|
Item 1.
|
Financial Statements
|
Our consolidated financial statements included in this Form 10-Q
are as follows:
|
F-1
|
Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (unaudited);
|
|
F-2
|
Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (unaudited);
|
|
F-3
|
Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2020 and 2019 (unaudited);
|
|
F-4
|
Consolidated Statements of Cash Flow for the three and six months ended June 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 June 30, 2020 are not necessarily indicative of the results that can be expected for the full
year.
SKINVISIBLE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
June
30, 2020
|
|
December
31, 2019
|
ASSETS
|
|
(Unaudited)
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
35,089
|
|
|
$
|
1,298
|
Accounts
receivable (including $4,370 and nil, from related parties respectively)
|
|
|
14,599
|
|
|
|
10,204
|
Prepaid
expense and other current assets
|
|
|
6,500
|
|
|
|
4,875
|
Total
current assets
|
|
|
56,188
|
|
|
|
16,377
|
|
|
|
|
|
|
|
|
Patents
and trademarks, net of accumulated amortization of $553,096 and $533,415, respectively
|
|
|
160,377
|
|
|
|
165,385
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
216,565
|
|
|
$
|
181,762
|
|
|
|
|
|
|
|
.
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
759,304
|
|
|
$
|
597,291
|
Accounts
payable related party
|
|
|
11,818
|
|
|
|
9,274
|
Accrued
interest payable
|
|
|
762,450
|
|
|
|
491,601
|
Loans
from related party
|
|
|
58,899
|
|
|
|
46,899
|
Loans
payable
|
|
|
552,000
|
|
|
|
552,000
|
Convertible
notes payable
|
|
|
220,000
|
|
|
|
220,000
|
Total
current liabilities
|
|
|
2,364,471
|
|
|
|
1,917,065
|
|
|
|
|
|
|
|
|
Convertible
notes payable related party, net of unamortized discount of $2,756,044 and $3,060,970 respectively
|
|
|
1,479,165
|
|
|
|
1,174,239
|
Convertible
notes payable, net of unamortized debt discount of $229,102 and $254,450, respectively
|
|
|
122,973
|
|
|
|
97,625
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,966,609
|
|
|
|
3,188,929
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common stock; $0.001
par value; 200,000,000 shares authorized; 4,471,746 and 4,471,746 shares issued and outstanding at June 30, 2020 and December
31, 2019, respectively
|
|
|
4,472
|
|
|
|
4,472
|
Shares payable
|
|
|
59,602
|
|
|
|
59,602
|
Additional
paid-in capital
|
|
|
30,181,555
|
|
|
|
30,181,555
|
Accumulated
deficit
|
|
|
(33,995,673
|
)
|
|
|
(33,252,796)
|
Total
stockholders' deficit
|
|
|
(3,750,044
|
)
|
|
|
(3,007,167)
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
216,565
|
|
|
$
|
181,762
|
See Accompanying Notes to Consolidated
Financial Statements.
SKINVISIBLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
June
30, 2020
|
|
June
30, 2019
|
|
June
30, 2020
|
|
June
30, 2019
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
9,000
|
|
|
$
|
12,617
|
|
|
$
|
17,409
|
|
|
$
|
19,984
|
Revenues
- related party
|
|
|
110,970
|
|
|
|
100
|
|
|
|
118,613
|
|
|
|
1,100
|
|
|
$
|
119,970
|
|
|
$
|
12,717
|
|
|
$
|
136,022
|
|
|
$
|
21,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
—
|
|
|
|
6,573
|
|
|
|
—
|
|
|
|
6,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
119,970
|
|
|
|
6,144
|
|
|
|
136,022
|
|
|
|
14,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
9,961
|
|
|
|
9,979
|
|
|
|
19,681
|
|
|
|
19,630
|
Selling
general and administrative
|
|
|
122,771
|
|
|
|
135,461
|
|
|
|
259,095
|
|
|
|
279,893
|
Total
operating expenses
|
|
|
132,732
|
|
|
|
145,440
|
|
|
|
278,776
|
|
|
|
299,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(12,762
|
)
|
|
|
(139,296
|
)
|
|
|
(142,754
|
)
|
|
|
(285,388)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income - related party
|
|
|
—
|
|
|
|
12,500
|
|
|
|
—
|
|
|
|
12,500
|
Loss
on extinguishment of debt
|
|
|
—
|
|
|
|
(247,998
|
)
|
|
|
—
|
|
|
|
(405,224)
|
Interest
expense
|
|
|
(300,031
|
)
|
|
|
(208,217
|
)
|
|
|
(600,123
|
)
|
|
|
(247,998)
|
Total
other expenses
|
|
|
(300,031
|
)
|
|
|
(443,715
|
)
|
|
|
(600,123
|
)
|
|
|
(640,722)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(312,793
|
)
|
|
$
|
(583,011
|
)
|
|
$
|
(742,877
|
)
|
|
$
|
(926,110)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per
common share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
diluted loss per common share
|
|
$
|
(0.07
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.17
|
)
|
|
$
|
(0.32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
4,471,746
|
|
|
|
2,896,689
|
|
|
|
4,471,746
|
|
|
|
2,896,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
diluted weighted average common shares outstanding
|
|
|
4,471,746
|
|
|
|
2,896,689
|
|
|
|
4,471,746
|
|
|
|
2,896,689
|
See Accompanying Notes to Consolidated Financial
Statements.
SKINVISIBLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
DEFICIT
(UNAUDITED)
For
the Three and Six months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
For
the Three and Six months Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
See Accompanying
Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six
Months Ended
|
|
|
June
30, 2020
|
|
June
30, 2019
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(742,877
|
)
|
|
$
|
(926,110)
|
Adjustments
to reconcile net loss to net
|
|
|
|
|
|
|
|
cash
provided (used) by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
19,681
|
|
|
|
19,630
|
Amortization
of debt discount
|
|
|
330,274
|
|
|
|
227,392
|
Loss
on extinguishment of debt
|
|
|
—
|
|
|
|
247,998
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in inventory
|
|
|
—
|
|
|
|
6,902
|
Decrease
(Increase) in prepaid assets
|
|
|
(1,625
|
)
|
|
|
6,000
|
Increase
in accounts receivable
|
|
|
(4,395
|
)
|
|
|
(1,454)
|
Increase
in accounts payable and accrued liabilities
|
|
|
164,557
|
|
|
|
201,640
|
Increase
in accrued interest
|
|
|
270,849
|
|
|
|
168,600
|
Net
cash provided (used) by operating activities
|
|
|
36,464
|
|
|
|
(49,402)
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
Purchase
of intangible assets
|
|
|
(14,673
|
)
|
|
|
(24,319)
|
Net
cash used in investing activities
|
|
|
(14,673
|
)
|
|
|
(24,319)
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
bank
overdraft
|
|
|
—
|
|
|
|
595
|
Payments
on related party loans
|
|
|
(15,000
|
)
|
|
|
—
|
Proceeds
from related party loans
|
|
|
27,000
|
|
|
|
70,644
|
Net
cash provided by financing activities
|
|
|
12,000
|
|
|
|
71,239
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
33,791
|
|
|
|
(2,482)
|
|
|
|
|
|
|
|
|
Cash, beginning
of period
|
|
|
1,298
|
|
|
|
2,482
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
35,089
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
—
|
|
|
$
|
2,637
|
Cash
paid for tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible debt
|
|
$
|
—
|
|
|
$
|
3,646,320
|
Common
stock issued on extinguishment of debts
|
|
$
|
—
|
|
|
$
|
42,000
|
See Accompanying
Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
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 $33,995,673
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. 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 $35,089 and $1,298
in cash as of June 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 June 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 six months ending June 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 27,163,307
additional shares issuable in connection with outstanding options, warrants, stock payable and convertible debts as of June 30,
2020. The shares issuable under each instrument is as follows; 100,000 shares issuable for options, 60,000 shares issuable for
warrants, 59,602 shares issuable for shares payable and 26,943,705 shares issuable under convertible notes. There were 25,931,481
additional shares issuable in connection with outstanding options, warrants, stock payable and convertible debts as of June 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 24,110,176 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 June 30, 2020 intangible assets total $713,473, net of $553,096 of accumulated amortization. As of December 31, 2019,
intangible assets total $698,800, net of $533,415 of accumulated amortization. The Company capitalized $14,673 in patent cost
during the six months ended June 30, 2020.
Amortization
expense for the three months ended June 30, 2020 and 2019 was $9,961 and $9,979, respectively.
Amortization
expense for the six months ended June 30, 2020 and 2019 was $19,681 and $19,630, 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 June 30, 2020.
5. STOCK
OPTIONS AND WARRANTS
Stock options
The following is a summary
of option activity during the six months ended June 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,
June 30, 2020
|
|
|
100,000
|
|
|
|
1.
51
|
The
following is a summary of option activity during the six months ended June 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,
June 30, 2019
|
|
|
135,000
|
|
|
$
|
1.76
|
As of June 30, 2020, all stock options
outstanding are exercisable.
Stock warrants
The following
is a summary of warrants activity during the six months ended June 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,
June 30, 20 20
|
|
|
60,000
|
|
|
$
|
1.11
|
The
following is a summary of warrants activity during the six months ended June 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,
June 30, 2019
|
|
|
72,200
|
|
|
$
|
1.18
|
As of June 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 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 June 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 six months ended June 30, 2020, $27,000 was advanced by an officer and $15,000 was repaid to another officer.
As
of June 30, 2020, $58,899 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
an extension fee of $100,000 payable in year 3 of the agreement if it chooses to continue the license.
On
June 10, 2020, Ovation Science Inc. accelerated the extension fee and paid the
Company the $100,000 otherwise due in year 3 and in exchange the Company extended the term of Ovation’s license to
6-years and transferred to Ovation additional 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. The Company completed the required assignments during the three months ending June 30, 2020 and
recognized $100,000 in revenue, as the license was considered to be functional, and therefore revenue is recognized at a
point in time.
The
Company earned $3,838 in royalties under the license agreement during the three months ending June 30, 2020.
The
Company earned $11,481 in royalties under the license agreement during the six months ending June 30, 2020.
8. CONVERTIBLE
NOTES PAYABLE
Convertible Notes
Payable consists of the following:
|
|
June
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 $25,348 during the six months ended June 30,
2020 and nil for the six months ended June 30, 2019.
The
aggregate beneficial conversion feature has been accreted and charged to interest expenses
as a financing expense in the amount of $12,674 during the three months ended June 30,
2020 and nil for the three months ended June 30, 2019.
|
|
|
352,075
|
|
|
|
352,075
|
Unamortized
debt discount
|
|
|
(229,102
|
)
|
|
|
(254,450)
|
Total, net of unamortized
discount
|
|
|
122,973
|
|
|
|
97,625
|
Total Convertible Notes
|
|
$
|
342,973
|
|
|
$
|
317,625
|
Current portion:
|
|
|
220,000
|
|
|
|
220,000
|
Total long-term convertible notes
|
|
$
|
122,973
|
|
|
$
|
97,625
|
9. CONVERTIBLE
NOTES PAYABLE RELATED PARTY
Convertible Notes Payable Related Party consists
of the following:
|
|
June
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 accreted and charged to interest expenses as a financing
expense in the amount of $304,926 during the six months ended June 30, 2020 and nil for
the six months ended June 30, 2019.
The
aggregate beneficial conversion feature has been accreted and charged to interest expenses
as a financing expense in the amount of $152,463 during the three months ended June 30,
2020 and nil for the three months ended June 30, 2019.
|
|
$
|
4,235,209
|
|
|
$
|
4,235,209
|
Unamortized debt discount
|
|
|
(2,756,044
|
)
|
|
|
(3,060,970)
|
Total, net of unamortized discount
|
|
$
|
1,479,165
|
|
|
$
|
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 4,471,746 and 4,471,746 issued and
outstanding shares of common stock as of June 30, 2020 and December 31, 2019, respectively.
As of June 30,
2020, and December 31, 2019, the Company had 68,097 shares remaining to be issued to the investors as a result of the settlement
agreements and has a remaining stock payable of $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 June 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 three months ended June 30, 2020.
Results of
Operations for the Three Months Ended June 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 June 30,
2020 was $119,970, an increase from $12,717 for the same period ended June 30, 2019.
The increase
in revenue for three months ended June 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 three months ended June 30, 2020 was $0, compared with the prior year period when cost of revenues was $6,573.
Our cost of
revenues decreased for the three months ended June 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 June 30, 2020 was $119,970 , as compared with gross profit of $6,144 for the three months ended
June 30, 2019.
Operating
Expenses
Operating expenses
decreased to $132,732 for the three months ended June 30, 2020 from $145,440 for the same period ended June 30, 2019.
Our operating
expenses for the three months ended June 30, 2020 consisted mainly of accrued salaries and wages of $87,942, audit and accounting
of $16,610, and amortization of $9,962. In comparison, our operating expenses for the three months ended June 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 $9,979.
Other
Expenses
We had other
expenses of $300,031 for the three months ended June 30, 2020, compared with other expenses of $443,715 for the three months ended
June 30, 2019.
Our
other expenses for the three months ended June 30, 2020 consisting entirely of $300,031 in interest expense, which includes interest
expense of $134,895 and debt discount amortization of $165,136, compared
with the three months ended June 30, 2019, which consisted primarily of loss on extinguishment of debts of $247,998 and $203,217
in interest expense, which includes interest expense of $88,629 and debt discount amortization of $113,378.
Net Loss
We recorded
a net loss of $312,793 for the three months ended June 30, 2020, as compared with a net loss of $583,011 for the three months
ended June 30, 2019.
Results of
Operations for the Six Months Ended June 30, 2020 and 2019
Revenues
Our revenue
from product sales, royalties on patent licenses and license fees (product development fees) for the six months ended June 30,
2020 was $136,022, an increase from $21,084 for the same period ended June 30, 2019.
The increase
in revenue for six months ended June 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 six months ended June 30, 2020 was $0, compared with the prior year period when cost of revenues was $6,949.
Our cost of
revenues decreased for the six months ended June 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 six months ended June 30, 2020 was $136,022 , as compared with gross profit of $14,135 for the six months ended June
30, 2019.
Operating
Expenses
Operating expenses
decreased to $278,776 for the six months ended June 30, 2020 from $299,523 for the same period ended June 30, 2019.
Our operating
expenses for the six months ended June 30, 2020 consisted mainly of accrued salaries and wages of $175,885, audit and accounting
of $45,480, and amortization of $19,681. In comparison, our operating expenses for the six months ended June 30, 2019 consisted
mainly of accrued salaries and wages of $175,885, audit and accounting of $32,242, rent of $29,709 and depreciation and amortization
of $19,630.
Other
Expenses
We had other
expenses of $600,123 for the six months ended June 30, 2020, compared with other expenses of $640,722 for the six months ended
June 30, 2019.
Our
other expenses for the six months ended June 30, 2020 consisting entirely of interest expense which includes, interest expense
of $269,849 and debt discount amortization of $330,274 , compared
with the six months ended June 30, 2019 which consisted primarily of loss on extinguishment of debt of $247,998 and $405,224 in
interest expense which includes, interest expense of $177,832 and debt discount amortization of $227,392.
Net Loss
We recorded
a net loss of $742,877 for the six months ended June 30, 2020, as compared with a net loss of $926,110 for the six months ended
June 30, 2019.
Liquidity
and Capital Resources
As of June 30,
2020, we had total current assets of $56,188 and total assets in the amount of $216,565. Our total current liabilities as of June
30, 2020 were $2,364,471. We had a working capital deficit of $2,308,283 as of June 30, 2020, compared with a working capital
deficit of $1,900,688 as of June 30, 2019.
Operating activities
provided $36,464 in cash for the six months ended June 30, 2020, as compared with $49,402 used for the six months ended June 30,
2019. Our positive operating cash flow for the six months ended June 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 six month
ended June 30, 2019, which recorded a negative operating cash flow largely as the result of our net loss for the period.
We used cash
of $14,673 and $24,319 in investing activities for the six months ended June 30, 2020 and 2019, respectively, for the purchase
of intangible assets.
Cash flows provided
by financing activities during the six months ended June 30, 2020 amounted to $12,000, as compared with $71,239 for the six
months ended June 30, 2019. Our cash flows for the six months ended June 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 $33,995,673
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 June 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 June 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.