Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words "believes,"
"project," "expects," "anticipates," "estimates," "intends," "strategy," "plan,"
"may," "will," "would," "will be," "will continue," "will likely result," and
similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are including this
statement for purposes of complying with those safe-harbor provisions.
Forward-looking statements are based on current expectations and assumptions
that are subject to risks and uncertainties which may cause actual results to
differ materially from the forward-looking statements. Our ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of
capital, interest rates, competition, and generally accepted accounting
principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
Overview
COVID-19
The full extent of the impact of the COVID-19 pandemic on our business,
operations and financial results will depend on numerous evolving factors that
we may not be able to accurately predict at the present time. In an effort to
contain COVID-19 or slow its spread, governments around the world have enacted
various measures, including orders to close all businesses not deemed
"essential," isolate residents to their homes or places of residence, and
practice social distancing when engaging in essential activities. We anticipate
that these actions and the global health crisis caused by COVID-19 will
negatively impact business activity across the globe. While we have not observed
any noticeable impact on our revenue related to these conditions in the past
fiscal year, or through the date of this filing, we cannot estimate the impact
COVID-19 will have in the future as business and consumer activity decelerates
across the globe.
In March 2020, we enacted precautionary measures to protect the health and
safety of our employees and partners. These measures include closing our office,
having employees work from home, and eliminating all travel. While having
employees work from home may have a negative impact on efficiency and may result
in negligible increases in costs, it does have an impact on our ability to
execute on our agreements to deliver our core products.
We will continue to actively monitor the situation and may take further actions
that alter our business operations as may be required by federal, state, local
or foreign authorities, or that we determine are in the best interests of our
employees, customers, partners and stockholders. It is not clear what the
potential effects any such alterations or modifications may have on our
business, including the effects on our customers, partners, or vendors, or on
our financial results.
Recent Developments
License with Quoin Pharmaceuticals, Inc.
On October 17, 2019, Skinvisible entered an Exclusive License Agreement with
Quoin pursuant to which Skinvisible granted to Quoin a license to certain
patents for the development of products for commercial sale. In exchange for the
license, Quoin agreed to pay to Skinvisible a license fee of $1,000,000 and a
royalty percentage on all net sales on the licensed products subject to
adjustment in certain situations. The agreement also requires that Quoin make
certain milestone payments to Skinvisible upon achieving regulatory approval
milestones for certain drug products.
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The agreement is subject to termination, if among other things, 50% of the
license fee is not paid by December 31, 2019 and if the full License Fee is not
paid by March 31, 2020. No payments were made by Quoin and the agreement was
terminated. Both Parties subsequently determined that they continue to see the
value in a partnership and therefore on May 8, 2020 and again on July 31, 2020
the companies agreed to extend the Exclusive License Agreement under the same
terms to expire now on September 30, 2020. As of the date of this filing no
payments had been received.
License with Ovation Science Inc.
On February 3, 2020, we entered into a License Agreement with Ovation Science
Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for
the manufacture and distribution rights to its hand sanitizer product, DermSafe.
In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible a
royalty percentage on all net sales on the licensed products subject to
adjustment in certain situations plus a license fee payable in year 3 of the
agreement if it chooses to continue the license. On June 10, 2020, the agreement
was further amended to provide additonal assignment rights for its hand
sanitizer products in exchange for $100,000 which was recognized as revenue
during the nine months ended September 30, 2020.
Results of Operations for the Three Months Ended September 30, 2020 and 2019
Revenues
Our revenue from product sales, royalties on patent licenses and license fees
(product development fees) for the three months ended September 30, 2020 was
$6,186, a decrease from $11,295 for the same period ended September 30, 2019.
The decrease in revenue for three months ended September 30, 2020 was mainly due
to decreased product sales. We hope to achieve increased revenues for the
balance of 2020, as a result of our License Agreement with Quoin
Pharmaceuticals, Inc.
Cost of Revenues
Our cost of revenues for the three months ended September 30, 2020 was $0,
compared with the prior year period when cost of revenues was $250.
Our cost of revenues decreased for the three months ended September 30, 2020
over the prior year period because our revenues in 2020 were attributable to our
license with Ovation Science.
Gross Profit
Gross profit for the three months ended September 30, 2020 was $6,816 , as
compared with gross profit of $11,045 for the three months ended September 30,
2019.
Operating Expenses
Operating expenses decreased to $125,438 for the three months ended September
30, 2020 from $147,970 for the same period ended September 30, 2019.
Our operating expenses for the three months ended September 30, 2020 consisted
mainly of accrued salaries and wages of $87,941, audit and accounting of $9,609,
and amortization of $4,292. In comparison, our operating expenses for the three
months ended September 30, 2019 consisted mainly of accrued salaries and wages
of $87,942, audit and accounting of $9,610, rent of $15,673 and depreciation and
amortization of $10,185.
Other Expenses
We had other expenses of $291,137 for the three months ended September 30, 2020,
compared with other expenses of $211,817 for the three months ended September
30, 2019.
Our other expenses for the three months ended September 30, 2020 consisting
entirely of $291,137 in interest expense, which includes interest expense of
$125,861 and debt discount amortization of $165,276, compared with the three
months ended September 30, 2019 which consisted primarily of $305,009 in
interest expense which includes interest expense of $138,059 and debt discount
amortization of $166,950, offset by other income from related party of $93,192.
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Net Loss
We recorded a net loss of $409,759 for the three months ended September 30,
2020, as compared with a net loss of $348,742 for the three months ended
September 30, 2019.
Results of Operations for the Nine Months Ended September 30, 2020 and 2019
Revenues
Our revenue from product sales, royalties on patent licenses and license fees
(product development fees) for the nine months ended September 30, 2020 was
$142,838, an increase from $32,379 for the same period ended September 30, 2019.
The increase in revenue for nine months ended September 30, 2020 was mainly due
to our license agreement with Ovation Science. We hope to generate more revenues
from this license and the license with Quoin for the rest of the year.
Cost of Revenues
Our cost of revenues for the nine months ended September 30, 2020 was $0,
compared with the prior year period when cost of revenues was $7,199.
Our cost of revenues decreased for the ninemonths ended September 30, 2020 over
the prior year period because our revenues in 2020 were attributable to our
license with Ovation Science.
Gross Profit
Gross profit for the nine months ended September 30, 2020 was $142,838 , as
compared with gross profit of $25,180 for the nine months ended September 30,
2019.
Operating Expenses
Operating expenses decreased to $404,214 for the nine months ended September 30,
2020 from $447,493 for the same period ended September 30, 2019.
Our operating expenses for the nine months ended September 30, 2020 consisted
mainly of accrued salaries and wages of $263,826, audit and accounting of
$55,089, and amortization of $23,973. In comparison, our operating expenses for
the nine months ended September 30, 2019 consisted mainly of salaries and wages
of $263,827, audit and accounting of $41,852, rent of $45,002, insurance of
$11,471 and amortization and depreciation of $29,815
Other Expenses
We had other expenses of $891,260 for the nine months ended September 30, 2020,
compared with other expenses of $852,539 for the nine months ended September 30,
2019.
Our other expenses for the nine months ended September 30, 2020 consisting
entirely of interest expense which includes, interest expense of $395,710 and
debt discount amortization of $495,550, compared with the nine months ended
September 30, 2019 which consisted primarily of $710,233 in interest expense
which includes, interest expense of $315,973 and debt discount amortization of
$394,260 , loss on extinguishment of debts of $247,998, offset by income
related party of $105,692.
Net Loss
We recorded a net loss of $1,152,636 for the nine months ended September 30,
2020, as compared with a net loss of $1,274,852 for the nine months ended
September 30, 2019.
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Liquidity and Capital Resources
As of September 30, 2020, we had total current assets of $25,917 and total
assets in the amount of $184,096. Our total current liabilities as of September
30, 2020 were $2,576,485. We had a working capital deficit of $2,550,568 as of
September 30, 2020, compared with a working capital deficit of $2,753,277 as of
September 30, 2019.
Operating activities provided $15,588 in cash for the nine months ended
September 30, 2020, as compared with $41,976 used for the nine months ended
September 30, 2019. Our positive operating cash flow for the nine months ended
September 30, 2020 is largely the result of an increase in accrued interest,
accounts payable and accrued liabilities, offset mainly by our net loss for the
period, compared with the nine month ended September 30, 2019, which recorded a
negative operating cash flow largely as the result of our net loss for the
period.
We used cash of $16,767 and $24,320 in investing activities for the nine months
ended September 30, 2020 and 2019, respectively, for the purchase of intangible
assets.
Cash flows provided by financing activities during the nine months ended
September 30, 2020 amounted to $11,700, as compared with $74,644 for the nine
months ended September 30, 2019. Our cash flows for the ninemonths ended
September 30, 2020 and 2019 consisted of proceeds from related party loans.
The features of the debt instruments and payables concerning our financing
activities are detailed in the footnotes to our financial statements.
Based upon our current financial condition, we do not have sufficient cash to
operate our business at the current level for the next twelve months. We intend
to fund operations through increased sales and debt and/or equity financing
arrangements, which may be insufficient to fund expenditures or other cash
requirements. We plan to seek additional financing in a private equity offering
to secure funding for operations. There can be no assurance that we will be
successful in raising additional funding. If we are not able to secure
additional funding, the implementation of our business plan will be impaired.
There can be no assurance that such additional financing will be available to us
on acceptable terms or at all.
Going concern - The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. We have incurred
cumulative net losses of $34,405,432 since our inception and require capital for
our contemplated operational and marketing activities to take place. Our ability
to raise additional capital through the future issuances of common stock is
unknown. The obtainment of additional financing, the successful development of
our contemplated plan of operations, and our transition, ultimately, to the
attainment of profitable operations are necessary for us to continue operations.
The ability to successfully resolve these factors raise substantial doubt about
our ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that may result from the outcome of
these aforementioned uncertainties.
Off Balance Sheet Arrangements
As of September 30, 2020, there were no off balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most
"critical accounting polices" in the Management Discussion and Analysis. The SEC
indicated that a "critical accounting policy" is one which is both important to
the portrayal of a company's financial condition and results, and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.
Product sales - Revenues from the sale of products (Invisicare® polymers) are
recognized when title to the products are transferred to the customer and only
when no further contingencies or material performance obligations are warranted,
and thereby have earned the right to receive reasonably assured payments for
products sold and delivered.
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Royalty sales - We also recognize royalty revenue from licensing our patented
product formulations only when earned, with no further contingencies or material
performance obligations are warranted, and thereby have earned the right to
receive and retain reasonably assured payments.
Distribution and license rights sales - We also recognize revenue from
distribution and license rights only when earned (and are amortized over a
five-year period), with no further contingencies or material performance
obligations are warranted, and thereby have earned the right to receive and
retain reasonably assured payments.
Costs of Revenue - Cost of revenue includes raw materials, component parts, and
shipping supplies. Shipping and handling costs is not a significant portion of
the cost of revenue.
Accounts Receivable - Accounts receivable is comprised of uncollateralized
customer obligations due under normal trade terms requiring payment within 30
days from the invoice date. The carrying amount of accounts receivable is
reviewed periodically for collectability. If management determines that
collection is unlikely, an allowance that reflects management's best estimate of
the amounts that will not be collected is recorded. Management reviews each
accounts receivable balance that exceeds 30 days from the invoice date and,
based on an assessment of creditworthiness, estimates the portion, if any, of
the balance that will not be collected. As of September 30, 2020, the Company
had not recorded a reserve for doubtful accounts. The Company has $175,000 in
convertible notes payable which are secured by the accounts receivable of a
license agreement the Company has with Women's Choice Pharmaceuticals, LLC on
its proprietary prescription product, ProCort®.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or
cash flow.
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