|
Item 1.
|
Financial Statements
|
Our
consolidated financial statements included in this Form 10-Q are as follows:
|
F-1
|
Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020
(unaudited);
|
|
F-2
|
Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and March
31, 2020 (unaudited);
|
|
F-3
|
Condensed Consolidated Statements of Stockholders’ Deficit for the three months
ended March 31, 2021 and 2020 (unaudited);
|
|
F-4
|
Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 2021 and 2020
(unaudited);
|
|
F-5
|
Notes to Condensed Consolidated Financial Statements.
|
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
March 31, 2021
|
|
December 31, 2020
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,667
|
|
|
$
|
35,896
|
Accounts receivable
|
|
|
6,500
|
|
|
|
7,718
|
Prepaid expense and other current assets
|
|
|
3,250
|
|
|
|
6,500
|
Total current assets
|
|
|
22,417
|
|
|
|
50,114
|
|
|
|
|
|
|
|
|
Patents and trademarks, net
|
|
|
146,329
|
|
|
|
150,130
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
168,746
|
|
|
$
|
200,244
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
952,243
|
|
|
$
|
865,497
|
Accounts payable related party
|
|
|
500
|
|
|
|
7,616
|
Accrued interest payable
|
|
|
1,140,282
|
|
|
|
1,021,373
|
Derivative liability
|
|
|
40,471
|
|
|
|
—
|
Loans from related party
|
|
|
52,499
|
|
|
|
52,499
|
Notes payable
|
|
|
552,000
|
|
|
|
552,000
|
Convertible notes payable
|
|
|
220,000
|
|
|
|
220,000
|
Total current liabilities
|
|
|
2,957,995
|
|
|
|
2,718,985
|
|
|
|
|
|
|
|
|
Convertible notes payable related party, net of unamortized discount of $2,447,770 and $3,060,970 respectively
|
|
|
1,939,902
|
|
|
|
1,787,439
|
Convertible notes payable, net of unamortized debt discount of $203,476 and
$54,450, respectively, less current portion
|
|
|
161,133
|
|
|
|
148,599
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,059,030
|
|
|
|
4,655,023
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common stock; $0.001 par value; 200,000,000 shares authorized; 4,539,843 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
|
|
|
4,540
|
|
|
|
4,540
|
Shares payable
|
|
|
—
|
|
|
|
—
|
Additional paid-in capital
|
|
|
30,241,089
|
|
|
|
30,241,089
|
Accumulated deficit
|
|
|
(35,135,913
|
)
|
|
|
(34,700,408)
|
Total stockholders' deficit
|
|
|
(4,890,284
|
)
|
|
|
(4,454,779)
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit
|
|
$
|
168,746
|
|
|
$
|
200,244
|
See
Accompanying Notes to Condensed Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three months ended
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
12,051
|
|
|
$
|
16,052
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
3,300
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
8,751
|
|
|
|
16,052
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,251
|
|
|
|
9,720
|
Selling general and administrative
|
|
|
115,627
|
|
|
|
136,324
|
Total operating expenses
|
|
|
119,878
|
|
|
|
146,044
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(111,127
|
)
|
|
|
(129,992)
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(283,907
|
)
|
|
|
(300,092)
|
Loss on change of derivative liability
|
|
|
(40,471
|
)
|
|
|
|
Total other expense
|
|
|
(324,378
|
)
|
|
|
(300,092)
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(435,505
|
)
|
|
$
|
(430,084)
|
|
|
|
|
|
|
|
|
Basic loss per common share
|
|
|
(0.10
|
)
|
|
$
|
(0.10)
|
|
|
|
|
|
|
|
|
Fully diluted loss per common share
|
|
|
(0.10
|
)
|
|
$
|
(0.10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
4,539,843
|
|
|
|
4,471,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully diluted weighted average common shares outstanding
|
|
|
4,539,843
|
|
|
|
4,471,746
|
See
Accompanying Notes to Condensed Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional Paid-in
Capital
|
|
|
|
Shares
payable
|
|
|
|
Accumulated
Deficit
|
|
|
|
Total
Stockholders’ Deficit
|
Balance, December 31, 2020
|
|
|
4,539,843
|
|
|
$
|
4,540
|
|
|
$
|
30,241,089
|
|
|
$
|
—
|
|
|
$
|
(34,700,408
|
)
|
|
$
|
(4,454,779)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(435,505
|
)
|
|
|
(435,505)
|
Balance, March 31, 2021
|
|
|
4,539,843
|
|
|
$
|
4,540
|
|
|
$
|
30,241,089
|
|
|
$
|
—
|
|
|
$
|
(35,135,193
|
)
|
|
$
|
(4,890,284)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
4,471,746
|
|
|
$
|
4,472
|
|
|
$
|
30,181,555
|
|
|
$
|
59,602
|
|
|
$
|
(33,252,796
|
)
|
|
$
|
(3,007,167)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(430,084
|
)
|
|
|
(430,084)
|
Balance, March 31, 2020
|
|
|
4,471,746
|
|
|
$
|
4,472
|
|
|
$
|
30,181,555
|
|
|
$
|
59,602
|
|
|
$
|
(33,682,880
|
)
|
|
$
|
(3,437,251)
|
See Accompanying
Notes to Condensed Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three months ended
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(435,505
|
)
|
|
$
|
(430,084)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,251
|
|
|
|
9,720
|
Amortization of debt discount
|
|
|
164,997
|
|
|
|
165,137
|
Loss on change of derivative liability
|
|
|
40,471
|
|
|
|
—
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease (Increase) in prepaid assets
|
|
|
3,250
|
|
|
|
1,625
|
Decrease (Increase) in accounts receivable
|
|
|
1,218
|
|
|
|
1,795
|
Increase in accounts payable and accrued liabilities
|
|
|
86,746
|
|
|
|
101,003
|
Decrease in due from related party
|
|
|
—
|
|
|
|
|
Increase in accrued interest
|
|
|
118,909
|
|
|
|
134,955
|
Net cash provided used in operating activities
|
|
|
(15,663
|
)
|
|
|
(15,849)
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Purchase of fixed and intangible assets
|
|
|
(450
|
)
|
|
|
(870)
|
Net cash used in investing activities
|
|
|
(450
|
)
|
|
|
(870)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Payments on related party loans
|
|
|
(7,116
|
)
|
|
|
—
|
Proceeds from related party loans
|
|
|
—
|
|
|
|
22,000
|
Net cash provided by (used in) financing activities
|
|
|
(7,116
|
)
|
|
|
22,000
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(23,229
|
)
|
|
|
5,281
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
35,896
|
|
|
|
1,298
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
12,667
|
|
|
$
|
6,579
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
Cash paid for tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
See
Accompanying Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021
(Unaudited)
1. DESCRIPTION
OF BUSINESS AND HISTORY
Description of business – Skinvisible,
Inc., (referred to as the “Company”) is focused on the development and manufacture and sales of innovative topical,
transdermal and mucosal polymer-based delivery system technologies and formulations incorporating its patent-pending formula/process
for combining hydrophilic and hydrophobic polymer emulsions. The technologies and formulations have broad industry applications
within the pharmaceutical, over-the-counter, personal skincare and cosmetic arenas. Additionally, the Company’s non-dermatological
formulations, offer solutions for a broad spectrum of markets women’s health, pain management, and others. The Company maintains
executive and sales offices in Las Vegas, Nevada.
History – The Company was incorporated
in Nevada on March 6, 1998, under the name of Microbial Solutions, Inc. The Company underwent a name change on February 26, 1999,
when it changed its name to Skinvisible, Inc. The Company’s subsidiary’s name of Manloe Labs, Inc. was also changed
to Skinvisible Pharmaceuticals, Inc.
Skinvisible, Inc., together with its subsidiaries,
shall herein be collectively referred to as the “Company.”
2. BASIS
OF PRESENTATION AND GOING CONCERN
Basis of presentation – The accompanying
unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with the instructions to Quarterly Report on Form 10-Q and
Article 10 of Regulation S-X , and should be read in conjunction with the audited financial statements and notes thereto contained
in the Company’s most recent Annual Financial Statements on Form 10-K filed with the SEC on April 15, 2021. In the opinion
of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim
period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which
would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period,
as reported in the Form 10-K, have been omitted.
The condensed consolidated balance sheet at
December 31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.
Going concern – 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. For the three months ended March 31, 2021, the Company had a net loss of $435,505 The Company
has also incurred cumulative net losses of $35,135,913 since its inception and requires capital for its contemplated operational and marketing
activities to take place. These factors, among others, raises substantial doubt about the Company’s ability to continue as a going
concern within one year from the date of filing.
Managements plans for the Company are to generate
the necessary funding through licensing of its core products and to seek additional debt and equity funding. However, the
Company’s ability to generate the necessary funds through licensing or raise additional capital through the future issuances
of common stock or debt is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated
plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to
continue operations. The consolidated financial statements of the Company do not include any adjustments that may result from the
outcome of these aforementioned uncertainties.
COVID-19 Pandemic
In December 2019, an outbreak of a novel
strain of coronavirus originated in Wuhan, China (“COVID-19”) and has since spread worldwide, including to the Unites States,
posing public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”). The COVID-19 Pandemic poses a
threat to the health and economic wellbeing of our employees, customers and vendors. Like most businesses world-wide, the COVID-19 Pandemic
has impacted the Company financially; however, management cannot presently predict the scope and severity with which COVID-19 will impact
our business, financial condition, results of operations and cash flows.
3. SUMMARY OF
SIGNIFICANT POLICIES
This summary of significant accounting policies of Skinvisible
Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements
and notes are representations of the Company’s management, who are responsible for
their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the consolidated financial statements.
Principles of consolidation –
The consolidated financial statements include the accounts of the Company and its subsidiary Skinvisible Pharmaceuticals Inc. All
significant intercompany balances and transactions have been eliminated.
Use of estimates – The preparation
of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates
used to review the Company’s, impairments and estimations of long-lived assets, allowances for uncollectible accounts, inventory
valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Cash and cash equivalents – For
purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term instruments with original
maturities of three months or less to be cash equivalents.
Accounting for Derivatives - The Company evaluates
all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair
value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based
derivative financial instruments, the Company uses a Binomial lattice pricing model to value the derivative instruments at inception
and on subsequent valuation dates.
The classification of derivative instruments, including
whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the
derivative instrument could be required within 12 months of the balance sheet date.
Fair Value of financial instruments
–The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the
short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks
arising from these financial instruments. The carrying amount of the Company’s convertible debt is also stated at a fair
value since the stated rate of interest approximates market rates.
Fair value is defined as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques
used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes
a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.
|
•
|
Level 1 Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. The Company uses Level 1 measurements to value the transactions when it issues shares, warrants, options and debt with beneficial conversion features.
|
|
•
|
Level 2 Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments. The Company did not rely on any Level 2 measurements for any of its transactions in the periods included in these financial statements.
|
|
•
|
Level 3 Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The Company did not rely on any Level 3 measurements for any of its transactions in the periods included in these financial statements.
|
Financial assets and liabilities measured at fair value on
a recurring basis are summarized below as of March 31, 2021:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,471
|
|
|
$
|
40,471
|
As of
March 31, 2021, the Company’s used the following assumptions to value the derivative liabilities using the for Binomial-Lattice
valuation model. Stock price was $0.11, term 0.50 years, risk-free discount rate of 0.16% and volatility of 110.66%
The following table provides a summary
of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value
on a recurring basis using significant unobservable inputs:
|
|
Amount
|
Balance December 31, 2020
|
|
$
|
—
|
Change in fair market value of derivative liabilities
|
|
|
40,471
|
Balance March 31, 2021
|
|
$
|
40,471
|
Revenue recognition – We recognize
revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board's (“FASB”)
Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which requires that five steps
be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii) identify the performance obligations
in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or
as the entity satisfied a performance obligation.
Product sales –
Revenues from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the
customer and only when no further contingencies or material performance obligations are warranted, and thereby have earned the
right to receive reasonably assured payments for products sold and delivered.
Royalty sales –
We also recognize royalty revenue from licensing our patented product formulations only when earned, with no further contingencies
or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
Distribution
and license rights sales – We also recognize revenue from distribution and license rights when no further contingencies
or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
The Company has made an accounting policy election
to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are collected by the
Company from its customers (sales and use taxes, value added taxes, some excise taxes).
Accounts Receivable – Accounts
receivable is comprised of uncollateralized customer obligations due under normal trade terms requiring payment within 30 days
from the invoice date. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines
that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected
is recorded. Management reviews each accounts receivable balance that exceeds 30 days from the invoice date and, based on an assessment
of creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of March 31, 2021 and December
31, 2020, the Company had not recorded a reserve for doubtful accounts.
Stock-based
compensation - The Company records
stock based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expenses related
to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using intrinsic
value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of
all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments
issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached
by the ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of
the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other
than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods
or services as defined by ASC 505-50.
Earnings (loss) per share – The Company
reports earnings (loss) per share in accordance with FASB Codification Topic ASC 260-10 “Earnings Per Share”, Basic
earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common
shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator
is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented for the quarter ending
March 31, 2021, since the effect of the assumed exercise of options and warrants to purchase common shares (common stock equivalents)
would have an anti-dilutive effect. There are 30,779,400 additional shares issuable in connection with outstanding options, warrants,
stock payable and convertible debts as of March 31, 2021. The shares issuable under each instrument is as follows; 100,000 shares issuable
for options, 60,000 shares issuable for warrants, and 30,619,400 shares issuable under convertible notes.
Recently issued accounting pronouncements
– The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a material
effect on the Company's financial position, results of operations or cash flows.
4. INTANGIBLE
AND OTHER ASSETS
Patents and trademarks and other intangible
assets are capitalized at their historical cost and are amortized over their estimated useful lives. As of March 31, 2021, intangible
assets total $261,726, net of $115,846 of accumulated amortization. As of December 31, 2020, intangible assets total $261,726,
net of $111,596 of accumulated amortization.
Amortization expense for the three months ended March 31,
2021 and 2020 was $4,251 and $9,720, respectively. License and distributor rights were acquired by the Company in January 1999
and provide exclusive use distribution of polymers and polymer based products. The Company has a non-expiring term on the license
and distribution rights. Accordingly, the Company annually assesses this license and distribution rights for impairment and has
determined that no impairment write-down is considered necessary as of March 31, 2021.
5. RELATED PARTY
TRANSACTIONS
During the three months ended March 31, 2021 and 2020,
$0 and $22,000 was advanced by an officer and $7,616 and $0 was repaid, respectively .
As of March 31, 2021 and December 31, 2020, $52,499 and
$52,499 in advances remained due to officers of the company, respectively. All other related party notes have been extinguished
or re-negotiated as convertible notes.
Convertible Notes Related
Party
Convertible Notes Payable Related Party consists of the following:
|
|
March 31, 2021
|
|
December 31, 2020
|
On June 30, 2019, the Company renegotiated accrued salaries, accrued interest, unpaid reimbursements, cash advances, and outstanding convertible notes for its two officers. Under the terms of the agreements, all outstanding notes totaling $2,464,480, accrued interest of $966,203, accrued salaries of $617,915, accrued vacation of $64,423, unpaid reimbursements of $11,942 and cash advances of $110,245 were converted to promissory notes convertible into common stock with a warrant feature. The convertible promissory notes are unsecured, due five years from issuance, and bear an interest rate of 10%. At the investor’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.20 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.30 per share for three years after the conversion date.
The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $3,369,244. The aggregate beneficial conversion feature associated with these notes has been accreted and charged to interest expenses as a financing expense in the amount of $105,880 during the year ended March 31, 2021 and 2020, respectively.
|
|
$
|
4,235,209
|
|
|
$
|
4,235,209
|
Unamortized debt discount
|
|
|
(2,295,307
|
)
|
|
|
(2,447,770)
|
Total, net of unamortized discount
|
|
$
|
1,939,302
|
|
|
$
|
1,787,439
|
6. NOTES PAYABLE
Secured debt offering
During the period from May 22, 2013
and December 31, 2018, the Company entered into a 9% notes payable to nineteen investors and received proceeds of $552,000. The
notes were due two years from the anniversary date of execution. The Notes are secured by the US Patent rights granted for the
Company's Sunscreen Products: US patent number #8,128,913: "Sunscreen Composition with Enhanced UV-A Absorber Stability and
Methods.”
As of March 31, 2021, $552,000 of
the outstanding notes payable are past due and in default and have been classified as current notes payable.
7. CONVERTIBLE
NOTES PAYABLE
Convertible Notes Payable consists of the following:
|
|
March 31,
|
|
December 31,
|
|
|
2021
|
|
2020
|
$40,000 face value 9% secured notes payable to investors, due in 2015. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90% of the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®.
The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of March 31, 2021,
the fair value of the derivative is $7,358. The Company determined the derivative was immaterial as of December 31, 2020. The notes have
reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.
|
|
|
40,000
|
|
|
|
40,000
|
Original issue discount
|
|
|
—
|
|
|
|
—
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
On October 26, 2015 the Company
issued a $135,000 face value 9% unsecured notes payable to investors, due October 26, 2017. At the investor’s option until the
repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90% of
the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license
agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®. The Company
evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of March 31, 2021, the fair
value of the derivative is $24,834. The Company determined the derivative was immaterial as of December 31, 2020. The note has reached maturity and is in default.
|
|
|
135,000
|
|
|
|
135,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
135,000
|
|
|
|
135,000
|
|
|
|
|
|
|
|
|
On February 17, 2016, the Company
entered into a convertible promissory note pursuant to which it borrowed $20,000. Interest under the convertible promissory note is
9% per annum, and the principal and all accrued but unpaid interest is due on February 17, 2018. The note is convertible at any time
following 90 days after the issuance date at noteholders option into shares of our common stock at a variable conversion price of
90% of the average five day market price of our common stock during the 5 trading days prior to the notice of conversion, subject to
adjustment as described in the note. The holder’s ability to convert the note, however, is limited in that it will not be
permitted to convert any portion of the note if the number of shares of our common stock beneficially owned by the holder and its
affiliates, together with the number of shares of our common stock issuable upon any full or partial conversion, would exceed 4.99%
of the Company’s outstanding shares of common stock. The Company evaluated the conversion feature of the note and concluded
that it represents an embedded derivative. As of March 31, 2021, the fair value of the derivative is $3,679. The Company determined
the derivative was immaterial as of December 31, 2020. The note has reached maturity and is in default.
|
|
|
20,000
|
|
|
|
20,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
20,000
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
On August 11, 2016, the Company
entered into a convertible promissory note pursuant to which it borrowed $15,000. Interest under the convertible promissory note is
9% per annum, and the principal and all accrued but unpaid interest is due on August 11, 2018. The note is convertible into shares
of our common stock at a variable conversion price of 90% of the average market price of our common stock during the 5 trading days
prior to the notice of conversion, subject to adjustment as described in the note. The Company evaluated the conversion feature of
the note and concluded that it represents an embedded derivative. As of March 31, 2021, the fair value of the derivative is $2,759.
The Company determined the derivative was immaterial as of December 31, 2020. The note has reached maturity and is in default.
|
|
|
15,000
|
|
|
|
15,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
On January 27, 2017, the Company entered into a convertible promissory note pursuant to which it borrowed $10,000. Interest under the convertible promissory note is 9% per annum, and the principal and all accrued but unpaid interest is due on January 27, 2019. The note is convertible into shares of our common stock at a variable conversion price of 90% of the average market price of our common stock during the 5 trading days prior to the notice of conversion, subject to adjustment as described in the note. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of March 31, 2021, the fair value of the derivative is $1,840.
The Company determined the derivative was immaterial as of December 31, 2020 The note has reached maturity and is in default.
|
|
|
10,000
|
|
|
|
10,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
On June 30, 2019, the Company renegotiated accrued salaries and interest and outstanding convertible notes for a former employee. Under the terms of the agreements, all outstanding notes totaling $224,064, accrued interest of $119,278, accrued salaries of $7,260 and accrued vacation of $1,473 were converted to a promissory note convertible into common stock with a warrant feature. The convertible promissory note is unsecured, due five years from issuance, and bears an interest rate of 10%. At the noteholder’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.20 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.30 per share for three years after the conversion date.
The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $280,076 as valued under the intrinsic value method. The aggregate beneficial conversion feature has been accreted and charged to interest expenses in the amount of $12,534 and $12,674 for the three months ended March 31, 2021 and 2020, respectively.
|
|
|
352,075
|
|
|
|
352,075
|
Unamortized debt discount
|
|
|
(190,942
|
)
|
|
|
(203,476
|
Total, net of unamortized discount
|
|
|
161,133
|
|
|
|
148,599
|
Total Convertible Notes
|
|
$
|
381,133
|
|
|
$
|
368,599
|
Current portion:
|
|
|
220,000
|
|
|
|
220,000
|
Total long-term convertible notes
|
|
$
|
161,133
|
|
|
$
|
148,599
|
The Company
determined the derivative liability of the options using the Binomial model.
The variables used for the Binomial model as of March 31, 2021 are as
listed below:
Risk free interest rate
|
|
|
0.16
|
%
|
Expected term (years)
|
|
|
.50
|
|
Expected volatility
|
|
|
110.66
|
%
|
8. COMMITMENTS
AND CONTINGENCIES
License Agreement
On October 17, 2019, Skinvisible
entered an Exclusive License Agreement with Quoin pursuant to which Skinvisible granted to Quoin a license to certain patents for the
development of products for commercial sale. In exchange for the license, Quoin agreed to pay to Skinvisible a license fee of $1,000,000
and a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations. The agreement also requires
that Quoin make certain milestone payments to Skinvisible upon achieving regulatory approval milestones for certain drug products.
The
agreement is subject to termination, if among other things, 50% of the license fee is not paid by December 31, 2019 and if the full
License Fee is not paid by March 31, 2020. No payments were made by Quoin and the agreement was terminated on December 31, 2019.
Both Parties subsequently determined that they continue to see the value in a partnership and therefore on May 8, 2020 and again on
July 31, 2020 the companies agreed to extend the Exclusive License Agreement, as amended under the same terms to expire on September
30, 2020 and
on January 27, 2021 the companies agreed to revise the milestone payments due under the agreement and to extend the agreement
indefinitely. The milestones have not been reached as of March 31, 2021. The initial
licensing fee has not been accrued due to the uncertainty of its collection.
On February 3, 2020, we entered into a License Agreement with Ovation
Science Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture and distribution rights to its
hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible a royalty percentage
on all net sales on the licensed products subject to adjustment in certain situations plus a license fee payable in year 3 of the agreement
if it chooses to continue the license. On June 10, 2020, the agreement was further amended to provide additional assignment rights for
its hand sanitizer products in exchange for $100,000.
9. STOCK OPTIONS
AND WARRANTS
The following is a summary of option activity during the
three months ended March 31, 2021.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2020
|
|
|
100,000
|
|
|
|
1. 51
|
|
|
|
|
|
|
|
|
Options granted and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
—
|
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
100,000
|
|
|
|
1. 51
|
As of March 31, 2021, all stock options outstanding are
exercisable.
Stock warrants -
The following is a summary of warrants activity
during the year ended March 31, 2021.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2020
|
|
|
60,000
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants expired
|
|
|
—
|
|
|
|
—
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
|
|
60,000
|
|
|
$
|
1.18
|
As of March 31, 2021, all stock warrants outstanding are
exercisable.
10. STOCKHOLDERS’
DEFICIT
The Company is authorized to issue 200,000,000
shares of $0.001 par value common stock. The Company had 4,539,843 and 4,539,843 issued and outstanding shares of common stock
as of March 31, 2021 and December 31, 2020, respectively.
11. SUBSEQUENT
EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its
operations subsequent to March 31, 2021 to the date these financial statements were issued and has determined that
it does not have any material subsequent events to disclose in these financial statements.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Certain statements, other than purely historical
information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results,
and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement
for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.
Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could
have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally
accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
COVID-19
The full extent of the impact of the COVID-19 pandemic
on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately
predict at the present time. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various
measures, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places
of residence, and practice social distancing when engaging in essential activities. We anticipate that these actions and the global
health crisis caused by COVID-19 will negatively impact business activity across the globe. While we have not observed any noticeable
impact on our revenue related to these conditions in the past fiscal year, or through the date of this filing, we cannot estimate
the impact COVID-19 will have in the future as business and consumer activity decelerates across the globe.
We will continue to actively monitor the situation and
may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities,
or that we determine are in the best interests of our employees, customers, partners and stockholders. It is not clear what the
potential effects any such alterations or modifications may have on our business, including the effects on our customers, partners,
or vendors, or on our financial results.
Recent Developments
On October 17, 2019, we entered an Exclusive License
Agreement with Quoin Pharmaceuticals, Inc., a Delaware corporation (“Quoin”) pursuant to which we granted to Quoin
a license to certain patents for the development of products for commercial sale. In exchange for the license, Quoin agreed to
pay to us a license fee of $1,000,000 (the “License Fee”) and a single digit royalty interest of all net sales on the
licensed products subject to adjustment in certain situations. The agreement also requires that Quoin make certain milestone payments
to us upon achieving regulatory approval milestones for certain drug products.
The agreement was subject to termination, if among
other things, 50% of the license fee is not paid by December 31, 2019 and if the full License Fee is not paid by March 31, 2020.
No payments were made by Quoin and the agreement was terminated. Both Parties subsequently determined that they continue to see
the value in a partnership and therefore on May 8, 2020 and again on July 31, 2020 the companies agreed to extend the Exclusive
License Agreement under the same terms to expire on September 30, 2020, and on January 27, 2021 the companies agreed to revise
the milestone payments due under the agreement and to extend the agreement indefinitely. As of March 31, 2021, we have received
$125,000 in licensing fee income per this agreement.
On February 3, 2020, we entered into a License Agreement with Ovation
Science Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture and distribution rights to its
hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible a royalty percentage
on all net sales on the licensed products subject to adjustment in certain situations plus a license fee of $100,000 payable in year
3 of the agreement if it chooses to continue the license. On June 10, 2020, the company exercised its rights and paid the $100,000 license
fee.
Results of Operations for the Three Months Ended March 31, 2021
and 2020
Revenues
Our revenue, which we combine from product sales,
royalties on patent licenses and license fees (product development fees), was $12,051 for the three months ended March 31, 2021,
a decrease from $16,052 for the same period ended March 31, 2020.
The revenue for both periods was mainly from license
fees, but we did have some product sales in the 2021 quarter. We hope to generate more revenues from our licenses with Quoin and
Ovation for the rest of the year.
Gross Profit
We had $3,300 in cost of revenues for the
three months ended March 31, 2021, as compared with no cost of revenues for the same period ended 2020, so our gross profit was
$8,751 for the three months ended March 31, 2021, as compared with gross profit of $16,052 for the three months ended March 31,
2020.
We had some product sales resulting in a reduced
gross profit for 2021 as compared with 2020. We hope that our gross profit increases in 2021 with more revenues from our licenses
with Quoin and Ovation expected for the rest of the year, which do not have a cost of revenue component.
Operating Expenses
Operating expenses decreased to $119,878 for the
three months ended March 31, 2021 from $146,044 for the same period ended March 31, 2020.
Our operating expenses for the three months
ended March 31, 2021 consisted mainly of accrued salaries and wages of $87,942, audit and accounting of $13,610, and amortization
of $4,251. In comparison, our operating expenses for the three months ended March 31, 2020 consisted mainly of accrued salaries
and wages of $87,942, audit and accounting of $28,870, and amortization of $9,719.
Other Expenses
We had other expenses of $324,378 for the three months ended March
31, 2021, as compared with other expenses of $300,092 for the three months ended March 31, 2020. The increase in other expenses was primarily
a result of a loss on change od derivative liability in the amount of $40,471.
We expect to experience high debt payments in the future as a
result of our outstanding liabilities. Moreover, as of the date of this report, there are a number of secured promissory notes with an
aggregate principal amount of approximately $772,000 that have matured. In addition, we also have one unsecured promissory note with an
aggregate principal amount of $10,000 that has matured. If we are unable to generate sufficient revenues and/or additional financing to
service this debt, there is a risk the lenders will call the notes, secure our assets, as to those applicable secured notes, and demand
payment. If this happens, we could go out of business.
Net Loss
We recorded a net loss of $435,505 for the three months ended
March 31, 2021, as compared with a net loss of $430,084 for the three months ended March 31, 2020.
Liquidity and Capital Resources
As of March 31, 2021, we had total current assets of $22,417 and
total assets in the amount of $168,746. Our total current liabilities as of March 31, 2021 were $2,957,995. We had a working capital deficit
of $2,935,578 as of March 31, 2021, compared with a working capital deficit of $2,668,871 as of December 31, 2020.
Operating activities used $16,116 in cash for the three months
ended March 31, 2021, as compared with $15,849 used for the three months ended March 31, 2020. Our negative operating cash flow for each
period was largely the result of our net losses for those periods, offset by adjustments to amortization of debt discount and increases
in accrued interest.
We used cash of $0 and $870 in investing activities for the three
months ended March 31, 2021 and 2020, respectively, for the purchase of fixed and intangible assets.
Cash flows used by financing activities during the three months
ended March 31, 2021 amounted to $7,616, as compared with cash provided of $22,000 for the three months ended March 31, 2021. Our cash
flow for the three months ended March 31, 2021 consisted of repayments of related party loans. Our cash flow for the three months ended
March 31, 2020 consisted of proceeds from related party loans.
The features of the debt instruments and payables concerning our
financing activities are detailed in the footnotes to our financial statements.
Based upon our current financial condition, we do not have sufficient
cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and
debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek
additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful
in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired.
There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Going concern – 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. We have incurred cumulative net losses of $35,135,913 since our inception and require capital for our contemplated
operational and marketing activities to take place. Our ability to raise additional capital through the future issuances of common stock
is unknown. The obtainment of additional financing, the successful development of our contemplated plan of operations, and our transition,
ultimately, to the attainment of profitable operations are necessary for us to continue operations. The ability to successfully resolve
these factors raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements do not
include any adjustments that may result from the outcome of these aforementioned uncertainties.
Off Balance Sheet Arrangements
As of March 31, 2021, there were no off balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that
all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated
that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial
condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the
need to make estimates about the effect of matters that are inherently uncertain.
Product sales – Revenues
from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the customer
and only when no further contingencies or material performance obligations are warranted, and thereby have earned the right to
receive reasonably assured payments for products sold and delivered.
Royalty sales – We also recognize
royalty revenue from licensing our patented product formulations only when earned, with no further contingencies or material performance
obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
Distribution and license rights sales
– We also recognize revenue from distribution and license rights only when earned (and are amortized over a five-year
period), with no further contingencies or material performance obligations are warranted, and thereby have earned the right to
receive and retain reasonably assured payments.
Costs of Revenue – Cost of
revenue includes raw materials, component parts, and shipping supplies. Shipping and handling costs is not a significant portion
of the cost of revenue.
Accounts Receivable – Accounts
receivable is comprised of uncollateralized customer obligations due under normal trade terms requiring payment within 30 days
from the invoice date. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines
that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected
is recorded. Management reviews each accounts receivable balance that exceeds 30 days from the invoice date and, based on an assessment
of creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of March 31, 2021, we had not
recorded a reserve for doubtful accounts. We have $175,000in convertible notes payable which are secured by the accounts receivable
of a license agreement the Company has with Women's Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued
accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.