   |  | Xavier Gras Balaguer
420 Lexington Ave.
Suite 212
New York, NY 10170 |  | 150,000                              |  | 0.48%           
|                   |  |                                                                      |  |                                      |  |                 
|                   |  | Directors and Officers as a Group
5 persons                          |  | 15,343,512                           |  | 49.59%          



(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, 2009 are included in the number of shares beneficially owned, but such shares are not included in the calculation of the percent of class. All share ownership is direct unless otherwise indicated.





15



---

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the year ended May 31, 2009 the major stockholder of the Company provided a loan to the Company in the amount of $182,000. This loan is non-interest bearing and due on demand.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

On January 7, 2008, we were notified that certain of the partners of Goldstein Golub & Kessler LLP (GGK) became partners of McGladrey & Pullen in a limited asset purchase agreement. As a result, GGK resigned as our independent registered public accounting firm effective as of January 7, 2008 and McGladrey & Pullen was appointed by our Board of Directors as our new independent registered public accounting firm for the Companys annual financial statements for the year ended May 31, 2008. Our Board of Directors has approved the selection of McGladrey & Pullen to audit our financial statements for the year ending May 31, 2008, and such appointment was ratified by the shareholders.

Through January 7, 2008, GGK had a continuing relationship with RSM McGladrey, Inc. (RSM) from which it leased auditing staff who were full time, permanent employees of RSM and through which its partners provided non-audit services. Subsequent to January 7, 2008, this relationship ceased and McGladrey & Pullen established, and maintains, a similar relationship with RSM. McGladrey & Pullen has no full time employees and, therefore, none of the audit services were provided by permanent full-time employees of McGladrey & Pullen. McGladrey & Pullen manages and supervises the audit and audit staff and is exclusively responsible for the opinion rendered in connection with its examination.

The following table sets forth the fees billed by our independent accountants for each of our last two fiscal years for the categories of services indicated.

| |                       |  |      |        |      |   |        |  | 
| | --------------------- |  | ---- | ------ | ---- | - | ------ |  | 
| |                       |  | 2009 |        | 2008 |   |       
| | Audit fees(1)         |  | $    | 32,500 |      | $ | 32,500 |  | 
| | Audit-related fees(2) |  |      |       |      |   |       |  | 
| | Tax fees(3)           |  | $    | 2,500  |      | $ | 2,500  |  | 



(1)

Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

(2)

Consists of assurance and related services that are reasonably related to the performance of the audit and reviews of our financial statements and are not included in audit fees in this table. The services provided by our accountants within this category consisted of advice relating to SEC matters and employee benefit matters.

(3)

Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.

ITEM 15.

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



16



---



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      
|Date:  September 9, 2009 |                | William E. Luther
President
|                         |               



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    |  | President, Principal Executive Officer,  
|    | William E. Luther        |  | Principal Financial Officer,             
|    | September 9, 2009        |  | Principal Accounting Officer and Director
|    |                          |  |                                          
|By: | /s/ George E. Ehrlich    |  | Director                                 
|    | George E. Ehrlich        |  |                                          
|    | September 9, 2009        |  |                                          
|    |                          |  |                                          
|By: | /s/ Charles T. Maxwell   |  | Director                                 
|    | Charles T. Maxwell       |  |                                          
|    | September 9, 2009        |  |                                          
|    |                          |  |                                          
|By: | /s/ Russell O. Wiese     |  | Director                                 
|    | Russell O. Wiese         |  |                                          
|    | September 9, 2009        |  |                                          
|    |                          |  |                                          
|By: | /s/ Xavier Gras Balaguer |  | Director                                 
|    | Xavier Gras Balaguer     |  |                                          
|    | September 9, 2009        |  |                                          



17



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LESCARDEN INC.

INDEX TO FINANCIAL STATEMENTS



|                                                                              |           
|----------------------------------------------------------------------------- | ----------
|Report of Independent Registered Public Accounting Firm                       | F-2       
|Balance Sheets as of May 31, 2009 and 2008                                    | F-3       
|Statements of Operations for the Years Ended May 31, 2009 and 2008            | F-4       
|Statements of Stockholders' Deficit for the Years Ended May 31, 2009 and 2008 | F-5       
|Statements of Cash Flow for the Years Ended May 31, 2009 and 2008             | F-6       
|Notes to Financial Statements                                                 | F-7  F-10



F-1



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Lescarden Inc.

We have audited the accompanying balance sheets of Lescarden Inc. (the "Company") as of May 31, 2009 and 2008, and the related statements of operations, stockholders' deficit, and cash flows for the years 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, 2009 and 2008, and the results of its operations and its cash flows for the years then ended in conformity with United States generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, and has a stockholders deficiency and working capital deficiency. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We were not engaged to examine managements assertion of the effectiveness of the Companys internal control over financial reporting as of May 31, 2009, included in the accompanying Managements Report on Internal Control over Financial Reporting and, accordingly, we do not express an opinion thereon.



McGLADREY & PULLEN, LLP

New York, New York

September 9, 2009



F-2



---

LESCARDEN INC.

BALANCE SHEETS

|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | - |  | - | ----------- | -
|As of May 31,                                                                                                                                                     |  |   | 2009        |   |  |   | 2008        |  
|ASSETS                                                                                                                                                            |  |   |             |   |  |   |             |  
|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|Current assets:                                                                                                                                                   |  |   |             |   |  |   |             |  
|Cash and cash equivalents                                                                                                                                         |  | $ | 40,265      |   |  | $ | 38,867      |  
|Accounts receivable                                                                                                                                               |  |   | 23,151      |   |  |   | 82,490      |  
|Inventory                                                                                                                                                         |  |   | 163,278     |   |  |   | 219,637     |  
|Total current assets                                                                                                                                              |  |   | 226,693     |   |  |   | 340,994     |  
|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|Deferred income tax asset, net of valuation allowance of $1,485,000
and $1,425,000, respectively                                                                  |  |   |           |   |  |   |           |  
|Total assets                                                                                                                                                      |  | $ | 226,693     |   |  |   | $340,994    |  
|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                             |  |   |             |   |  |   |             |  
|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|Liabilities:                                                                                                                                                      |  |   |             |   |  |   |             |  
|Accounts payable and accrued expenses                                                                                                                             |  | $ | 219,963     |   |  |   | $173,506    |  
|Shareholder loan                                                                                                                                                  |  |   | 189,000     |   |  |   | 7,000       |  
|Deferred revenue                                                                                                                                                  |  |   | 7,640       |   |  |   | 42,722      |  
|Deferred license fees                                                                                                                                             |  |   | 110,804     |   |  |   | 264,477     |  
|Total liabilities                                                                                                                                                 |  |   | 527,407     |   |  |   | 487,705     |  
|                                                                                                                                                                  |  |   |             |   |  |   |             |  
|Stockholders' deficit:                                                                                                                                            |  |   |             |   |  |   |             |  
|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       |   |  |   | 1,840       |  
|Common stock - $.001 par value; authorized 200,000,000 issued and outstanding 30,943,450 shares                                                                   |  |   | 30,943      |   |  |   | 30,943      |  
|Additional paid-in capital                                                                                                                                        |  |   | 16,617,615  |   |  |   | 16,617,615  |  
|Accumulated deficit                                                                                                                                               |  |   | (16,951,112 | ) |  |   | (16,797,109 | )
|Stockholders' deficit                                                                                                                                             |  |   | (300,714    | ) |  |   | (146,711    | )
|Total liabilities and stockholders' deficit                                                                                                                       |  | $ | 226,693     |   |  |   | $340,994    |  





See Notes to Financial Statements

F-3



---



LESCARDEN INC.

STATEMENTS OF OPERATIONS

|                                                      |  |      |            |   |      |   |            |  
|----------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|Year ended May 31,                                    |  | 2009 |            |   | 2008 |  
|Revenues:                                             |  |      |            |   |      |  
|Product sales                                         |  | $    | 244,643    |   |      | $ | 272,874    |  
|License fees                                          |  |      | 153,674    |   |      |   | 156,344    |  
|Other income                                          |  |      | 80,183     |   |      |   |            |  
|Interest income                                       |  |      | 31         |   |      |   | 2,451      |  
|Total revenues                                        |  |      | 478,531    |   |      |   | 431,669    |  
|                                                      |  |      |            |   |      |   |            |  
|Costs and expenses:                                   |  |      |            |   |      |   |            |  
|Cost of product sales                                 |  |      | 97,619     |   |      |   | 68,302     |  
|Salaries and wages                                    |  |      | 162,476    |   |      |   | 271,935    |  
|Professional fees and consulting                      |  |      | 182,071    |   |      |   | 186,714    |  
|Rent and office expenses                              |  |      | 108,057    |   |      |   | 115,638    |  
|Travel and meetings                                   |  |      | 14,378     |   |      |   | 118,112    |  
|Insurance                                             |  |      | 47,482     |   |      |   | 62,786     |  
|Other administrative expenses                         |  |      | 20,451     |   |      |   | 11,997     |  
|Total costs and expenses                              |  |      | 632,534    |   |      |   | 835,484    |  
|Net loss                                              |  | $    | (154,003   | ) |      | $ | (403,815   | )
|Net loss per common share - basic and diluted         |  | $    | (.00       | ) |      | $ | (.01       | )
|                                                      |  |      |            |   |      |   |            |  
|Weighted-average number of common shares outstanding: |  |      |            |   |      |   |            |  
|Basic                                                 |  |      | 30,943,450 |   |      |   | 30,943,450 |  
|Diluted                                               |  |      | 30,943,450 |   |      |   | 30,943,450 |  





See Notes to Financial Statements

F-4



---

LESCARDEN INC.

STATEMENTS OF STOCKHOLDERS DEFICIT

|                        |  |                       |        |  |                  |   |       |                  |  |  |                  |  |  |                            |        |  |                     |   |            |                                |  |   |             |   |  |   |          |  
|----------------------- |  | --------------------- | ------ |  | ---------------- | - | ----- | ---------------- |  |  | ---------------- |  |  | -------------------------- | ------ |  | ------------------- | - | ---------- | ------------------------------ |  | - | ----------- | - |  | - | -------- | -
|                        |  | Convertible Preferred |        |  | Common Stock     |   |       |                  |  |  |                  |  |  |                            |       
|                        |  | Stock                 |        |  |                  |   |       |                  |  |  |                  |  |  |                            |       
|                        |  | Number of Shares      |        |  | Par Value Amount |   |       | Number of Shares |  |  | Par Value Amount |  |  | Additional Paid-in Capital |        |  | Accumulated Deficit |   |            | Stockholders Equity (Deficit) | 
|                        |  |                       |        |  |                  |   |       |                  |  |  |                  |  |  |                            |        |  |                     |   |            |                                | 
|Balance at May 31,
2007 |  |                       | 92,000 |  |                  | $ | 1,840 |                  |  |  | 30,943,450       |  |  | $                          | 30,943 |  |                     | $ | 16,617,615 |                                |  | $ | (16,393,294 | ) |  | $ | 257,104  |  
|Net loss                |  |                       |        |  |                  |   |       |                  |  |  |                  |  |  |                            |        |  |                     |   |            |                                |  |   | (403,815    | ) |  |   | (403,815 | )
|Balance at May 31,
2008 |  |                       | 92,000 |  |                  |   | 1,840 |                  |  |  | 30,943,450       |  |  |                            | 30,943 |  |                     |   | 16,617,615 |                                |  |   | (16,797,109 | ) |  |   | (146,711 | )
|Net loss                |  |                       |        |  |                  |   |       |                  |  |  |                  |  |  |                            |        |  |                     |   |            |                                |  |   | (154,003    | ) |  |   | (154,003 | )
|Balance at May 31,
2009 |  |                       | 92,000 |  |                  | $ | 1,840 |                  |  |  | 30,943,450       |  |  | $                          | 30,943 |  |                     | $ | 16,617,615 |                                |  | $ | (16,951,112 | ) |  | $ | (300,714 | )



See Notes to Financial Statements

F-5



---

LESCARDEN INC.

STATEMENTS OF CASH FLOWS

|                                                  |  |      |          |   |      |   |          |  
|------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|Year ended May 31,                                |  | 2009 |          |   | 2008 |  
|Cash flows from operating activities:             |  |      |          |   |      |  
|Net loss                                          |  | $    | (154,003 | ) |      | $ | (403,815 | )
|                                                  |  |      |          |   |      |   |          |  
|Changes in operating assets and liabilities:      |  |      |          |   |      |   |          |  
|Decrease in accounts receivable                   |  |      | 59,340   | ) |      |   | 3,884    | )
|Decrease in inventory                             |  |      | 56,359   |   |      |   | 4,529    |  
|Increase in accounts payable and accrued expenses |  |      | 46,457   | ) |      |   | 127,322  | )
|(Decrease) increase in deferred revenue           |  |      | (35,082  | ) |      |   | 42,722   |  
|Decrease in deferred license fees                 |  |      | (153,673 | ) |      |   | (156,344 | )
|Net cash used in operating activities             |  |      | (180,602 | ) |      |   | (381,702 | )
|                                                  |  |      |          |   |      |   |          |  
|Cash flows from financing activities:             |  |      |          |   |      |   |          |  
|Increase in shareholder loan                      |  |      | 182,000  |   |      |   | 7,000    |  
|Cash provided by financing activities             |  |      | 182,000  |   |      |   | 7,000    |  
|                                                  |  |      |          |   |      |   |          |  
|Net increase (decrease) in cash                   |  |      | 1,398    |   |      |   | (374,702 | )
|Cash and cash equivalents at beginning of year    |  |      | 38,867   |   |      |   | 413,569  |  
|Cash and cash equivalents at end of year          |  | $    | 40,265   |   |      | $ | 38,867   |  



See Notes to Financial Statements

F-6



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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.

The accompanying financial statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability of assets and the satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern.

As shown in the financial statements, the Company incurred a loss from operations for the year ended May 31, 2009, has a stockholders deficiency and a working capital deficiency. The Companys major stockholder has committed to provide loan to the Company as needed to fund operating expenses until the Company can return to profitability. These conditions raise substantial doubt about the Companys ability to continue as a going concern.

The Companys plan and ability to continue as a going concern is primarily dependent upon successful regulatory certification of its new packager which will enable the Company to grow revenue through existing and new lines of business. There can be no assurance that the Company will be able to grow revenues or secure sufficient additional financing to meet future obligations.

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 $110,804 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, 2009.

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.

Basic earnings (loss) per share is computed by dividing net income (loss) per common share by the weighted-average number of common shares outstanding during the year. Diluted earnings per share has not been presented in the accompanying statement of operations since warrants to purchase 438,783 and 488,783 shares of the Companys common stock , were not included in the calculation, due to the fact that these warrants were anti-dilutive for the years ended May 31, 2009 and 2008, 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



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LESCARDEN INC.

NOTES TO FINANCIAL STATEMENTS



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.

Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income TaxesAn Interpretation of FASB Statement No. 109." FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. Upon the adoption of FIN 48, the Company had no unrecognized tax benefits.

Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carryforwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence; it is more likely than not such benefits will be realized. The Company recognizes interest and penalties, if any, related to uncertain tax positions in selling, general and administrative expenses. No interest and penalties related to uncertain tax positions were accrued at May 31, 2009.

The tax years 2005 through 2008 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax positions within the next twelve months.

2.

INVENTORY:

|                                                |  |   |         |  |      |        
|----------------------------------------------- |  | - | ------- |  | ---- | -------
|Inventory at May 31, consists of the following: |  |   | 2009    |  | 2008
|Finished goods                                  |  | $ | 62,653  |  | $    | 83,198 
|Raw materials                                   |  |   | 100,625 |  |      | 136,439
|                                                |  | $ | 163,278 |  | $    | 219,637

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, 2009, 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 Share |  
|Balance at June 1, 2007 |  |                                | 538,783 |   |                                         | $ | .28 | 
|Expired                 |  |                                | (50,000 | ) |                                         |   | .34 | 
|Balance at May 31, 2008 |  |                                | 488,783 |   |                                         | $ | .28 | 
|Expired                 |  |                                | (50,000 | ) |                                         |   | .34 | 
|Balance at May 31, 2009 |  |                                | 438,783 |   |                                         | $ | .28 | 



F-8



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LESCARDEN INC.

NOTES TO FINANCIAL STATEMENTS



The following table summarizes the information about warrants outstanding at May 31, 2009:

|                                     |            |  |                     |  |         |                                                      |  |  |                                 |  |  |   |     | 
|------------------------------------ | ---------- |  | ------------------- |  | ------- | ---------------------------------------------------- |  |  | ------------------------------- |  |  | - | --- | 
|Warrants Outstanding and Exercisable |           
|Range of Excise Price                |            |  | Number
 Outstanding |  |         | Weighted-average
Remaining Contractual 
life (years) |  |  | Weighted Average
 Excise Price | 
|$                                    | .15        |  |                     |  | 50,000  |                                                      |  |  | 2.83                            |  |  | $ | .15 | 
|                                     | .25 - $.29 |  |                     |  | 48,783  |                                                      |  |  | 1.89                            |  |  |   | .25 | 
|$                                    | .30 - $.34 |  |                     |  | 340,000 |                                                      |  |  | 2.25                            |  |  |   | .32 | 
|$                                    | .15 - $.34 |  |                     |  | 438,783 |                                                      |  |  | 2.33                            |  |  | $ | .28 | 

4.

MAJOR CUSTOMERS AND SUPPLIER:

During the year ended May 31, 2009 and May 31 2008, sales to two customers accounted for approximately 73% and 53% 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, 2009 and 2008 were from one vendor.

5.

COMMITMENTS AND CONTINGENCIES:

The Company has a non-cancelable 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, |  |   |        
|2010                |  | $ | 72,435  | 
|2011                |  |   | 48,930  | 
|                    |  | $ | 121,365 | 



Rent expense charged to operations for the years ended May 31, 2009 and 2008 amounted to approximately $87,000 and $83,000, 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 balance sheets, $70,000 and $90,000 is included in deferred license fees at May 31, 2009 and 2008 respectively.

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 balance sheets, $4,989 and $135,477 of license fees received from this agreement is included in deferred license fees at May 31, 2009 and 2008 respectively.

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 balance sheet, $33,000 and $39,000 of license fees received from this agreement is included in deferred license fees at May 31, 2009 and 2008 respectively.



F-9



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LESCARDEN INC.

NOTES TO FINANCIAL STATEMENTS



6.

STOCKHOLDERS' DEFICIT:

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 $4,369,000 available to reduce future taxable income, which expire in various years through 2034.

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, 2009 and 2008 respectively:

|                              |  |      |            |   |      |   |            |  
|----------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                              |  | 2009 |            |   | 2008 |  
|Gross deferred tax assets     |  | $    | 1,485,000  |   |      | $ | 1,435,000  |  
|Valuation allowance           |  |      | (1,485,000 | ) |      |   | (1,435,000 | )
|Net deferred income tax asset |  | $    | -0-        |   |      | $ | -0-        |  



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



|                                      |  |      |       |  |      |  |       | 
|------------------------------------- |  | ---- | ----- |  | ---- |  | ----- | 
|Year ended May 31,                    |  | 2009 |       |  | 2008 | 
|Tax benefit at federal statutory rate |  |      | (34)% |  |      |  | (34)% | 
|Increase in valuation allowance       |  |      | 34    |  |      |  | 34    | 
|                                      |  |      | -0-%  |  |      |  | -0-%  | 

8.

RELATED PARTY TRANSACTIONS:

During the year ended May 31, 2009 the major stockholder of the Company provided a loan to the Company in the amount of $182,000. This loan is non-interest bearing and due on demand.





F-10