Item 5. Market for Registrant’s
Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock is quoted under the symbol
“SKVI” on the OTCQB operated by OTC Markets Group, Inc.
The OTCQB is a quotation service that displays
real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. An OTCQB equity security generally
is any equity that is not listed or traded on a national securities exchange. Because we are quoted on the OTCQB, our securities
may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be
obtained if they were listed on a national securities exchange.
Trading in stocks quoted on the OTCQB is often
thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated to a company’s
operations or business prospects. We cannot assure you that there will be a market in the future for our common stock.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than
$5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document
prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public
offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and
of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities
laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and
the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary
actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains
such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction
in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer
and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information
relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value
of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk
disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability
statement.
These disclosure requirements may have the effect of reducing the
trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of April 6, 2021, we had 4,539,843 shares of our common stock
issued and outstanding, held by 253 shareholders of record, other than those held in street name.
Dividends
There are no restrictions in our articles of incorporation or bylaws
that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after
giving effect to the distribution of the dividend:
1.
|
we would not be able to pay our debts as they become due in the usual course of business, or;
|
2.
|
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.
|
We have not declared any dividends and we do not plan to declare
any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The information set forth below relates to our issuances of securities
without registration under the Securities Act of 1933 during the reporting period which were not previously included in a Quarterly
Report on Form 10-Q or Current Report on Form 8-K.
During the year ended December 31, 2020, the Company issued 68,097
shares valued at $59,602 to investors in settlement of outstanding stock payable.
These securities were issued pursuant to Section 4(2) of the Securities
Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only
and not with a view towards distribution. The investors were given adequate information about us to make an informed investment
decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates
with the appropriate restrictive legend affixed to the restricted stock.
Securities Authorized for Issuance under Equity Compensation
Plans
The following table provides information about our compensation
plans under which shares of common stock may be issued upon the exercise of options as of December 31, 2020.
In July 2006, we adopted the 2006 Skinvisible, Inc. Stock Option
Plan, which provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted
stock, performance shares and performance units, and stock awards our officers, directors or employees of, as well as advisers
and consultants. This plan was confirmed by our stockholders on August 7, 2006 at the annual shareholders meeting.
Under the 2006 Skinvisible, Inc. Stock Option Plan, we reserved
200,000 shares of common stock for the granting of options and rights.
Equity Compensation
Plans as of December 31, 2020
|
A
|
B
|
C
|
Plan Category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and right
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
|
Equity compensation plans
approved by security
holders
|
100,000
|
$1.51
|
39,000
|
Equity compensation plans
not approved by security
holders
|
60,000
|
$1.11
|
-
|
Total
|
160,000
|
$1.31
|
-
|
Item 7. 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.” 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. 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.
COVID-19
The full extent of the impact
of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we may
not be able to accurately predict at the present time. In an effort to contain COVID-19 or slow its spread, governments around
the world have enacted various measures, including orders to close all businesses not deemed “essential,” isolate residents
to their homes or places of residence, and practice social distancing when engaging in essential activities. We anticipate that
these actions and the global health crisis caused by COVID-19 will negatively impact business activity across the globe. While
we have not observed any noticeable impact on our revenue related to these conditions in the past fiscal year, or through the date
of this filing, we cannot estimate the impact COVID-19 will have in the future as business and consumer activity decelerates across
the globe.
We will continue to actively
monitor the situation and may take further actions that alter our business operations as may be required by federal, state, local
or foreign authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders.
It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects
on our customers, partners, or vendors, or on our financial results.
Results of
Operations for the Years Ended December 31, 2020 and 2019
Revenues
Our revenue from product sales, royalties on patent licenses and
license fees (product development fees) for the year ended December 31, 2020 was $275,556, an increase from $43,166 for the year
ended December 31, 2019.
The increase in revenue for year ended December 31, 2020 was mainly
due to our license agreements with Ovation and Quoin.
Cost of Revenues
Our cost of revenues for the year ended December 31, 2020 decreased
to $0 from the prior year when cost of revenues was $17,551.
Our cost of revenues decreased for the year ended December 31, 2020
over the prior year period as a result of decreased product sales and increased license fees that do not have a cost of revenue.
Gross Profit
Gross profit for the year ended December 31, 2020 was $275,556,
or 100% of sales. Gross profit for the year ended December 31, 2019 was $25,615, or approximately 60% of sales. Our gross profit
margin increased significantly in 2020 over 2019 as a result of the increased license fee revenue, which has no costs verses product
sales.
Operating Expenses
Operating expenses decreased
to $529,221 for the year ended December 31, 2020 from $565,392 for the year ended December 31, 2019. Our operating expenses for
the year ended December 31, 2020 consisted mainly of selling, general and administrative expenses of $497,199 and depreciation
and amortization of $32,022. In comparison, our operating expenses for the year ended December 31, 2019 consisted mainly of selling,
general and administrative expenses of $525,776 and depreciation and amortization of $39,616.
Other Expenses
We had other expense of $1,193,947 for the year ended December
31, 2020, compared with other expenses of $1,162,354 for the year ended December 31, 2019. Our other expenses for 2020 are the
result of interest expense. Our other expenses for 2019 is largely the result of $1,004,756 in interest expense and $247,998 in
the extinguishment of debt offset by $90,400 as other related party income.
We expect to experience high debt payments in the future
as a result of our outstanding liabilities. Moreover, as of the date of this report, there are a number of secured promissory notes
with an aggregate principal amount of approximately $762,000 that have matured. In addition, we also have one unsecured promissory
note with an aggregate principal amount of $10,000 that has matured. If we are unable to generate sufficient revenues and/or additional
financing to service this debt, there is a risk the lenders will call the notes, secure our assets, as to those applicable secured
notes, and demand payment. If this happens, we could go out of business.
Net Loss
We recorded net loss for the year ended December 31, 2020 of $1,447,612
compared to net loss of $1,702,131 for the year ended December 31, 2019.
Liquidity and
Capital Resources
Going concern –
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $34,700,408
since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s
ability to generate the necessary funds through licensing of its core products or the ability to 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. These factors, among others, raises substantial doubt about the Company’s
ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that
may result from the outcome of these aforementioned uncertainties.
As of December 31, 2020, we had total current assets of $50,114
and total assets in the amount of $200,244. Our total current liabilities as of December 31, 2020 were $2,718,985. We had a working
capital deficit of $ 2,668,871 as of December 31, 2020 as compared with a working capital deficit of $2,550,568 as of September
30, 2020 and a working capital deficit of $1,900,688 as of December 31, 2019. The change in working capital is largely the result
of our efforts to convert debt into equity during the year.
Operating activities used $45,765 in cash for the year ended December
31, 2020, as compared with $128,212 for the year ended December 31, 2019. The company’s net loss was the main component of
our negative operating cash flow, offset mainly by an increase in accrued interest of $529,772 amortization of debt discount of
$664,174 and an increase in accounts payable and accrued liabilities of $268,206.
Cash flows used by investing activities during the year ended December
31, 2020 was $16,767 as compared with $26,116 for the year ended December 31, 2019, as a result of the purchase of intangible assets
for 2019 and 2018.
Cash flows provided by financing activities during the year ended
December 31, 2020 amounted to $5,600 as compared with $78,144 for the year ended December 31, 2019. Cash flows for the year ended
December 31, 2020 consisted of $26,900 in proceeds from related party debt offset by $21,300 paid on notes payable. Cash flows
for the year ended December 31, 2019 mainly consisted of $117,144 in proceeds from related party debt, offset by $39,000 in payments
on notes payable.
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.
Off
Balance Sheet Arrangements
As
of December 31, 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
December 31, 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.
Item
8. Financial Statements and Supplementary Data
Index
to Financial Statements Required by Article 8 of Regulation S-X:
Audited Financial Statements:
F-1
|
Report of Independent Registered Public Accounting Firm
|
F-3
|
Consolidated Balance Sheets as of December 31, 2020 and 2019
|
F-4
|
Consolidated Statements of Operations for the years ended December 31, 2020 and 2019
|
F-5
|
Consolidated Statement of Stockholders’ Deficit for the years ended December 31, 2020 and 2019
|
F-6
|
Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019
|
F-7
|
Notes to Consolidated Financial Statements
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Skinvisible, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance
sheets of Skinvisible, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of operations, stockholders’
deficit, and cash flows for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively
referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each
of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the
United States of America.
Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company
has incurred cumulative net losses, which raises substantial doubt about its ability to continue as a going concern. Management’s
plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated
below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated
to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved
our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any
way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
As described in Note 3, to the financial
statements, the Company recognizes revenue 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.
The principal considerations for our determination
that performing procedures relating to revenue recognition as a critical audit matter are the significant judgement by management
in determining the nature, timing and extent in the recognition of revenue, this in turn led to significant auditor judgement,
subjectivity, and effort in performing procedures and evaluating audit evidence.
Addressing the matter involved performing
procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures
included: 1) evaluating the appropriateness and consistency of management’s methods and assumptions used in identification,
recognition, measurement and disclosure of revenue 2) reading contract source documents for each audit selection, including master
agreements, and other documents that were part of the agreement 3) testing management's identification and treatment of contract
terms 4) Assessing the terms in the customer agreement and evaluated the appropriateness of management's application of their
accounting policies, along with their use of estimates, in the determination of revenue recognition conclusions 5) testing the
mathematical accuracy of management's calculations of revenue and the associated timing of revenue recognized in the financial
statements.
Valuation of Intangible Assets
As disclosed in Note 6, to the financial
statements, intangible assets are tested for impairment at least annually and has determined that no impairment write-down is considered
necessary as of December 31, 2020. Auditing management’s impairment tests of intangible assets was complex and highly judgmental
due to the significant measurement uncertainty in determining the fair values of intangible assets.
The principal considerations for our determination
that performing procedures relating to the valuation of intangible assets as a critical audit matter are the significant judgement
by management in determining the nature, timing and extent of the carrying value of intangible assets, this in turn led to significant
auditor judgement, subjectivity, and effort in performing procedures and evaluating audit evidence.
Addressing the matter included assessing
methodologies and testing the significant assumptions and underlying data used by the Company. We compared the significant assumptions
used in the Company’s plan for the next twelve months, as well as revenue and operating margins, to current industry and
economic trends, including the impact of COVID-19.
/s/ Prager Metis CPAs, LLC
|
|
|
We have served as the Company’s auditor since 2019.
|
|
|
Basking Ridge, NJ
|
|
|
April 15, 2020
|
|
SKINVISIBLE,
INC.
CONSOLIDATED
BALANCE SHEETS
|
|
December
31, 2020
|
|
December
31, 2019
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
Cash
|
|
$
|
35,896
|
|
|
$
|
1,298
|
Accounts
receivable
|
|
|
7,718
|
|
|
|
10,204
|
Prepaid
expense and other current assets
|
|
|
6,500
|
|
|
|
4,875
|
Total
current assets
|
|
|
50,114
|
|
|
|
16,377
|
|
|
|
|
|
|
|
|
Patents
and trademarks, net of accumulated amortization of $111,596 and $533,415, respectively
|
|
|
150,130
|
|
|
|
165,385
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
200,244
|
|
|
$
|
181,762
|
|
|
|
|
|
|
|
.
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
865,497
|
|
|
$
|
597,291
|
Accounts
payable related party
|
|
|
7,616
|
|
|
|
9,274
|
Accrued
interest payable
|
|
|
1,021,373
|
|
|
|
491,601
|
Loans
from related party
|
|
|
52,499
|
|
|
|
46,899
|
Loans
payable
|
|
|
552,000
|
|
|
|
552,000
|
Convertible
notes payable, current portion
|
|
|
220,000
|
|
|
|
220,000
|
Total
current liabilities
|
|
|
2,718,985
|
|
|
|
1,917,065
|
|
|
|
|
|
|
|
|
Convertible
notes payable related party, net of unamortized discount of $2,603,581 and $3,060,970 respectively
|
|
|
1,787,439
|
|
|
|
1,174,239
|
Convertible
notes payable, net of unamortized debt discount of $216,289 and $254,450, respectively, less current potion
|
|
|
148,599
|
|
|
|
97,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,655,023
|
|
|
|
3,188,929
|
|
|
|
|
|
|
|
|
Commitment
and contingencies( Note 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
|
Common
stock; $0.001 par value; 200,000,000 shares authorized; 4,539,843 and 4,471,746 shares issued and outstanding at December
31, 2020 and 2019, respectively
|
|
|
4,540
|
|
|
|
4,472
|
Shares payable
|
|
|
—
|
|
|
|
59,602
|
Additional
paid-in capital
|
|
|
30,241,089
|
|
|
|
30,181,555
|
Accumulated
deficit
|
|
|
(34,700,408
|
)
|
|
|
(33,252,796)
|
Total
stockholders' deficit
|
|
|
(4,454,779
|
)
|
|
|
(3,007,167)
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
200,244
|
|
|
$
|
181,762
|
See
Accompanying Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Years
Ended
|
|
|
December
31, 2020
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
152,633
|
|
|
$
|
42,066
|
Revenues, related party
|
|
|
122,923
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
—
|
|
|
|
17,551
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
275,556
|
|
|
|
25,615
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
32,022
|
|
|
|
39,616
|
Selling
general and administrative
|
|
|
497,199
|
|
|
|
525,776
|
Total
operating expenses
|
|
|
529,221
|
|
|
|
565,392
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(253,665
|
)
|
|
|
(539,777)
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
|
|
|
|
Other
income - related party
|
|
|
—
|
|
|
|
15,400
|
Gain
on sale of fixed assets, related party
|
|
|
—
|
|
|
|
75,000
|
Loss
on extinguishment of debt
|
|
|
—
|
|
|
|
(247,998)
|
Interest
expense
|
|
|
(1,193,947
|
)
|
|
|
(1,004,756)
|
Total
other income (expense)
|
|
|
(1,193,947
|
)
|
|
|
(1,162,354)
|
|
|
|
|
|
|
|
|
Net
loss before tax provision
|
|
|
(1,447,612
|
)
|
|
|
(1,702,131)
|
Tax
provision
|
|
|
—
|
|
|
|
—
|
Net loss
|
|
$
|
(1,447,612
|
)
|
|
$
|
(1,702,131)
|
|
|
|
|
|
|
|
|
Basic
loss per common share
|
|
$
|
(0.32
|
)
|
|
$
|
(0.59)
|
|
|
|
|
|
|
|
|
Fully
diluted loss per common share
|
|
$
|
(0.32
|
)
|
|
$
|
(0.59)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding
|
|
|
4,492,398
|
|
|
|
2,896,689
|
|
|
|
|
|
|
|
|
Fully diluted
weighted average common shares outstanding
|
|
|
4,492,398
|
|
|
|
2,896,689
|
See
Accompanying Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' DEFICIT
|
|
|
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)
|
Shares to be issued for settlement of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,028
|
|
|
|
—
|
|
|
|
7,028
|
Discount on convertible
notes
|
|
|
—
|
|
|
|
—
|
|
|
|
3,649,320
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,649,320
|
Debt modification
|
|
|
—
|
|
|
|
—
|
|
|
|
(241,969
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(241,969)
|
Issuance of shares payable
|
|
|
1,575,057
|
|
|
|
1,575
|
|
|
|
1,999,317
|
|
|
|
(2,000,892
|
)
|
|
|
—
|
|
|
|
—
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,702,131
|
)
|
|
|
(1,702,131)
|
Balance,
December 31, 2019
|
|
|
4,471,746
|
|
|
$
|
4,472
|
|
|
$
|
30,181,555
|
|
|
$
|
59,602
|
|
|
$
|
(33,252,796
|
)
|
|
$
|
(3,007,167)
|
Issuance of shares payable
|
|
|
68,097
|
|
|
|
68
|
|
|
|
59,534
|
|
|
|
(59,602
|
)
|
|
|
—
|
|
|
|
—
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,447,612
|
)
|
|
|
(1,447,612)
|
Balance,
December 31, 2020
|
|
|
4,539,843
|
|
|
$
|
4,540
|
|
|
$
|
30,241,089
|
|
|
$
|
—
|
|
|
$
|
(34,700,408
|
)
|
|
$
|
(4,454,779)
|
See
Accompanying Notes to Consolidated Financial Statements.
SKINVISIBLE,
INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Years
Ended
|
|
|
December
31, 2020
|
|
December
31, 2019
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,447,612
|
)
|
|
$
|
(1,702,131)
|
Adjustments
to reconcile net income (loss) to net
|
|
|
|
|
|
|
|
cash
provided (used) by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
32,022
|
|
|
|
39,616
|
Amortization
of debt discount
|
|
|
664,174
|
|
|
|
561,292
|
Loss
on extinguishment of debt
|
|
|
—
|
|
|
|
247,998
|
Inventory
write-off
|
|
|
—
|
|
|
|
10,265
|
Gain
on sale of fixed assets, related party
|
|
|
—
|
|
|
|
(75,000)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease
in inventory
|
|
|
—
|
|
|
|
7,152
|
Decrease
(Increase) in prepaid assets
|
|
|
(1,625
|
)
|
|
|
7,125
|
Decrease
(Increase) in accounts receivable
|
|
|
2,486
|
|
|
|
(1,745)
|
Increase
in accounts payable and accrued liabilities
|
|
|
266,548
|
|
|
|
354,707
|
Decrease
in due from related party
|
|
|
—
|
|
|
|
1,145
|
Increase
in accrued interest
|
|
|
529,772
|
|
|
|
421,364
|
Net
cash provided by (used in) operating activities
|
|
|
45,765
|
|
|
|
(128,212)
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
Proceeds
from sale of fixed assets
|
|
|
—
|
|
|
|
75,000
|
Purchase
of fixed and intangible assets
|
|
|
(16,767
|
)
|
|
|
(26,116)
|
Net
cash (used in) provided by investing activities
|
|
|
(16,767
|
)
|
|
|
48,884
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
Proceeds
from related party loans
|
|
|
26,900
|
|
|
|
117,144
|
Payments
on related party loans
|
|
|
(21,300
|
)
|
|
|
(39,000)
|
Net
cash provided by financing activities
|
|
|
5,600
|
|
|
|
78,144
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
34,598
|
|
|
|
(1,184)
|
|
|
|
|
|
|
|
|
Cash, beginning
of period
|
|
|
1,298
|
|
|
|
2,482
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
35,896
|
|
|
$
|
1,298
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
12,631
|
|
|
$
|
27,005
|
Cash
paid for tax
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Beneficial
conversion feature on convertible debt
|
|
$
|
—
|
|
|
$
|
3,649,320
|
Common
stock issued on extinguishment of debts
|
|
$
|
—
|
|
|
$
|
2,000,892
|
Common
stock payable on extinguishment of debts
|
|
$
|
—
|
|
|
$
|
42,000
|
Shares
issued to settle shares payable
|
|
$
|
59,534
|
|
|
$
|
—
|
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.
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
audited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the
United States of America. 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 period presented have been reflected herein.
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 year ended December 31, 2020, the Company had
a net loss of $1,447,612 The Company has also incurred cumulative net losses of $34,700,408 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.
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 filing. 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 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 (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) 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 December 31, 2020 and 2019,
the Company had determined it was not necessary to recognize 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 year ending December 31, 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 30,779,400 additional
shares issuable in connection with outstanding options, warrants, stock payable and convertible debts as of December 31, 2020.
The shares issuable under each instrument is as follows; 100,000 shares issuable for options, 60,000 shares issuable for warrants,
30,619,400 shares issuable under convertible notes. There were 25,317,929 additional shares issuable in connection with outstanding
options, warrants, stock payable and convertible debts as of December 31, 2019. The shares which were issuable at that date under
each instrument were as follows; 100,000 shares issuable for options, 72,000 shares issuable for warrants, 59,602 shares issuable
for shares payable and 25,086,327 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.
RELATED PARTY TRANSACTIONS
During
the year ended December 31, 2020, $26,900 was advanced by an officer and $21,300 was repaid to another officer.
As
of December 31, 2020, $52,499 in advances remained due to officers of the company. All other related party notes have been extinguished
or re-negotiated as convertible notes. (See note 9 for additional details.)
License
Agreement with Ovation Science for DermSafe hand sanitizer - On February 3, 2020, we entered into a License Agreement
with Ovation Science Inc., a related party, pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture
and distribution rights to its hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay
to Skinvisible a percentage on all net sales on the licensed products subject to adjustment in certain situations plus
a license fee payable in year 3 of the agreement if it chooses to continue the license.
On
June 10, 2020, Ovation Science Inc. paid
the Company the fee otherwise due in year 3 and in exchange the Company extended the term of Ovation’s license to 6-years
and granted Ovation 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. In exchange
for these rights Ovation paid a $100,000 license fee. The Company completed the required assignments during the year ending December
31, 2020 and recognized $100,000 in revenue.
The
Company earned $15,860 in royalties under the license agreement during the year ending December 31, 2020.
The
Company sold polymer products to Ovation Science Inc and earned $7,132 and 0 as of December 31, 2020 and 2019, respectively.
Convertible
Notes Related Party
Convertible Notes Payable Related Party consists of the following:
|
|
December 31, 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 $613,200 during the year ended December 31, 2020 and $308,274 for the year ended December 31, 2019.
|
|
$
|
4,235,209
|
|
|
$
|
4,235,209
|
Unamortized debt discount
|
|
|
(2,447,770
|
)
|
|
|
(3,060,970)
|
Total, net of unamortized discount
|
|
$
|
1,787,439
|
|
|
$
|
1,174,239
|
5. FIXED
ASSETS
Depreciation
expense for the years ended December 31, 2020 and 2019 was $0 and $119, respectively.
During
the year ended December 31, 2019, the Company sold furniture, fixtures and lab equipment to Ovation Science, a related party,
for $75,000, the assets had been fully depreciated by the Company in prior years and the Company recorded a gain from related
party of $75,000 as a result of the sale.
6. INTANGIBLE
AND OTHER ASSETS
Patents
and other intangible assets are capitalized at their historical cost and are amortized over their estimated useful
lives. As of December 31, 2020 intangible assets total $261,726, net of $111,596 of accumulated amortization. As of December 31,
2019, intangible assets total $698,800, net of $533,415 of accumulated amortization.
The
Company capitalized $16,767 in patent cost during the year ended December 31, 2020.
Amortization
expense for the years ended December 31, 2020 and 2019 was $34,056 and $39,497, 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 December 31, 2020.
7. 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 December 31, 2020, $552,000 of the outstanding notes payable are past due and in default and have been classified as current
notes payable.
8. CONVERTIBLE
NOTES PAYABLE
Convertible Notes Payable consists of the following:
|
|
December 31,
|
|
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 in the amount of $50,974 and $25,626 for the years ended December 31, 2020 and 2019, respectively.
|
|
|
352,075
|
|
|
|
352,075
|
Unamortized debt discount
|
|
|
(203,476
|
)
|
|
|
(254,450)
|
Total, net of unamortized discount
|
|
|
148,599
|
|
|
|
97,625
|
Total Convertible Notes
|
|
$
|
368,599
|
|
|
$
|
317,625
|
Current portion:
|
|
|
220,000
|
|
|
|
220,000
|
Total long-term convertible notes
|
|
$
|
148,599
|
|
|
$
|
97,625
|
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
(See note 13). As of December 31, 2020 the Company has received $125,000 in licensing fee income per this agreement.
10.
INCOME TAXES
The
Company provides for income taxes under FASB ASC 740, Accounting for Income Taxes. FASB ASC 740 requires the use of an asset
and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the tax rates in effect currently.
FASB
ASC 740 requires the reduction of deferred tax assets by a valuation allowance, if, based on the weight of available evidence,
it is more likely than not that some or all of the deferred tax assets will not be realized. In the Company’s opinion, it
is uncertain whether they will generate sufficient taxable income in the future to fully utilize the net deferred tax asset. Accordingly,
a valuation allowance equal to the deferred tax asset has been recorded. The total deferred tax asset is approximately $3.0 million
as of December 31, 2020 which is calculated by multiplying a 21% estimated tax rate by the cumulative net operating loss (NOL)
of approximately $14.6 million.
Due
to the enactment of the Tax Reform Act of 2017, we have calculated our deferred tax assets using an estimated corporate tax rate
of 21%. US Tax codes and laws may be subject to further reform or adjustment which may have a material impact to the Company’s
deferred tax assets and liabilities.
The
Company will recognize interest and penalties related to uncertain tax positions as a component of income tax expense. As of December
31, 2020, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized
in the Company’s statement of operations.
The
significant components of the Company's deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:
As of December 31,
|
|
2020
|
|
2019
|
Cumulative tax net operating losses (in millions)
|
|
$
|
14.6
|
|
|
$
|
13.2
|
|
|
|
|
|
|
|
|
Deferred tax asset (in millions)
|
|
$
|
3.0
|
|
|
$
|
2.8
|
Valuation allowance (in millions)
|
|
|
(3.0
|
)
|
|
|
(2.8)
|
Current taxes payable
|
|
|
—
|
|
|
|
—
|
Income tax expense
|
|
$
|
—
|
|
|
$
|
—
|
As
of December 31, 2020, and 2019, the Company had gross federal net operating loss carryforwards of approximately $14.6 million and
$13.2 million, respectively.
The
Company plans to file its U.S. federal return for the year ended December 31, 2020 upon the issuance of this filing. Upon filing
of the tax return for the year ended December 31, 2019 the actual deferred tax asset and associated valuation allowance available
to the Company may differ from management’s estimates. The tax years 2017-2019 remained open to examination for federal
income tax purposes by the major tax jurisdictions to which the Company is subject. No tax returns are currently under examination
by any tax authorities.
11. STOCK
OPTIONS AND WARRANTS
Stock
options
The
following is a summary of option activity during the years ended December 31, 2019 and 2020.
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
Balance, December 31, 2018
|
|
|
161,000
|
|
|
$
|
1.80
|
|
|
|
|
|
|
|
|
Options granted and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
(61,000
|
)
|
|
|
2.250
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
100,000
|
|
|
|
1. 51
|
|
|
|
|
|
|
|
|
Options granted
and assumed
|
|
|
—
|
|
|
|
—
|
Options expired
|
|
|
—
|
|
|
|
—
|
Options canceled
|
|
|
—
|
|
|
|
—
|
Options exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance, December
31, 2020
|
|
|
100,000
|
|
|
|
1.51
|
As
of December 31, 2020, all stock options outstanding are exercisable.
Stock
warrants
The
following is a summary of warrants activity during the years ended December 31, 2019 and 2020.
|
|
Number of Shares
|
|
Weighted
Average Exercise Price
|
Balance,
December 31, 2018
|
|
|
72,200
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
Warrants
granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants
expired
|
|
|
—
|
|
|
|
—
|
Warrants
canceled
|
|
|
—
|
|
|
|
—
|
Warrants
exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
|
|
72,200
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
Warrants
granted and assumed
|
|
|
—
|
|
|
|
—
|
Warrants
expired
|
|
|
(12,200
|
)
|
|
|
1.50
|
Warrants
canceled
|
|
|
—
|
|
|
|
—
|
Warrants
exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
|
|
60,000
|
|
|
|
1.11
|
As
of December 31, 2020 , all stock warrants outstanding are exercisable.
12. STOCKHOLDERS’
DEFICIT
The
Company is authorized to issue 200,000,000 shares of $0.001 par value common stock. The Company had 4,539,843 and 4,471,746 issued
and outstanding shares of common stock as of December 31, 2020 and December 31, 2019, respectively.
During
the year ended December 31, 2020, the Company issued 68,097 shares valued at $59,602 to investors in settlement of outstanding
stock payable.
13. SUBSEQUENT
EVENTS
On January 27, 2021 the Company and Quoin agreed to revise the milestone
payments due under the Exclusive License Agreement to the following:
(i) Successful completion
of Phase 2 testing: $250,000
(ii) Successful completion
of Phase 3 testing: $500,000
(iii) Regulatory approval
in US: $14,500,000
(iv) Regulatory approval
in EU: $7,250,000
In addition as part the amendment the Companies
also agreed to extend the agreement indefinitely.