|
Item 1.
|
Financial Statements
|
Our consolidated financial statements included in this Form 10-Q
are as follows:
|
F-1
|
Consolidated Balance Sheets as of September
30, 2020 and December 31, 2019 (unaudited);
|
|
F-2
|
Consolidated Statements of Operations for the
three and nine months ended September 30, 2020 and 2019 (unaudited);
|
|
F-3
|
Consolidated Statements of Stockholders’
Deficit for the nine months ended September 30, 2020 and 2019 (unaudited);
|
|
F-4
|
Consolidated Statements of Cash Flow for the
three and nine
months ended September 30, 2020 and 2019 (unaudited);
|
|
F-5
|
Notes to Consolidated Financial Statements.
|
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions
to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating
results for the interim period ended September 30, 2020 are not necessarily indicative of the results that can be expected for
the full year.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September
30, 2020
(Unaudited)
|
|
December
31, 2019
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
11,819
|
|
|
$
|
1,298
|
Accounts
receivable
|
|
|
10,848
|
|
|
|
10,204
|
Prepaid
expense and other current assets
|
|
|
3,250
|
|
|
|
4,875
|
Total
current assets
|
|
|
25,917
|
|
|
|
16,377
|
|
|
|
|
|
|
|
|
Patents
and trademarks, net of accumulated amortization of $557,388 and $533,415, respectively
|
|
|
158,179
|
|
|
|
165,385
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
184,096
|
|
|
$
|
181,762
|
|
|
|
|
|
|
|
.
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
842,769
|
|
|
$
|
597,291
|
Accounts
payable related party
|
|
|
12,807
|
|
|
|
9,274
|
Accrued
interest payable
|
|
|
890,310
|
|
|
|
491,601
|
Loans
from related party
|
|
|
58,599
|
|
|
|
46,899
|
Loans
payable
|
|
|
552,000
|
|
|
|
552,000
|
Convertible
notes payable, current portion
|
|
|
220,000
|
|
|
|
220,000
|
Total
current liabilities
|
|
|
2,576,485
|
|
|
|
1,917,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable related party, net of unamortized discount of $2,603,581 and $3,060,970 respectively
|
|
|
1,631,628
|
|
|
|
1,174,239
|
|
|
|
|
|
|
|
|
Convertible
notes payable, net of current portion and unamortized debt discount of $216,289 and $254,450, respectively
|
|
|
135,786
|
|
|
|
97,625
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,343,899
|
|
|
|
3,188,929
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common
stock; $0.001 par value; 200,000,000 shares authorized; 4,539,843 and 4,471,746 shares issued and outstanding at September
30, 2020 and December 31, 2019, respectively
|
|
|
4,540
|
|
|
|
4,472
|
Shares payable
|
|
|
—
|
|
|
|
59,602
|
Additional
paid-in capital
|
|
|
30,241,089
|
|
|
|
30,181,555
|
Accumulated
deficit
|
|
|
(34,405,432
|
)
|
|
|
(33,252,796)
|
Total
stockholders' deficit
|
|
|
(4,159,803
|
)
|
|
|
(3,007,167)
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
184,096
|
|
|
$
|
181,762
|
See Accompanying Notes to
Condensed Consolidated Financial Statements.
SKINVISIBLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three
Months Ended
|
|
Nine
Months Ended
|
|
|
September
30, 2020
|
|
September
30, 2019
|
|
September
30, 2020
|
|
September
30, 2019
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,183
|
|
|
$
|
11,295
|
|
|
$
|
21,592
|
|
|
$
|
31,279
|
Revenues related party
|
|
|
2,633
|
|
|
|
—
|
|
|
|
121,246
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
—
|
|
|
|
250
|
|
|
|
—
|
|
|
|
7,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
6,816
|
|
|
|
11,045
|
|
|
|
142,838
|
|
|
|
25,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
4,292
|
|
|
|
10,185
|
|
|
|
23,973
|
|
|
|
29,815
|
Selling
general and administrative
|
|
|
121,146
|
|
|
|
137,785
|
|
|
|
380,241
|
|
|
|
417,678
|
Total
operating expenses
|
|
|
125,438
|
|
|
|
147,970
|
|
|
|
404,214
|
|
|
|
447,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(118,622
|
)
|
|
|
(136,925
|
)
|
|
|
(261,376
|
)
|
|
|
(422,313)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income - related party
|
|
|
—
|
|
|
|
93,192
|
|
|
|
—
|
|
|
|
105,692
|
Loss
on extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(247,998)
|
Interest
expense
|
|
|
(291,137
|
)
|
|
|
(305,009
|
)
|
|
|
(891,260
|
)
|
|
|
(710,233)
|
Total
other expense
|
|
|
(291,137
|
)
|
|
|
(211,817
|
)
|
|
|
(891,260
|
)
|
|
|
(852,539)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(409,759
|
)
|
|
$
|
(348,742
|
)
|
|
$
|
(1,152,636
|
)
|
|
$
|
(1,274,852)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per
common share
|
|
$
|
(0.09
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.44)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per common share
|
|
$
|
(0.09
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.44)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding
|
|
|
4,471,746
|
|
|
|
2,896,689
|
|
|
|
4,476,468
|
|
|
|
2,896,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common
|
|
|
4,471,746
|
|
|
|
2,896,689
|
|
|
|
4,476,468
|
|
|
|
2,896,689
|
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, 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)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(312,793
|
)
|
|
|
(312,793)
|
Balance,
June 30, 2020
|
|
|
4,471,746
|
|
|
$
|
4,472
|
|
|
$
|
30,181,555
|
|
|
$
|
59,602
|
|
|
$
|
(33,995,673
|
)
|
|
$
|
(3,750,044)
|
Shares issued for shares payable
|
|
|
68,097
|
|
|
|
68
|
|
|
|
59,534
|
|
|
|
(59,602
|
)
|
|
|
—
|
|
|
|
—
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(409,759
|
)
|
|
|
(409,759)
|
Balance,
September 30, 2020
|
|
|
4,539,843
|
|
|
$
|
4,540
|
|
|
$
|
30,241,089
|
|
|
$
|
—
|
|
|
$
|
(34,405,432
|
)
|
|
$
|
(4,159,803)
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Amount
|
|
|
|
Additional
Paid-in Capital
|
|
|
|
Shares
payable
|
|
|
|
Accumulated
Deficit
|
|
|
|
Total
Stockholders’ Deficit
|
Balance,
December 31, 2018
|
|
|
2,896,689
|
|
|
$
|
2,897
|
|
|
$
|
24,774,887
|
|
|
$
|
2,053,466
|
|
|
$
|
(31,550,665
|
)
|
|
$
|
(4,719,415)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(343,099
|
)
|
|
|
(343,099)
|
Balance,
March 31, 2019
|
|
|
2,896,689
|
|
|
$
|
2,897
|
|
|
$
|
24,774,887
|
|
|
$
|
2,053,466
|
|
|
$
|
(31,893,764
|
)
|
|
$
|
(5,062,514)
|
Settlement of debts
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,028
|
|
|
|
—
|
|
|
|
7,028
|
Beneficial conversion
feature on convertible notes issued as settlement on existing payables
|
|
|
—
|
|
|
|
—
|
|
|
|
3,649,320
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,649,320
|
Beneficial conversion
feature repurchase
|
|
|
—
|
|
|
|
—
|
|
|
|
(241,969
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(241,969)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(583,011
|
)
|
|
|
(583,011)
|
Balance,
June 30, 2019
|
|
|
2,896,689
|
|
|
$
|
2,897
|
|
|
$
|
28,182,238
|
|
|
$
|
2,060,494
|
|
|
$
|
(32,476,775
|
)
|
|
$
|
(2,231,146)
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(348,742
|
)
|
|
|
(348,742)
|
Balance,
September 30, 2019
|
|
|
2,896,689
|
|
|
$
|
2,897
|
|
|
$
|
28,182,238
|
|
|
$
|
2,060,494
|
|
|
$
|
(32,825,517
|
)
|
|
$
|
(2,579,888)
|
See Accompanying Notes to
Condensed Consolidated Financial Statements.
SKINVISIBLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Nine
Months Ended
|
|
|
September
30, 2020
|
|
September
30, 2019
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,152,636
|
)
|
|
$
|
(1,274,852)
|
Adjustments
to reconcile net loss to net cash
provided (used) by operating activities:
|
|
|
|
|
|
|
|
Amortization
|
|
|
23,973
|
|
|
|
29,816
|
Amortization
of debt discount
|
|
|
495,550
|
|
|
|
690,886
|
Gain
on extinguishment of debt
|
|
|
—
|
|
|
|
(34,972)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in inventory
|
|
|
—
|
|
|
|
7,152
|
Decrease
in prepaid assets
|
|
|
1,625
|
|
|
|
9,000
|
Increase
in accounts receivable
|
|
|
(644
|
)
|
|
|
(990)
|
Increase
in accounts payable and accrued liabilities
|
|
|
249,011
|
|
|
|
253,768
|
Increase
in accrued interest
|
|
|
398,709
|
|
|
|
278,216
|
Net
cash provided (used) by operating activities
|
|
|
15,588
|
|
|
|
(41,976)
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
Purchase
of intangible assets
|
|
|
(16,767
|
)
|
|
|
(24,320)
|
Net
cash used in investing activities
|
|
|
(16,767
|
)
|
|
|
(24,320)
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
Payments
on related party loans
|
|
|
(15,300
|
)
|
|
|
(35,000)
|
Proceeds
from related party loans
|
|
|
27,000
|
|
|
|
109,644
|
Net
cash provided by financing activities
|
|
|
11,700
|
|
|
|
74,644
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
10,521
|
|
|
|
8,348
|
|
|
|
|
|
|
|
|
Cash, beginning
of period
|
|
|
1,298
|
|
|
|
2,482
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
11,819
|
|
|
$
|
10,830
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
|
$
|
17,088
|
Cash
paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible debt
|
|
$
|
—
|
|
|
$
|
3,646,320
|
Common
stock issued for settlement of shares payable
|
|
$
|
59,602
|
|
|
$
|
42,000
|
See Accompanying Notes to
Condensed Consolidated Financial Statements.
SKINVISIBLE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION
OF BUSINESS AND HISTORY
Description of business – Skinvisible,
Inc., (referred to as the “Company”) is focused on the development, 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 including 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.
On September 26, 2017, the Company purchased
5,750,000 shares of common stock of Ovation Science Inc. (“Ovation”) for $32,286, which at the time of purchase the
Company’s ownership represented 99.9% of the then issued and outstanding common stock. On March 28, 2018 the Company sold
its interest in Ovation to officers of the Company for $500,000 which at the time represented a 37.80% interest in Ovation.
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 May 14, 2020. 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, 2019 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. The Company has incurred cumulative net losses of $34,405,432 since its inception and requires capital
for its contemplated operational and marketing activities to take place. These factors, among others, raise substantial doubt
about the Company’s ability to continue as a going concern. 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.
The Company's operations and business have
experienced disruption due to the unprecedented conditions surrounding the COVID-19 pandemic spreading throughout the United States
and elsewhere. The spread of COVID-19 has caused a change in
the availability of our staff and support services. Due to the COVID-19
pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any
specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of
its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates could change in the
future, as new events occur, or additional information is obtained.
3. SUMMARY OF
SIGNIFICANT POLICIES
This
summary of significant accounting policies of Skinvisible Inc. is presented to assist in understanding the Company’s condensed
consolidated financial statements. The condensed 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 condensed consolidated financial statements.
Principles of consolidation –
The condensed 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. There are $11,189 and $1,298 in cash as of September 30, 2020 and December
31, 2019 respectively.
Fair Value of financial instruments
–The carrying value of cash, accounts payable and accrued expenses, and debt (See Notes 6 & 8) 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 of $4,807,284 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.
|
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) identity 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 September 30, 2020 and December
31, 2019, the Company had not recorded a reserve for doubtful accounts.
Intangible assets – The Company
follows Financial Accounting Standard Board’s (FASB) Codification Topic 350-10 (“ASC 350-10”), “Intangibles
– Goodwill and Other”. According to this statement, intangible assets with indefinite lives are no longer subject
to amortization, but rather an annual assessment of impairment by applying a fair-value based test. Under ASC 350-10, the
carrying value of assets are calculated at the lowest level for which there are identifiable cash flows.
Income taxes – The Company accounts
for its income taxes in accordance with FASB Codification Topic ASC 740-10, “Income Taxes”, which requires recognition
of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Stock-based compensation – The
Company follows the guidelines in FASB Codification Topic ASC 718-10 “Compensation-Stock Compensation”, which
requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors
including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated
fair values.
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 three and nine months ending September 30, 2020 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 28,167,881 additional shares
issuable in connection with outstanding options, warrants, stock payable and convertible debts as of September 30, 2020. The shares
issuable under each instrument is as follows; 100,000 shares issuable for options, 60,000 shares issuable for warrants, 28,007,881
shares issuable under convertible notes. There were 27,228,407 additional shares issuable in connection with outstanding options,
warrants, stock payable and convertible debts as of September 30, 2019. The shares which were issuable at that date under each
instrument were as follows; 135,000 shares issuable for options, 72,000 shares issuable for warrants, 1,614,305 shares issuable
for shares payable and 25,407,102 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 September 30, 2020 intangible
assets total $715,567, net of $557,388 of accumulated amortization. As of December 31, 2019, intangible assets total $698,800,
net of $533,415 of accumulated amortization.
The Company capitalized $16,767 in
patent cost during the nine months ended September 30, 2020.
Amortization expense for the three
months ended September 30, 2020 and 2019 was $4,292 and $10,186, respectively.
Amortization expense for the nine
months ended September 30, 2020 and 2019 was $23,973 and $29,698, 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 September 30, 2020.
5. STOCK OPTIONS
AND WARRANTS
Stock options
The following is a summary of option activity during the
nine months ended September 30, 2020.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2019
|
|
|
100,000
|
|
|
|
1. 51
|
|
|
|
|
|
|
|
|
Options granted and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
—
|
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
100,000
|
|
|
|
1. 51
|
The following is a summary of option
activity during the nine months ended September 30, 2019.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2018
|
|
|
161,000
|
|
|
$
|
1.80
|
|
|
|
|
|
|
|
|
Options granted and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
(26,000
|
)
|
|
|
2.00
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
|
135,000
|
|
|
$
|
1.76
|
As of September 30, 2020, all stock options outstanding are exercisable.
Stock warrants
The following is a summary of warrants activity
during the nine months ended September 30, 2020
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 201 9
|
|
|
72,200
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants expired
|
|
|
(12,200
|
)
|
|
|
1.50
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30, 2020
|
|
|
60,000
|
|
|
$
|
1.11
|
The following is a summary
of warrants activity during the nine months ended September 30, 2019.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2018
|
|
|
72,200
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants expired
|
|
|
—
|
|
|
|
—
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30, 2019
|
|
|
72,200
|
|
|
$
|
1.18
|
As of September 30, 2020 , all stock warrants outstanding
are exercisable.
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 September 30, 2020, $552,000
of the outstanding notes payable are past due and in default and have been classified as current notes payable.
7. RELATED PARTY
TRANSACTIONS
During the nine months ended September
30, 2020, $27,000 was advanced by an officer and $15,300 was repaid to another officer.
As of September 30, 2020, $58,599
in advances remained due to officers of the company. All other related party notes have been extinguished or re-negotiated as convertible
notes. (See note 9 for additional details.)
License Agreement with Ovation
Science for DermSafe hand sanitizer - On February 3, 2020, we entered into a License Agreement with Ovation Science
Inc., a related party, 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 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, Ovation Science Inc. paid
the Company the fee otherwise due in year 3
and in exchange the Company extended the term of Ovation’s license to 6- years
and granted Ovation additonal rights
to its hand sanitizer products and assigned
Canadian Identification Numbers 02310589 and 02355558, all DermSafe Trademarks, DermSafe clinical data and the right to patent
DermSafe where not currently
patented. In exchange for these rights Ovation paid a $100,000 license fee. The Company completed the required assignments during
the nine months ending September 30, 2020 and recognized $100,000 in revenue.
The
Company earned $2,633 in royalties under the license agreement during the three months ending September 30, 2020.
The
Company earned $14,114 in royalties under the license agreement during the nine months ending September 30, 2020.
The Company
sold polymer products to Ovation Science Inc and earned $0 and $7,132 during the three and nine months ending September 30, 2020,
respectively
8. CONVERTIBLE
NOTES PAYABLE
Convertible Notes Payable consists of the following:
|
|
September 30,
|
|
December 31,
|
|
|
2020
|
|
2019
|
$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 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 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 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 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 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 as a financing expense in the amount of $38,161 during the nine months ended September 30, 2020 and $12,813 for the nine months ended September 30, 2019.
The aggregate beneficial conversion feature has been accreted and charged to interest expenses as a financing expense in the amount of $12,731 during the three months ended September 30, 2020 and $12,813 for the three months ended September 30, 2019.
|
|
|
352,075
|
|
|
|
352,075
|
Unamortized debt discount
|
|
|
(216,289
|
)
|
|
|
(254,450)
|
Total, net of unamortized discount
|
|
|
135,786
|
|
|
|
97,625
|
Total Convertible Notes
|
|
$
|
355,786
|
|
|
$
|
317,625
|
Current portion:
|
|
|
220,000
|
|
|
|
220,000
|
Total long-term convertible notes
|
|
$
|
135,786
|
|
|
$
|
97,625
|
9. CONVERTIBLE
NOTES PAYABLE RELATED PARTY
Convertible Notes Payable Related Party consists of the following:
|
|
September 30, 2020
|
|
December 31, 201 9
|
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 amortized and charged to interest expenses as a financing expense in the amount of $457,389 during the nine months ended September 30, 2020 and 152,463 for the nine months ended September 30, 2019.
The aggregate beneficial conversion feature has been amortized and charged to interest expenses as a financing expense in the amount of $152,463 during the three months ended September 30, 2020 and 152,463 for the three months ended September 30, 2019.
|
|
$
|
4,235,209
|
|
|
$
|
4,235,209
|
|
Unamortized debt discount
|
|
|
(2,603,581
|
)
|
|
|
(3,060,970
|
)
|
Total, net of unamortized discount
|
|
$
|
1,631,628
|
|
|
$
|
1,174,239
|
|
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 4,471,746 issued and outstanding shares of common stock
as of September 30, 2020 and December 31, 2019, respectively.
During the nine months ended September 30,
2020, the Company issued 68,097 shares to investors as a result of agreements settled during the year ended December 31, 2019 and
recorded as stock payable valued at $59,602.
11. 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
now on September 30, 2020. As of the date of this filing
no payments had been received.
12. SUBSEQUENT
EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its
operations subsequent to September 30, 2020 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.
In March 2020, we enacted precautionary measures
to protect the health and safety of our employees and partners. These measures include closing our office, having employees work
from home, and eliminating all travel. While having employees work from home may have a negative impact on efficiency and may result
in negligible increases in costs, it does have an impact on our ability to execute on our agreements to deliver our core products.
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
License with Quoin Pharmaceuticals, Inc.
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. 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 now on September 30, 2020. As
of the date of this filing no payments had been received.
License with Ovation Science Inc.
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 additonal assignment rights for its hand sanitizer products in exchange for $100,000 which was recognized as
revenue during the nine months ended September 30, 2020.
Results of Operations for the Three Months
Ended September 30, 2020 and 2019
Revenues
Our revenue from product sales, royalties on
patent licenses and license fees (product development fees) for the three months ended September 30, 2020 was $6,186, a decrease
from $11,295 for the same period ended September 30, 2019.
The decrease in revenue for three months ended
September 30, 2020 was mainly due to decreased product sales. We hope to achieve increased revenues for the balance of 2020, as
a result of our License Agreement with Quoin Pharmaceuticals, Inc.
Cost of Revenues
Our cost of revenues for the three months ended
September 30, 2020 was $0, compared with the prior year period when cost of revenues was $250.
Our cost of revenues decreased for the three
months ended September 30, 2020 over the prior year period because our revenues in 2020 were attributable to our license with Ovation
Science.
Gross Profit
Gross profit for the three months ended September
30, 2020 was $6,816 , as compared with gross profit of $11,045 for the three months ended September 30, 2019.
Operating Expenses
Operating expenses decreased to $125,438 for
the three months ended September 30, 2020 from $147,970 for the same period ended September 30, 2019.
Our operating expenses for the three months
ended September 30, 2020 consisted mainly of accrued salaries and wages of $87,941, audit and accounting of $9,609, and amortization
of $4,292. In comparison, our operating expenses for the three months ended September 30, 2019 consisted mainly of accrued salaries
and wages of $87,942, audit and accounting of $9,610, rent of $15,673 and depreciation and amortization of $10,185.
Other Expenses
We had other expenses of $291,137 for the three
months ended September 30, 2020, compared with other expenses of $211,817 for the three months ended September 30, 2019.
Our
other expenses for the three months ended September 30, 2020 consisting entirely of $291,137 in interest expense, which includes
interest expense of $125,861 and debt discount amortization of $165,276, compared with the three months ended September
30, 2019 which consisted primarily of $305,009 in interest expense which
includes interest expense of $138,059 and debt discount amortization of $166,950, offset by other income from related party of
$93,192.
Net Loss
We recorded a net loss of $409,759 for the
three months ended September 30, 2020, as compared with a net loss of $348,742 for the three months ended September 30, 2019.
Results
of Operations for the Nine Months Ended
September 30, 2020 and 2019
Revenues
Our revenue from product sales, royalties on
patent licenses and license fees (product development fees) for the nine months ended September 30, 2020 was $142,838, an increase
from $32,379 for the same period ended September 30, 2019.
The increase in revenue for nine months ended
September 30, 2020 was mainly due to our license agreement with Ovation Science. We hope to generate more revenues from this license
and the license with Quoin for the rest of the year.
Cost of Revenues
Our cost of revenues for the nine months ended
September 30, 2020 was $0, compared with the prior year period when cost of revenues was $7,199.
Our
cost of revenues decreased for the ninemonths ended
September 30, 2020 over the prior year period because our revenues in 2020 were attributable to our license with Ovation Science.
Gross Profit
Gross profit for the nine months ended September
30, 2020 was $142,838 , as compared with gross profit of $25,180 for the nine months ended September 30, 2019.
Operating Expenses
Operating expenses decreased to $404,214 for
the nine months ended September 30, 2020 from $447,493 for the same period ended September 30, 2019.
Our operating expenses for the nine months
ended September 30, 2020 consisted mainly of accrued salaries and wages of $263,826, audit and accounting of $55,089, and amortization
of $23,973. In comparison, our operating expenses for the nine months ended September 30, 2019 consisted mainly of salaries and
wages of $263,827, audit and accounting of $41,852, rent of $45,002, insurance of $11,471 and amortization and depreciation of
$29,815
Other Expenses
We had other expenses of $891,260 for the nine
months ended September 30, 2020, compared with other expenses of $852,539 for the nine months ended September 30, 2019.
Our
other expenses for the nine months ended September 30, 2020 consisting entirely of interest expense which includes, interest expense
of $395,710 and debt discount amortization of $495,550, compared with the nine months ended September 30, 2019 which consisted
primarily of $710,233 in interest expense which includes, interest expense of $315,973 and debt discount amortization of $394,260 ,
loss
on extinguishment of debts of $247,998, offset by income related party of $105,692.
Net Loss
We recorded a net loss of $1,152,636 for the
nine months ended September 30, 2020, as compared with a net loss of $1,274,852 for the nine months ended September 30, 2019.
Liquidity and Capital Resources
As of September 30, 2020, we had total current
assets of $25,917 and total assets in the amount of $184,096. Our total current liabilities as of September 30, 2020 were $2,576,485.
We had a working capital deficit of $2,550,568 as of September 30, 2020, compared with a working capital deficit of $2,753,277
as of September 30, 2019.
Operating activities provided $15,588 in cash
for the nine months ended September 30, 2020, as compared with $41,976 used for the nine months ended September 30, 2019. Our positive
operating cash flow for the nine months ended September 30, 2020 is largely the result of an increase in accrued interest, accounts
payable and accrued liabilities, offset mainly by our net loss for the period, compared with the nine month ended September 30,
2019, which recorded a negative operating cash flow largely as the result of our net loss for the period.
We used cash of $16,767 and $24,320 in investing
activities for the nine months ended September 30, 2020 and 2019, respectively, for the purchase of intangible assets.
Cash
flows provided by financing activities during the nine months ended September 30, 2020 amounted to $11,700, as compared with $74,644
for the nine months ended September 30, 2019. Our cash flows for the ninemonths
ended September 30, 2020 and 2019 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 $34,405,432 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 September 30, 2020, 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 September 30, 2020, the
Company had not recorded a reserve for doubtful accounts. The Company has $175,000 in 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.