Our consolidated financial statements included in this Form 10-Q
are as follows:
These condensed 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, 2021 are not necessarily indicative of
the results that can be expected for the full year.
SKINVISIBLE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
AND HISTORY
Description of business – Skinvisible,
Inc., (referred to as the “Company”) is focused on the development and manufacture and sales of innovative topical, transdermal
and mucosal polymer-based delivery system technologies and formulations incorporating its patent-pending formula/process for combining
hydrophilic and hydrophobic polymer emulsions. The technologies and formulations have broad industry applications within the pharmaceutical,
over-the-counter, personal skincare and cosmetic arenas. Additionally, the Company’s non-dermatological formulations, offer solutions
for a broad spectrum of markets women’s health, pain management, and others. The Company maintains executive and sales offices in
Las Vegas, Nevada.
History – The Company was incorporated
in Nevada on March 6, 1998, under the name of Microbial Solutions, Inc. The Company underwent a name change on February 26, 1999, when
it changed its name to Skinvisible, Inc. The Company’s subsidiary’s name of Manloe Labs, Inc. was also changed to Skinvisible
Pharmaceuticals, Inc.
Skinvisible, Inc., together with its subsidiaries,
shall herein be collectively referred to as the “Company.”
2. BASIS
OF PRESENTATION AND GOING CONCERN
Basis of presentation – The accompanying unaudited
interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation
S-X , and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most
recent Annual Financial Statements on Form 10-K filed with the SEC on April 15, 2021. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim
period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results
to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the
audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.
The condensed consolidated balance sheet at December
31, 2020 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes
required by generally accepted accounting principles in the U.S. for complete financial statements.
Going
concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. For the nine months ended September 30, 2021, the Company had a net loss of $907,371.
The Company has also incurred cumulative net losses of $35,607,779 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 within one year from the date of filing.
Managements
plans for the Company are to generate the necessary funding through licensing of its core products
and to seek additional debt and equity funding. However, the Company’s ability to generate the necessary funds through licensing
or raise additional capital through the future issuances of common stock or debt is unknown. The obtainment of additional financing, the
successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable
operations are necessary for the Company to continue operations. The consolidated financial statements of the Company do not include any
adjustments that may result from the outcome of these aforementioned uncertainties.
COVID-19 Pandemic
In December 2019, an outbreak of a novel strain of
coronavirus originated in Wuhan, China (“COVID-19”) and has since spread worldwide, including to the Unites States, posing
public health risks that have reached pandemic proportions (the “COVID-19 Pandemic”). The COVID-19 Pandemic poses a threat
to the health and economic wellbeing of our employees, customers and vendors. Like most businesses world-wide, the COVID-19 Pandemic has
impacted the Company financially; however, management cannot presently predict the scope and severity with which COVID-19 will impact
our business, financial condition, results of operations and cash flows.
3. SUMMARY OF SIGNIFICANT
POLICIES
This
summary of significant accounting policies of Skinvisible Inc. is presented to assist in understanding the Company’s consolidated
financial statements. The consolidated financial statements and notes are representations of the Company’s management, who
are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted
in the United States of America and have been consistently applied in the preparation of the consolidated financial statements.
Principles of consolidation
The consolidated financial statements include the
accounts of the Company and its subsidiary Skinvisible Pharmaceuticals Inc. All significant intercompany balances and transactions have
been eliminated.
Use of estimates
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of
the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates. Significant estimates include estimates used to review the Company’s, impairments and estimations of
long-lived assets, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances.
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Cash and cash equivalents
For purposes of the statement of cash flows,
the Company considers all highly liquid investments and short-term instruments with original maturities of three months or less to be
cash equivalents. As of September 30, 2021 and December 31, 2020 the Company had no cash equivalents.
Fair Value of financial instruments
The carrying value of cash, accounts payable and accrued
expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company
is not exposed to significant interest or credit risks arising from these financial instruments. The carrying amount of the Company’s
convertible debt is also stated at a fair value of $4,727,284 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.
|
Financial assets and liabilities measured
at fair value on a recurring basis are summarized below as of September 30, 2021:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
111,224
|
|
|
$
|
111,224
|
As of September 30, 2021, the Company’s used
the following assumptions to value the derivative liabilities using the for Binomial-Lattice valuation model. Stock price was $0.11,
term 0.25 years, risk-free discount rate of 0.05% and volatility of 344.11%
The following table provides a summary of the changes
in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis
using significant unobservable inputs:
|
|
Amount
|
Balance December 31, 2020
|
|
$
|
—
|
Derivative reclassified to additional paid in capital
|
|
|
(53,305)
|
Change in fair market value of derivative liabilities
|
|
|
164,529
|
Balance September 30, 2021
|
|
$
|
111,224
|
Revenue recognition
We recognize revenue in accordance with generally
accepted accounting principles as outlined in the Financial Accounting Standard Board's (“FASB”) Accounting Standards Codification
(“ASC”) 606, Revenue From Contracts with Customers, which requires that five steps be followed in evaluating revenue recognition:
(i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction
price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.
Product sales –
Revenues from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the customer
and only when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive
reasonably assured payments for products sold and delivered.
Royalty
sales – We also recognize royalty revenue from licensing our patented product formulations only when earned, with no further
contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured
payments. Revenue from royalty sales is recognized at the point of time in which sales occur which is determined by the receipt of royalty
statements.
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. Revenue from
distribution and license rights is recognized immediately meeting milestones and once collection is substantially probable.
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, 2021 and December 31, 2020, 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.
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 nine months
ending September 30, 2021 and 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 30,689,400 additional shares issuable in connection with outstanding
options, warrants, stock payable and convertible debts as of September 30, 2021. The
shares issuable under each instrument is as follows; 30,000 shares issuable for options, 40,000 shares issuable for warrants, and 30,619,400
shares issuable under convertible notes.
Recently issued accounting pronouncements
The Company has evaluated all other recent accounting
pronouncements and believes that none of them will have a material effect on the Company's financial position, results of operations or
cash flows.
In August 2020, FASB issued ASU 2020-06, Accounting for Convertible
Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce
costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users
of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the
convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted
for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer
separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The
new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings
per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective
for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with
early adoption permitted, but only at the beginning of the fiscal year. The Company is currently evaluating the impact the adoption of
ASU 2020-06 will have on the Company’s financial statements
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, 2021, intangible
assets total $157,750, net of $124,840 of accumulated amortization. As of December 31, 2020, intangible assets total $150,130, net of
$111,596 of accumulated amortization.
Amortization expense for the nine months
ended September 30, 2021 and 2020 was $13,244 and $23,973, 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, 2021.
5. RELATED PARTY TRANSACTIONS
Loans
From Related Party
During the nine months ended September 30,
2021 and 2020, $0 and $27,000 was advanced by an officer and $200 and $15,300 was repaid, respectively .
As of September 30, 2021 and December 31,
2020, $52,299 and $52,499 in advances remained due to officers of the company, respectively. All other related party notes have been extinguished
or re-negotiated as convertible notes. (See note 9 for additional details.)
Convertible Notes Related Party
|
|
|
|
|
|
|
|
Convertible Notes Payable Related Party consists of the following:
|
|
September 30, 2021
|
|
December 31, 2020
|
On June 30, 2019, the Company renegotiated accrued salaries, accrued interest, unpaid reimbursements, cash advances, and outstanding convertible notes for its two officers. Under the terms of the agreements, all outstanding notes totaling $2,464,480, accrued interest of $966,203, accrued salaries of $617,915, accrued vacation of $64,423, unpaid reimbursements of $11,942 and cash advances of $110,245 were converted to promissory notes convertible into common stock with a warrant feature. During the three months ended September 30, 2021, the Company made a $15,000 payment toward the principal balance of the note. 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 $457,389 and $457,389 during the nine months ended September 30, 2021 and 2020, respectively.
|
|
$
|
4,220,209
|
|
|
$
|
4,235,209
|
Unamortized debt discount
|
|
|
(1,990,381
|
)
|
|
|
(2,447,770)
|
Total, net of unamortized discount
|
|
$
|
2,229,828
|
|
|
$
|
1,787,439
|
6. NOTES PAYABLE
Secured debt offering
During the period from May 22, 2013 and December
31, 2018, the Company entered into a 9% notes payable to nineteen investors and received proceeds of $552,000. The notes were due two
years from the anniversary date of execution. The Notes are secured by the US Patent rights granted for the Company's Sunscreen Products:
US patent number #8,128,913: "Sunscreen Composition with Enhanced UV-A Absorber Stability and Methods.”
During the nine months ended September
30, 2021, the Company entered to settlement agreements to settle various notes. As part of the settlement the principal balance of the
note was settled for cash and all interest due through the date of settlement was forgiven. As of September 30, 2021, the Company has
recorded a gain on settlement of the debt of $64,673 associated with the settlement of $41,400 of principal. As of September 30, 2021,
$445,600 of the outstanding notes payable are past due and in default and have been classified as current notes payable.
7. CONVERTIBLE NOTES
PAYABLE
|
|
|
|
|
|
|
|
Convertible Notes Payable consists of the following:
|
|
September 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
$40,000 face value 9% secured notes payable to investors, due in 2015. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90% of the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of September 30, 2021, the fair value of the derivative is $28,703. The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.
|
|
|
40,000
|
|
|
|
40,000
|
Original issue discount
|
|
|
—
|
|
|
|
—
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
On
October 26, 2015 the Company issued a $135,000
face value
9% unsecured notes payable to investors, due October
26, 2017.
After the first anniversary of the note, 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 at a variable conversion price of 90%
of the average trading price of the common stock during the five (5) trading
day period ending on the latest complete trading day prior to the conversion date.. 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. The Company
evaluated the conversion feature of the note and concluded that it represents an embedded derivative.
During the three months ended June 30, 2021, the Company made payments of $50,000
on the balance
of the note. The fair value of the embedded derivative associated with the payments was $43,305
and was recorded
to additional paid in capital. As of September 30, 2021, the fair value of the derivative is $60,994.
The Company determined the derivative was immaterial as of December 31, 2020. The note has reached
maturity and is now in default, under the notes default provisions the entire balance is now due
upon demand. During the nine months ended September 30, 2021, the Company entered into a settlement
agreements to settle the note. As part of the settlement an initial payment of $50,000 was made on
the principal balance of the note and all interest due through the date of settlement was forgiven.
As of September 30, 2021, the Company has recorded a gain on settlement of the debt of $34,320 associated
with the settlement and the note had a balance of $85,000 as of September 30, 2021.
|
|
|
85,000
|
|
|
|
135,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
85,000
|
|
|
|
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 was due on February
17, 2018. The
note is convertible at any time following 90 days after the issuance date at noteholders option into shares of our common stock at a
variable conversion price of 90%
of the average five day market price of our common stock during the 5 trading days prior to the notice of conversion, subject to
adjustment as described in the note. The holder’s ability to convert the note, however, is limited in that it will not be
permitted to convert any portion of the note if the number of shares of our common stock beneficially owned by the holder and its
affiliates, together with the number of shares of our common stock issuable upon any full or partial conversion, would exceed 4.99%
of the Company’s outstanding shares of common stock. The Company evaluated
the conversion feature of the note and concluded that it represents an embedded derivative. As of September 30, 2021, the fair value
of the derivative is $14,351.
The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in
default, under the notes default provisions the entire balance is now due upon demand.
|
|
|
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 was due on August 11, 2018. The
note is convertible into shares of our common stock at a variable conversion price of 90%
of the average market price of our common stock during the 5 trading days prior to the notice of conversion, subject to adjustment
as described in the note. The Company evaluated the conversion feature of
the note and concluded that it represents an embedded derivative. The fair value of the embedded derivative associated with the
payments was $10,000
and was recorded to additional paid in capital. On April 15, 2021, the Company entered into
a settlement agreements to settle the note. As part of the settlement an initial payment of $15,000 was made on the principal
balance of the note and all interest due through the date of settlement was forgiven. As of September 30, 2021, the Company has
recorded a gain on settlement of the debt of $3,832 associated with the settlement of the note.
|
|
|
—
|
|
|
|
15,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
—
|
|
|
|
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. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of September 30, 2021, the fair value of the derivative is $7,176. The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.
|
|
|
10,000
|
|
|
|
10,000
|
Unamortized debt discount
|
|
|
—
|
|
|
|
—
|
Total, net of unamortized discount
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
On June 30, 2019, the Company renegotiated accrued salaries and interest and outstanding convertible notes for a former employee. Under the terms of the agreements, all outstanding notes totaling $224,064, accrued interest of $119,278, accrued salaries of $7,260 and accrued vacation of $1,473 were converted to a promissory note convertible into common stock with a warrant feature. The convertible promissory note is unsecured, due five years from issuance, and bears an interest rate of 10%. At the noteholder’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.20 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.30 per share for three years after the conversion date.
The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $280,076 as valued under the intrinsic value method. The aggregate beneficial conversion feature has been accreted and charged to interest expenses in the amount of $38,201 and $12,731 for the nine months ended September 30, 2021 and 2020, respectively.
|
|
|
352,075
|
|
|
|
352,075
|
Unamortized debt discount
|
|
|
(165,455
|
)
|
|
|
(203,476)
|
Total, net of unamortized discount
|
|
|
186,620
|
|
|
|
148,599
|
|
|
|
|
|
|
|
|
Total Convertible Notes
|
|
$
|
341,620
|
|
|
$
|
368,599
|
Current portion:
|
|
|
155,000
|
|
|
|
220,000
|
Total long-term convertible notes
|
|
$
|
186,620
|
|
|
$
|
148,599
|
8. COMMITMENTS AND CONTINGENCIES
License Agreement
On October 17, 2019, Skinvisible
entered an Exclusive License Agreement with Quoin pursuant to which Skinvisible granted to Quoin a license to certain patents for the
development of products for commercial sale. In exchange for the license, Quoin agreed to pay to Skinvisible a license fee of $1,000,000
and a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations. The agreement also requires
that Quoin make certain milestone payments to Skinvisible upon achieving regulatory approval milestones for certain drug products.
The
agreement is subject to termination, if among other things, 50% of the license fee is not paid by December 31, 2019 and if the full License
Fee is not paid by March 31, 2020. No payments were made by Quoin and the agreement was terminated on December 31, 2019. Both Parties
subsequently determined that they continue to see the value in a partnership and therefore on May 8, 2020 and again on July 31, 2020 the
companies agreed to extend the Exclusive License Agreement, as amended under the same terms to expire on September 30, 2020 and
on January 27, 2021 the companies agreed to revise the milestone payments due under the agreement and to extend the agreement indefinitely.
On June 14, 2021, the Company entered into an amendment to change
the terms of the license Fee as shown below.
As partial consideration for the rights conveyed
by Skinvisible under this Agreement, Licensee agrees to pay to Skinvisible a one-time, non-refundable, non-creditable license issue fee
of one million USD dollars (USO $1,000,000) (''License Fee''). To date, Licensee has paid three hundred ninety-two thousand five hundred
US dollars (USD $392,500) of this fee as part of the First Half Payment of the License Fee, $125,000 of which was paid in the year ending
December 31, 2020 and $375,000 in the nine months ended September 30, 2021. The balance due of the First Half Payment is one hundred seven
thousand five hundred US dollars (USD $107,500) which was received on July 7, 2021. A further payment of two hundred and fifty thousand
dollars ($250,000) is due no later than ten (10) business days after receipt by Licensee of additional funding from Altium Capital which
coincides with the approval from the SEC on Quoin’s merger with a NASDAQ listed company. On October 28, 2021 Quoin completed a merger
with Cellect Biotechnology, Ltd. and completed a securities purchase agreement with Altium Capital. The remaining balance of two hundred
and fifty thousand dollars ($250,000) will be paid on December 31, 2021.
As of September
30, 2021 the Company has recognized $510,800 under the agreement including $385,800 during the nine months ended September 30, 2021.
On February 3, 2020, we entered
into a License Agreement with Ovation Science Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture
and distribution rights to its hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible
a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations plus a license fee payable
in year 3 of the agreement if it chooses to continue the license. On June 10, 2020, the agreement was further amended to provide additional
assignment rights for its hand sanitizer products in exchange for $100,000.
9. STOCK OPTIONS AND
WARRANTS
The following is a summary of option activity during the nine
months ended September 30, 2021.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2020
|
|
|
100,000
|
|
|
|
1.51
|
|
|
|
|
|
|
|
|
Options granted and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
(70,000
|
)
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30, 2021
|
|
|
30,000
|
|
|
|
1.51
|
As of September 30, 2021, all stock options outstanding are exercisable.
Stock warrants -
The following is a summary of warrants activity during
the nine months ended September 30, 2021.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2020
|
|
|
60,000
|
|
|
$
|
1.11
|
|
|
|
|
|
|
|
|
Warrants granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants expired
|
|
|
(20,000
|
)
|
|
|
—
|
Warrants canceled
|
|
|
—
|
|
|
|
—
|
Warrants exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, September 30,
2021
|
|
|
40,000
|
|
|
$
|
1.17
|
As of September 30, 2021, all stock warrants outstanding are exercisable.
10. STOCKHOLDERS’
DEFICIT
The Company is authorized to issue 200,000,000 shares
of $0.001 par value common stock. The Company had 4,539,843 and 4,539,843 issued and outstanding shares of common stock as of September
30, 2021 and December 31, 2020, respectively.
11. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed
its operations subsequent to September 30, 2021 to the date these financial statements were issued and has determined that it does
not have any material subsequent events to disclose in these financial statements.