|
Item 1. |
Financial Statements |
Our consolidated financial statements included in this Form 10-Q
are as follows:
|
F-1 |
Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited); |
|
|
|
|
F-2 |
Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited); |
|
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|
|
F-3 |
Consolidated Statements of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2022 and 2021 (unaudited); |
|
|
|
|
F-4 |
Consolidated Statements of Cash Flow for the nine months ended September 30, 2022 and 2021 (unaudited); |
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|
F-5 |
Notes to Consolidated Financial Statements. |
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC
instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.
Operating results for the interim period ended September 30, 2022 are not necessarily indicative of the results that can be expected
for the full year.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
| |
| |
|
| |
September
30, 2022 | |
December
31, 2021 |
ASSETS | |
| |
|
Current assets | |
| | | |
| | |
Cash | |
$ | 127,413 | | |
$ | 66,037 | |
Accounts
receivable | |
| 5,000 | | |
| 82 | |
Prepaid
expense and other current assets | |
| 5,685 | | |
| 8,125 | |
Total
current assets | |
| 138,098 | | |
| 74,244 | |
| |
| | | |
| | |
Patents
and trademarks, net | |
| 141,060 | | |
| 153,055 | |
| |
| | | |
| | |
Total
assets | |
$ | 279,158 | | |
$ | 227,299 | |
| |
| | | |
| . | |
LIABILITIES AND STOCKHOLDERS'
DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
$ | 1,110,931 | | |
$ | 1,039,661 | |
Accrued
interest payable | |
| 1,835,574 | | |
| 1,475,067 | |
Loans
from related party | |
| — | | |
| 27,299 | |
Loans
payable | |
| 433,600 | | |
| 433,600 | |
Convertible
notes payable | |
| 220,000 | | |
| 40,000 | |
Derivative
liability | |
| 21,945 | | |
| 45,664 | |
Total
current liabilities | |
| 3,622,050 | | |
| 3,061,291 | |
| |
| | | |
| | |
Convertible
notes payable related party, net of unamortized discount of $1,380,529 and $1,837,918 respectively | |
| 2,839,680 | | |
| 2,382,291 | |
| |
| | | |
| | |
Convertible
notes payable, net of unamortized debt discount of $114,621 and $152,642, respectively | |
| 57,454 | | |
| 199,433 | |
| |
| | | |
| | |
Total liabilities | |
| 6,519,184 | | |
| 5,643,015 | |
| |
| | | |
| | |
Stockholders' deficit | |
| | | |
| | |
Common stock; $0.001 par
value; 200,000,000 shares authorized; 4,539,843 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | |
| 4,540 | | |
| 4,540 | |
Additional
paid-in capital | |
| 30,352,905 | | |
| 30,352,905 | |
Accumulated
deficit | |
| (36,597,471 | ) | |
| (35,773,161 | ) |
Total
stockholders' deficit | |
| (6,240,026 | ) | |
| (5,415,716 | ) |
| |
| | | |
| | |
Total
liabilities and stockholders' deficit | |
$ | 279,158 | | |
$ | 227,299 | |
See
Accompanying Notes to Condensed Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
| |
Three
months ended | |
Nine
months ended |
| |
September
30, 2022 | |
September
30, 2021 | |
September
30, 2022 | |
September
30, 2021 |
| |
| |
| |
| |
|
| |
| |
| |
| |
|
Revenues | |
$ | 9,316 | | |
$ | 111,421 | | |
$ | 274,296 | | |
$ | 410,571 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of revenues | |
| 3,300 | | |
| — | | |
| 4,808 | | |
| 3,300 | |
| |
| | | |
| | | |
| | | |
| | |
Gross
profit | |
| 6,016 | | |
| 111,421 | | |
| 269,488 | | |
| 407,271 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Depreciation
and amortization | |
| 4,729 | | |
| 4,696 | | |
| 14,000 | | |
| 13,244 | |
Selling
general and administrative | |
| 128,454 | | |
| 114,578 | | |
| 376,204 | | |
| 353,487 | |
Total
operating expenses | |
| 133,183 | | |
| 119,274 | | |
| 390,204 | | |
| 366,731 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from
operations | |
| (127,167 | ) | |
| (7,853 | ) | |
| (120,716 | ) | |
| 40,540 | |
| |
| | | |
| | | |
| | | |
| | |
Other income and (expense) | |
| | | |
| | | |
| | | |
| | |
Gain/(loss)
on settlement of debt | |
| — | | |
| 19,272 | | |
| 144,379 | | |
| 102,825 | |
Interest
expense | |
| (291,178 | ) | |
| (294,216 | ) | |
| (871,692 | ) | |
| (886,207 | ) |
Gain/(loss)
on change in derivative liability | |
| 277 | | |
| 79,445 | | |
| 23,719 | | |
| (164,529 | ) |
Total
other income (expense) | |
| (290,901 | ) | |
| (195,499 | ) | |
| (703,594 | ) | |
| (947,911 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
income (loss) | |
$ | (418,068 | ) | |
$ | (203,352 | ) | |
$ | (824,310 | ) | |
$ | (907,371 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic
income (loss) per common share | |
$ | (0.09 | ) | |
$ | (0.04 | ) | |
$ | (0.18 | ) | |
$ | (0.20 | ) |
| |
| | | |
| | | |
| | | |
| | |
Fully
diluted income (loss) per common share | |
$ | (0.09 | ) | |
$ | (0.04 | ) | |
$ | (0.18 | ) | |
$ | (0.20 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic
weighted average common shares outstanding | |
| 4,539,843 | | |
| 4,539,843 | | |
| 4,539,843 | | |
| 4,539,843 | |
| |
| | | |
| | | |
| | | |
| | |
Fully
diluted weighted average common shares outstanding | |
| 4,539,843 | | |
| 4,539,843 | | |
| 4,539,843 | | |
| 4,539,843 | |
See
Accompanying Notes to Condensed Consolidated Financial Statements
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Common
Stock | | |
| | | |
| | | |
| | | |
| |
| |
| Shares | | |
| Amount | | |
| Additional
Paid-in Capital | | |
| Shares
payable | | |
| Accumulated
Deficit | | |
| Total
Stockholders' Deficit |
Balance,
December 31, 2021 | |
| 4,539,843 | | |
$ | 4,540 | | |
$ | 30,352,905 | | |
$ | — | | |
$ | (35,773,161 | ) | |
$ | (5,415,716) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (214,519 | ) | |
| (214,519) |
Balance, March
31, 2022 | |
| 4,539,843 | | |
$ | 4,540 | | |
$ | 30,352,905 | | |
$ | — | | |
$ | (35,987,680 | ) | |
$ | (5,630,235) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (191,723 | ) | |
| (191,723) |
Balance, June 30,
2022 | |
| 4,539,843 | | |
$ | 4,540 | | |
$ | 30,352,905 | | |
$ | — | | |
$ | (36,179,403 | ) | |
$ | (5,821,958) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (418,068 | ) | |
| (418,068) |
Balance, September
30, 2022 | |
| 4,539,843 | | |
$ | 4,540 | | |
$ | 30,352,905 | | |
$ | — | | |
$ | (36,597,471 | ) | |
$ | (6,240,026) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| |
Balance,
December 31, 2020 | |
| 4,539,843 | | |
$ | 4,540 | | |
$ | 30,241,089 | | |
$ | — | | |
$ | (34,700,408 | ) | |
$ | (4,454,779) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (435,505 | ) | |
| (435,505) |
Balance, March
31, 2021 | |
| 4,539,843 | | |
| 4,540 | | |
| 30,241,089 | | |
| — | | |
| (35,135,913 | ) | |
| (4,890,284) |
Derivative liability
reclassified to APIC | |
| — | | |
| — | | |
| 53,305 | | |
| — | | |
| — | | |
| 53,305 |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (268,514 | ) | |
| (268,514) |
Balance, June 30,
2021 | |
| 4,539,843 | | |
| 4,540 | | |
| 30,294,394 | | |
| — | | |
| (35,404,427 | ) | |
| (5,105,493) |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| (203,352 | ) | |
| (203,352) |
Balance, September
30, 2021 | |
| 4,539,843 | | |
| 4,540 | | |
| 30,294,394 | | |
| — | | |
| (35,607,779 | ) | |
| (5,308,845) |
See
Accompanying Notes to Condensed Consolidated Financial Statements
SKINVISIBLE,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
| |
Nine
months ended |
| |
September
30, 2022 | |
September
30, 2021 |
| |
| |
|
Cash flows from operating
activities: | |
| | | |
| | |
Net
Income (loss) | |
$ | (824,310 | ) | |
$ | (907,371 | ) |
Adjustments
to reconcile net loss to net cash
provided (used) by operating activities: | |
| | | |
| | |
Non-cash
interest expense | |
| — | | |
| 102,825 | |
Depreciation
and amortization | |
| 14,000 | | |
| 13,244 | |
Amortization
of debt discount | |
| 495,410 | | |
| 495,410 | |
Gain/(loss)
on settlement of debt | |
| (144,379 | ) | |
| (102,825 | ) |
Gain/(loss)
on change in derivative liability | |
| (23,719 | ) | |
| 164,529 | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Decrease
(Increase) in prepaid assets | |
| 2,440 | | |
| 2,750 | |
Decrease
(Increase) in accounts receivable | |
| (4,918 | ) | |
| 2,670 | |
Increase
in accounts payable and accrued liabilities | |
| 215,649 | | |
| 168,403 | |
Decrease
in due from related party | |
| — | | |
| (7,616 | ) |
Increase
in accrued interest | |
| 360,507 | | |
| 288,772 | |
Net cash
provided used in operating activities | |
| 90,680 | | |
| 220,791 | |
| |
| | | |
| | |
Cash flows from investing
activities: | |
| | | |
| | |
Purchase
of fixed and intangible assets | |
| (2,005 | ) | |
| (20,864 | ) |
Net cash
used in investing activities | |
| (2,005 | ) | |
| (20,864 | ) |
| |
| | | |
| | |
Cash flows from financing
activities: | |
| | | |
| | |
Payments
on related party loans | |
| — | | |
| (200 | ) |
Proceeds
from related party loans | |
| (27,299 | ) | |
| — | |
Payments
on loans payable | |
| — | | |
| (106,400 | ) |
Payments
on convertible notes payable | |
| — | | |
| (65,000 | ) |
Payments
on convertible notes payable - related party | |
| — | | |
| (15,000 | ) |
Net
cash provided by (used in) financing activities | |
| (27,299 | ) | |
| (186,600 | ) |
| |
| | | |
| | |
Net change in cash | |
| 61,376 | | |
| 13,327 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 66,037 | | |
| 35,896 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 127,413 | | |
$ | 49,223 | |
| |
| | | |
| | |
Supplemental disclosure of
cash flow information: | |
| | | |
| | |
Cash
paid for interest | |
$ | 5,000 | | |
$ | — | |
Cash
paid for tax | |
$ | — | | |
$ | — | |
See
Accompanying Notes to Condensed Consolidated Financial Statements
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
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, 2021 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, 2022, the Company
had a net loss of $824,310. The Company has also incurred cumulative net losses of $36,597,471 since its inception and requires capital
for its contemplated operational and marketing activities to take place. These factors, among others, raises substantial doubt about
the Company’s ability to continue as a going concern within one year from the date of filing.
Managements plans for the Company are to generate
the necessary funding through licensing of its core products and to seek additional debt and equity funding. However, the Company’s
ability to generate the necessary funds through licensing or raise additional capital through the future issuances of common stock or
debt is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations,
and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The consolidated
financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
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.
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
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) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied
a performance obligation.
Product sales –
Revenues from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the customer
and only when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive
reasonably assured payments for products sold and delivered.
Royalty sales –
We also recognize royalty revenue from licensing our patented product formulations only when earned, with no further contingencies or
material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
Distribution and license
rights sales – We also recognize revenue from distribution and license rights when no further contingencies or material
performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
The Company has made an accounting policy election
to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are collected by the Company
from its customers (sales and use taxes, value added taxes, some excise taxes).
Accounts Receivable
Accounts receivable
is comprised of uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date.
The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely,
an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Management reviews
each accounts receivable balance that exceeds 30 days from the invoice date and, based on an assessment of creditworthiness, estimates
the portion, if any, of the balance that will not be collected. As of September 30, 2022 and December 31, 2021, 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 year ending
December 31, 2021, since the effect of the assumed exercise of options and warrants to purchase common shares (common stock equivalents)
would have an anti-dilutive effect. There are 23,609,820 additional shares issuable in connection with outstanding options, warrants,
stock payable and convertible debts as of September 30, 2022. The shares issuable under each instrument is as follows; 0 shares issuable
for options, 0 shares issuable for warrants, and 23,609,820 shares issuable under convertible notes.
Recently issued accounting pronouncements
The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a material effect on the
Company's financial position, results of operations or cash flows.
4. INTANGIBLE AND OTHER
ASSETS
Patents and trademarks and other intangible
assets are capitalized at their historical cost and are amortized over their estimated useful lives. As of September 30, 2022, intangible
assets total $141,060, net of $143,535 of accumulated amortization. As of December 31, 2021, intangible assets total $153,055, net of
$129,536 of accumulated amortization.
Amortization expense for the nine months ended September, 2022
and 2021 was $14,000 and $13,244, 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, 2022.
5. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2022 and 2021, $0 and
$0 was advanced by an officer and $27,299 and $200 was repaid, respectively .
As of September 30, 2022 and December 31, 2021, $0 and $27,299
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, 2022 |
|
December 31, 2021 |
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 $457,389 and $457,389 during the nine months ended September 30, 2022 and 2021, respectively. |
|
$ |
4,220,209 |
|
|
$ |
4,220,209 |
Unamortized debt discount |
|
|
(1,380,529 |
) |
|
|
(1,837,918) |
Total, net of unamortized discount |
|
$ |
2,839,680 |
|
|
$ |
2,382,291 |
6. NOTES PAYABLE
Secured debt offering
During the period from May 22, 2013 and December
31, 2018, the Company entered into a 9% notes payable to nineteen investors and received proceeds of $552,000. The notes were due two
years from the anniversary date of execution. The Notes are secured by the US Patent rights granted for the Company's Sunscreen Products:
US patent number #8,128,913: "Sunscreen Composition with Enhanced UV-A Absorber Stability and Methods.”
As of September 30, 2022, $433,600 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, |
|
|
2022 |
|
2021 |
$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 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 $38,021 and $38,201 for the nine months ended September 30, 2022 and 2021, respectively. |
|
|
352,075 |
|
|
|
352,075 |
Unamortized debt discount |
|
|
(114,621 |
) |
|
|
(152,642) |
Total, net of unamortized discount |
|
|
277,454 |
|
|
|
239,433 |
Current portion: |
|
|
220,000 |
|
|
|
40,000 |
Total long-term convertible notes |
|
$ |
57,454 |
|
|
$ |
199,433 |
8. STOCK OPTIONS AND
WARRANTS
The following is a summary of option activity during the
nine months ended September 30, 2022.
| |
Number of Shares | |
Weighted Average Exercise Price |
Balance, December 31, 2021 | |
| 30,000 | | |
| 1.51 | |
| |
| | | |
| | |
Options granted and assumed | |
| — | | |
| — | |
Options expired | |
| (30,000 | ) | |
| 1.51 | |
Options canceled | |
| — | | |
| — | |
Options exercised | |
| — | | |
| — | |
| |
| | | |
| | |
Balance, September 30, 2022 | |
| — | | |
| — | |
As of September 30, 2022, there are no stock options outstanding.
9.
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'').
As
of September 30, 2022, the Company has recognized $1,000,000 under the agreement including $250,000 during the nine
months ended September 30, 2022.
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.
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, 2022 and December 31, 2021, respectively.
11. SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations
subsequent to September 30, 2022 to the date these financial statements were available to be 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 Forward-Looking Statements |
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.
Company Overview
We, through our wholly owned subsidiary Skinvisible
Pharmaceuticals Inc., are a pharmaceutical research and development (“R&D”) company that has developed and patented an
innovative polymer delivery system, Invisicare® and formulated over forty topical skin products, which we out-license globally. We
were incorporated in 1998, and target an estimated $80 billion global skincare and dermatology market and a $30 billion global over-the-counter
market as well as other healthcare / medical and consumer goods markets.
With the research and development complete on
forty products and numerous patents issued (technology and product patents), we are ready to monetize our investment. Our business model
will continue to be to out-license our patented prescription and over-the-counter (“OTC”) products featuring Invisicare to
established manufacturers and marketers of brands internationally and to maximize profits from the products we have already out-licensed.
The opportunity for us to license our products
continues to be a viable model as the need for pharmaceutical companies to access external R&D companies for new products due to their
own down-sizing or elimination of internal R&D departments. The demand for our products is enhanced due to the granting of key US
and international patents and the completed development of a number of unique products.
Our Flagship Product
Pivotal to our success is our patented polymer
delivery system technology Invisicare. Invisicare is a patented polymer delivery system that enhances the delivery of active ingredients
for topically applied skin care products. Its patented technology has a unique formula and process for combining active ingredients with
a delivery system that extends the duration of time the product remains on the skin and active.
Invisicare is specifically formulated to
carry water insoluble active and certain cationic active ingredients in water-based products without the use of alcohol, silicones, waxes,
or other organic solvents. Products utilizing Invisicare have the proven ability to bond active ingredients to the skin for up to four
hours and longer. They are non-occlusive and allow normal skin respiration and perspiration while moisturizing and protecting against
exposure from a wide variety of environmental irritants.
When topically applied, these formulated products
adhere to the skin's outer layers, forming a protective bond, resisting wash-off, and delivering targeted levels of therapeutic or cosmetic
skincare agents to the skin. They allow enhanced delivery performance for a variety of skincare agents resulting in improved efficacy,
longer duration of action, reduced irritation and lower dosage of active agent required. The "invisible" polymer compositions
wear off as part of the natural exfoliation process of the skin's outer layer cells.
The advantage of products formulated with Invisicare
is (1) Invisicare’s ability to bind active ingredients (the drug) to the skin, forming a protective bond on the skin, for extended
periods of time; (2) Invisicare can deliver targeted levels (high or low) of therapeutic or cosmetic ingredients to the skin in a controlled
release; (3) Invisicare can help to reduce the irritation of some active ingredients due to how it controls the slower release of that
active ingredient; and (4) Invisicare science proves that it provides a protective skin barrier which helps retain the natural moisture
content of the skin, while still allowing it to breathe. These benefits present an excellent opportunity for clear scientific advantages
and marketing messages which resonate with physicians and consumers.
What We Do
We have positioned ourselves in the $80 billion
worldwide prescription and over-the-counter dermatology and skincare market. We generate revenue by:
|
• |
LICENSING: We develop topical prescription and over-the-counter products enhanced with Invisicare to
license to pharmaceutical and consumer goods companies around the world for an upfront fee and ongoing royalties; |
|
|
|
|
• |
CO-DEVELOPMENT: We assist pharmaceutical clients in the early development of the most optimal formulation, which they then
take forward into clinical testing; |
|
|
|
|
• |
LIFE CYCLE MANAGEMENT: We provide cost-effective solutions to global pharmaceutical companies by reformulating their products
coming off patent with a new Invisicare patent and new product benefits and line extensions. Pharmaceutical companies are under a lot
of pressure to develop innovative strategies to counteract the revenue loss from their drugs coming off patent. |
License Agreement with Quoin
On October 17, 2019, we entered an Exclusive License Agreement with Quoin
Pharmaceuticals, Inc., a Delaware corporation (“Quoin”) pursuant to which we granted to Quoin a license to certain patents
for the development of products for commercial sale. In exchange for the license, Quoin agreed to pay to us a license fee of $1,000,000
(the “License Fee”) and a single digit royalty interest of all net sales on the licensed products subject to adjustment in
certain situations. The agreement also requires that Quoin make certain milestone payments to us upon achieving regulatory approval milestones
for certain drug products.
The agreement was subject to termination, if among other things,
50% of the license fee is not paid by December 31, 2019 and if the full License Fee is not paid by March 31, 2020. No payments were made
by Quoin and the agreement was terminated. Both Parties subsequently determined that they continue to see the value in a partnership and
therefore on May 8, 2020 and again on July 31, 2020 the companies agreed to extend the Exclusive License Agreement under the same terms
to expire on December 31, 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 (USD $1,000,000) (''License Fee''). To date, Licensee has paid one million US dollars (USD $1,000,000)
Additionally, the milestones in the initial agreement were changed as shown
below:
|
(i) |
Successful completion of Phase 2 testing: $0 |
|
(ii) |
Successful completion of Phase 3 testing: $0 |
|
(iii) |
Regulatory approval in either 1· the US or EU, whichever happens first: $5,000,000 |
On June 6, 2022 we announced that Quoin has received
U.S. FDA acceptance of its Investigational New Drug (IND) application for its licensed formulation which uses our Invisicare proprietary
drug delivery technology. The topical formulation "QRX003" was developed to treat Nethertons Syndrome, a debilitating hereditary
disorder that affects the skin, hair and the immune system. There currently is no cure or approved treatment for Netherton Syndrome.
With the IND approved, the clinical trial will be
underway shortly. We look forward to assisting Quoin in their success and potential FDA approval as well as potentially bringing a treatment
to patients suffering from Nethertons Syndrome.
Quoin is responsible for obtaining all FDA and other
regulatory body approvals necessary to market the products in the US and other countries. Upon the successful completion of various clinical
and regulatory milestones, Skinvisible is entitled to receive a milestone payment of $5 million and ongoing royalties from sales.
Results of Operations for the Three and Nine Months Ended September
30, 2022 and 2021
Revenues
Our revenue, which we combine from product sales, royalties on patent licenses
and license fees (product development fees), was $9,316 for the three months ended September 30, 2022, a decrease from $111,421 for the
same period ended September 30, 2021. Our revenue was $274,296 for the nine months ended September 30, 2022, a decrease from $410,571
for the same period ended September 30, 2021.
The revenue for 2022 was mainly from license fees with Quoin and the revenue
for 2021 was mainly from license fees with Quoin and Ovation. We hope to generate more revenues from our licenses with Quoin and Ovation
for the rest of 2022.
Gross Profit
We had $3,300 and $4,808 in cost of revenues for the three and nine months
ended September 30, 2022, compared with no cost of revenues for the three months ended September 30, 2021 and $3,300 in cost of revenues
for the nine months ended September 30, 2021, so our gross profit was $6,016 and $269,488 for the three and nine months ended September
30, 2022, respectively, as compared with gross profit of $111,421 and $407,271 for the three and nine months ended September 30, 2021,
respectively.
Our gross profit decreased in 2022 due to less revenues from our
license with Quoin, and we hope to generate more revenues from our licenses with Quoin and Ovation for the rest of 2022.
Operating Expenses
Operating expenses increased to $133,183 for the three months
ended September 30, 2022 from $119,274 for the same period ended September 30, 2021. Operating expenses increased to $390,204 for the
nine months ended September 30, 2022 from $366,731 for the same period ended September 30, 2021.
Our operating expenses for all periods consisted mainly of selling, general
and administrative expenses.
Our selling, general and administrative expenses for the nine months
ended September 30, 2022 consisted mainly of accrued salaries and wages of $245,827 and audit and accounting of $46,528. In comparison,
our selling, general and administrative expenses for the nine months ended September 30, 2021 consisted mainly of accrued salaries and
wages of $243,826, audit and accounting of $43,102.
Other Expenses
We had other expenses of $290,901 for the three months ended September
30, 2022, as compared with other expenses of $195,499 for the three months ended September 30, 2021. We had other expenses of $703,594
for the nine months ended September 30, 2022, as compared with other expenses of $947,911 for the nine months ended September 30, 2021.
Our other expenses for the nine months ended September
30, 2022 consisted mainly of interest expense, netted against a gain on settlement of debt and gain on derivative liability changes. Our
other expenses for the nine months ended September 30, 2021 consisted mainly of interest expense and a loss on the changes in derivative
liability, offset by a gain on the settlement of debt.
Net Loss
We recorded a net loss of $418,068 for the three months ended September
30, 2022, as compared with a net loss of $203,352 for the three months ended September 30, 2021. We recorded a net loss of $824,310 for
the nine months ended September 30, 2022, as compared with a net loss of $907,371 for the nine months ended September 30, 2021.
Liquidity and Capital Resources
As of September 30, 2022, we had total current assets of $138,098 and total
assets in the amount of $279,158. Our total current liabilities as of September 30, 2022 were $3,622,050. We had a working capital deficit
of $3,483,952 as of September 30, 2022, compared with a working capital deficit of $2,987,049 as of December 31, 2021.
Operating activities provided $90,680 in cash for the nine months ended
September 30, 2022, as compared with $220,791 provided for the nine months ended September 30, 2021. Our positive operating cash flows
for 2022 and 2021 was largely the result of changes in operating assets and liabilities, amortization of debt discount offset mainly by
the net loss for the periods.
We used cash of $2,005 and $20,864 in investing activities for the nine
months ended September 30, 2022 and 2021, respectively, for the purchase of fixed and intangible assets.
Cash flows used by financing activities during the nine months ended September
30, 2022 amounted to $27,299, as compared with cash used of $186,600 for the nine months ended September 30, 2021. Our negative financing
cash flow for the nine months ended September 30, 2022 resulted from payments on related party loans. Our negative financing cash flow
for the nine months ended September 30, 2021 resulted from the repayments of debt.
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 $36,597,471 since our inception and require capital for our contemplated
operational and marketing activities to take place. Our ability to raise additional capital through the future issuances of common stock
is unknown. The obtainment of additional financing, the successful development of our contemplated plan of operations, and our transition,
ultimately, to the attainment of profitable operations are necessary for us to continue operations. The ability to successfully resolve
these factors raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements do not
include any adjustments that may result from the outcome of these aforementioned uncertainties.
Off Balance Sheet Arrangements
As of September 30, 2022, there were no off balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most
“critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting
policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are
inherently uncertain.
Product sales – Revenues from the sale of products (Invisicare®
polymers) are recognized when title to the products are transferred to the customer and only when no further contingencies or material
performance obligations are warranted, and thereby have earned the right to receive reasonably assured payments for products sold and
delivered.
Royalty sales – We also recognize royalty revenue from licensing
our patented product formulations only when earned, with no further contingencies or material performance obligations are warranted, and
thereby have earned the right to receive and retain reasonably assured payments.
Distribution and license rights sales – We also recognize
revenue from distribution and license rights only when earned (and are amortized over a five-year period), with no further contingencies
or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.
Costs of Revenue – Cost of revenue includes raw materials,
component parts, and shipping supplies. Shipping and handling costs is not a significant portion of the cost of revenue.
Accounts Receivable – Accounts receivable is comprised of
uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. The carrying
amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance
that reflects management’s best estimate of the amounts that will not be collected is recorded. Management reviews each accounts
receivable balance that exceeds 30 days from the invoice date and, based on an assessment of creditworthiness, estimates the portion,
if any, of the balance that will not be collected. As of September 30, 2022, we had not recorded a reserve for doubtful accounts.
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.