Enhance Skin Products Inc - FORM 10-Q/A - January 20, 2015

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EX-32.1 - ENHANCE SKIN PRODUCTS 10Q/A, CERTIFICATION 906 - Enhance Skin Products Incehskexh32_1.htm
EX-31.1 - ENHANCE SKIN PRODUCTS 10Q/A, CERTIFICATION 302 - Enhance Skin Products Incehskexh31_1.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q /A
Amendment No. 1
 
 x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarter ended October 31, 2014
 
OR
 
o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____________ to ________________
 
Commission File Number 000-52755
 
ENHANCE SKIN PRODUCTS INC.
(Exact name of registrant as specified in its charter)
 
Nevada
84-1724410
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.) 
 
50 West Liberty Street, Suite 880, Reno NV 89501
(Address of principal executive offices)(Zip Code)
 
Registrant's telephone number, including area code:  416-306-2493
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x    No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.   Yes o    No o  (Not Required)
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “Accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
o     (Do not check if a smaller reporting company)
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o    No x
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:  Number of shares outstanding of the registrant's class of common stock as of December 8, 2014: 101,017,882.

 
 
 
 
ENHANCE SKIN PRODUCTS INC.
 
INDEX
 
 
  
Explanatory Note for Amendment No. 1:
 
We are filing this Amendment No. 1 to our quarterly report on Form 10-Q for the three months ending October 31, 2014, to amend the following disclosure items in our originally filed quarterly report for that period.
 
●
We amend ITEM 4; Controls and Procedures to conform to the form of the disclosure made in our amended annual report on Form 10-K/A, Amendment  No.1 for the period ending April 30, 2014 filed on the same day as this report.
 
●
We amend paragraphs 4(b) and 4(d) of the management certifications in Exhibit 31.1 to conform to the format provided in Item 601(b)(31) of Regulation S-K.
 
●
We amend the first paragraph of the management certification in Exhibit 32.1 to refer to the quarter ended October 31, 2014.
 
Except as described above, this Form 10Q/A continues to speak as of December 10, 2014 and no other changes have been made to the quarterly report.  This Amendment No. 1 does not amend or update any other information set forth in the quarterly report and we have not updated disclosures contained therein to reflect any events that occurred at a  date subsequent to filing of the quarterly report.
 

 
 
PART I - FINANCIAL INFORMATION
 
ITEM 1.   Condensed Consolidated Financial Statements.
 
  
 
 
 



 

 






 
 
ENHANCE SKIN PRODUCTS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT OCTOBER 31, 2014 (UNAUDITED) AND APRIL 30, 2014 (AUDITED)
(Expressed in United States Dollar)
 
   
   
October 31, 2014
    
April 30, 2014
  
    $     $  
ASSETS
                
Cash
     2,575       1,136  
Prepayments
     600       —  
Total current assets
     3,175       1,136  
Total assets
     3,175       1,136  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
                
Liabilities
                
Accounts payable and accrued liabilities
     240,293       230,103  
Accounts payable to a related party (Note 4)
     457       457  
Accounts payable to related parties convertible into shares (Note 4)
     73,250       73,250  
Advances from a related party (Note 4)
     96,489       96,489  
Advances from a related party convertible into shares (Note 4)
     152,871       119,709  
Total current liabilities
     563,360       520,008  
Total liabilities
     563,360       520,008  
                 
Stockholders' deficit
                
Authorized:
                
300,000,000 common shares par value $0.001 as of October 31, 2014 (April 30, 2014: 300,000,000 common shares) - (Note 5)
  
Issued and outstanding 101,017,881 common shares as of October 31, 2014 (April 30, 2014: 100,267,881 common shares) - (Note 5)
     101,017       100,267  
Shares to be issued
     —       750  
Additional paid-in capital
     1,713,350       1,713,350  
Accumulated other comprehensive loss
     (1,154 )     (1,257 )
Accumulated deficit
     (2,373,398 )     (2,331,982 )
Total stockholders' deficit
     (560,185 )     (518,872 )
Total liabilities and stockholders' deficit
     3,175       1,136  
                 
                 
                 
                 
                 
                 
See accompanying notes
                



 
 
 
ENHANCE SKIN PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED OCTOBER 31, 2014 AND 2013 (UNAUDITED)
(Expressed in United States Dollar)
 
   
   
Three Months
    
Three Months
  
   
Ended October 31,
    
Ended October 31,
  
   
2014
    
2013
  
    $     $  
                 
SALES
     —       178  
                 
EXPENSES
                
General and administrative
     8,449       4,236  
Legal and professional fees
     12,415       53,631  
Marketing
     —       —  
Total operating expenses
     20,864       57,867  
                 
Net loss for the period before income taxes
     (20,864 )     (57,689 )
                 
Income taxes
     —       —  
Net loss for the period
     (20,864 )     (57,689 )
                 
Foreign currency translation adjustment
     52       643  
Comprehensive loss
     (20,812 )     (57,046 )
                 
Loss per share, basic and diluted
     (0.0002 )     (0.0007 )
                 
Weighted average number of
                
common shares outstanding
     101,017,881       87,289,014  
                 
                 
                 
                 
                 
                 
                 
See accompanying notes
                
 
 

 
 
 
ENHANCE SKIN PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2014 AND 2013 (UNAUDITED)
(Expressed in United States Dollar)
 
   
   
Six Months
    
Six Months
  
   
Ended October 31,
    
Ended October 31,
  
   
2014
    
2013
  
    $     $  
                 
SALES
     369       401  
                 
EXPENSES
                
General and administrative
     12,062       25,143  
Legal and professional fees
     29,444       105,057  
Marketing
     279       —  
Total operating expenses
     41,785       130,200  
                 
Net loss for the period before income taxes
     (41,416 )     (129,799 )
                 
Income taxes
     —       —  
Net loss for the period
     (41,416 )     (129,799 )
                 
Foreign currency translation adjustment
     103       1,714  
Comprehensive loss
     (41,313 )     (128,085 )
                 
Loss per share, basic and diluted
     (0.0004 )     (0.0016 )
                 
Weighted average number of
                
common shares outstanding
     101,017,881       79,749,514  
                 
                 
                 
                 
                 
                 
                 
See accompanying notes
                


 
 
 
 
ENHANCE SKIN PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE SIX MONTHS ENDED OCTOBER 31, 2014 (UNAUDITED) AND YEAR ENDED APRIL 30, 2014 (AUDITED)
(Expressed in United States Dollar)

   
   
Common stock
    
Shares
    
Additional
    
Accumulated
              
   
Shares
    
Amount
    
to be issued
    
paid-in
    
other
    
Accumulated
    
Total
  
               
Amount
    
capital
    
compreshensive
    
deficit
        
                           
loss
              
          $     $     $     $     $     $  
As at April 30, 2013
     55,250,000       55,250       27,215       1,637,118       (3,569 )     (2,066,057 )     (350,043 )
                                                         
Issuance of shares
     32,039,015       32,039       (27,215 )     33,772       —       —       38,596  
                                                         
Foreign currency translation
     —       —       —       —       1,714       —       1,714  
                                                         
Net loss for the year
     —       —       —       —       —       (129,799 )     (129,799 )
                                                         
As at October 31, 2013
     87,289,015       87,289       —       1,670,890       (1,855 )     (2,195,856 )     (439,532 )
                                                         
As at April 30, 2014
     100,267,881       100,267       750       1,713,350       (1,257 )     (2,331,982 )     (439,532 )
                                                         
Issuance of shares
     750,000       750       (750 )     —       —       —       —  
                                                         
Foreign currency translation
     —       —       —       —       103       —       103  
                                                         
Net loss for the period
     —       —       —       —       —       (41,416 )     (41,416 )
                                                         
As at October 31, 2014
     101,017,881       101,017       —       1,713,350       (1,154 )     (2,373,398 )     (480,845 )
                                                         
                                                         
                                                         
                                                         
                                                         
                                                         
See accompanying notes
                                                        

 


 
 
 
ENHANCE SKIN PRODUCTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 31, 2014 AND 2013 (UNAUDITED)
(Expressed in United States Dollar)
 
   
   
Six Months
    
Six Months
  
   
Ended October 31,
    
Ended October 31,
  
   
2014
    
2013
  
    $     $  
                 
OPERATING ACTIVITIES
                
Net loss for the period
     (41,416 )     (129,799 )
Stock issued for services
     —       26,096  
Net change in non-cash working capital balances:
                
Accounts receivable
     —       2,577  
Prepayments
     (600 )     1,100  
Accounts payable and accrued liabilities
     10,190       13,607  
Accounts payable to a related party
     —       3,070  
Cash used in operating activities
     (31,826 )     (83,349 )
                 
FINANCING ACTIVITIES
                
Proceeds from issuance of shares
     —       12,500  
Advances from a related party
     33,162       43,208  
Cash provided by financing activities
     33,162       55,708  
                 
Net increase (decrease) in cash during the period
     1,336       (27,641 )
Effect of foreign currency translation
     103       1,714  
Cash, beginning of the period
     1,136       30,866  
Cash, end of period
     2,575       4,939  
                 
Supplemental disclosure with respect to cash flows:
                
Cash paid for income taxes
     —       —  
Cash paid for interest
     —       —  
                 
                 
                 
                 
                 
See accompanying notes
                

 

 
 
 
 
ENHANCE SKIN PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2014 (Unaudited)
 
 
NOTE 1.   BASIS OF PRESENTATION
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial positions, results of operations, and cash flows at October 31, 2014 and 2013, have been made.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these unaudited interim condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's April 30, 2014 and 2013 audited financial statements. The results of operations for the period ended October 31, 2014 and 2013 are not necessarily indicative of the operating results for the full year.

NOTE 2.   RECENT ACCOUNTING PRONOUNCEMENTS
 
The Company’s management has evaluated all the recently issued accounting pronouncements through the filing date of these financial statements and does not believe that they will have a material effect on the Company’s financial position and results of operations.

NOTE 3.   GOING CONCERN
 
The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at October 31, 2014 the Company has a working capital deficit of $560,185 and accumulated deficit of $2,373,398. The Company has relied on advances from its former CEO, director, Mercuriali Ltd and a related party to meet the working capital requirements.
 
The ability of the Company to continue as a going concern and become a profitable entity is dependent upon the continued short term support of Mercuriali Ltd and the Company’s successful efforts to obtain and continue to obtain additional funding to reposition and re-launch its product line and generate sales and then attain profitable operations. 
 
Management is currently seeking additional financing to reformulate the first two Visible Youth products; namely, the Visible Youth Repairing Serum and the Visible Youth  Hydrating Moisturizer, and undertake two marketing clinical studies on these products, to pay on-going patent costs and to provide working capital prior to spending further sums on the further development of the remaining products and marketing materials. In the opinion of the board these marketing studies will be necessary to obtain further funding on acceptable terms and to further discussions with licensing partners.
 
Further funding will be required to reformulate the remaining Visible Youth products, design and implement the consumer rebranding, manufacture prototypes, design and implement e-Commerce platforms, undertake additional marketing clinical studies, pay on-going patent costs and to provide working capital prior to market launch.
 
Further funding will also be required to fund its market launch and direct to consumer sales campaign. The amount of funding required will depend on whether the Company decides to build its own US consumer marketing structure or to out-license to a marketing partner. The Board intends to evaluate the alternative marketing strategies for the US consumer market upon completion of the clinical studies.
 
Management is consequently pursuing a number of funding structures including debt and equity finance, asset sales, licensing and partnering activities. There can be no assurances, however, that Mercuriali and Enhance’s Directors and related parties will be able to continue to provide short term support or that management’s efforts to obtain additional funding and licensing or marketing partners on terms satisfactory to the Company, or at all will, be realized or that future sales will be realized.

 
 
 
ENHANCE SKIN PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2014 (Unaudited)


We have engaged a US based consultancy firm with a unique set of skills and extensive beauty industry experience and relationships to help reposition the brand and to help implement our strategy for its launch in the US and other markets. We have also engaged Business Development consultants to help seek licensing and marketing partners for the Company’s consumer and professional products both within the USA and Europe. In addition, prior to the Company having completed cumulative financings of at least five hundred thousand United States dollars ($500,000) the Company’s President & CEO, CSO and General Counsel will make no charge for services.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 4.   RELATED PARTY TRANSACTIONS AND BALANCES
 
The details of related party balances are as follows:

   
   
October 31,
    
April 30,
  
   
2014
    
2014
  
    $     $  
                 
       - Unreimbursed expenses
     457       457  
Accounts payable to a related party
     457       457  
                 
       - Unpaid remuneration
     40,062       40,062  
       - Balances owing to Mercuriali Ltd.
     33,188       33,188  
Accounts payable to related parties convertible into shares
     73,250       73,250  
                 
Advances from a related party
     96,489       96,489  
                 
Advances from a related party convertible into shares
     152,871       119,709  
 
 
ACCOUNTS PAYABLE TO A RELATED PARTY:

The outstanding balance represents amounts due to a related party in connection with the expenses incurred by it on behalf of the Company.  The amounts due do not bear any interest and is repayable on demand.

ACCOUNTS PAYABLE TO RELATED PARTIES CONVERTIBLE INTO SHARES:

The outstanding balance comprise of unpaid remuneration to a related party and a balance owing to Mercuriali Ltd as detailed below:

Unpaid remuneration

On May 12, 2010 Biostrategies Consulting Group Inc. the holder of 27,500,000 shares of common stock of the Company transferred 9,166,666 of these shares to Drasko Puseljic. Biostrategies Consulting Group Inc. is 100% privately owned by Dr. Samuel Asculai the CEO and a director of the Company. Mr. Puseljic had a 10-year service agreement with the company to assist in business development, contract administration and co-ordination of SEC filings with management and the Company’s SEC counsel. With his holdings, Mr. Puseljic has more than 5% of the outstanding equity of the Company and became a “related party”. Mr Puseljic billed the Company $150,000 during each of the previous fiscal years ended up to April 30, 2012. At April 30, 2013 Mr. Puseljic was owed $400,625 in unpaid fees. No such expenses have been accrued by the company since May 31, 2102 as they have been waived by Mr. Puseljic.  On March 5, 2013 Mr. Puseljic entered a termination agreement with the company (the “Puseljic Termination Agreement”) pursuant to which upon the Company substantially completing the Restructuring Plan,
 
 
 
 
ENHANCE SKIN PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2014 (Unaudited)
 
 
NOTE 4.   RELATED PARTY TRANSACTIONS AND BALANCES (continued)
 
Mr. Puseljic forgives all of the unpaid fees except for $20,031 which amount will be converted into five million three hundred twenty seven thousand four hundred and sixty (5,327,460) common shares of the Company’s stock upon the Company entering into cumulative fundraisings of at least one hundred and fifty thousand United States dollars ($150,000). During the previous year ended April 30, 2013 the Company substantially completed the Restructuring Plan.  Resultantly, Mr. Puseljic forgave all of the unpaid fees except for $20,031.  Further, the unpaid fee balance of Dr. Asculai of $20,031 described in the following paragraph, together with the associated share conversion, was also transferred to Mr. Puseljic’s balance.  Therefore, Mr. Puseljic’s balance of $40,062 is included in total unpaid remuneration balance as at October 31, 2014, which amount will be converted into ten million six hundred fifty four thousand nine hundred and twenty (10,654,920) common shares of the Company’s stock upon the Company entering into cumulative fundraisings of at least one hundred and fifty thousand United States dollars ($150,000).
 
The Company incurred monthly consulting fee expenses of $12,500 to either Samuel Asculai or Biostrategies Consulting Group Inc. (“Biostrategies”), a private Ontario company wholly owned by Samuel Asculai, the Company’s then CEO and Director. The Company recorded $150,000 as an expense during each of the previous fiscal years ended up to April 30, 2012.  At April 30, 2013, $400,625 of these expenses were unpaid.  No such expenses have been accrued by the company since May 31, 2012 because these have been waived by Biostrategies and Dr. Asculai.  On March 5, 2013 Biostrategies and Dr. Asculai entered a termination agreement with the Company (the “Asculai Termination Agreement”) pursuant to which upon the Company substantially completing the Restructuring Plan, Biostrategies and Dr. Asculai forgive all of the unpaid fees except for $20,031 which amount will be converted into five million three hundred twenty seven thousand four hundred and sixty (5,327,460) common shares of the Company’s stock upon the Company entering into cumulative fundraisings of at least one hundred and fifty thousand United States dollars ($150,000).  During the previous year ended April 30, 2013 the Company substantially completed the Restructuring Plan.  Resultantly, Dr. Asculai forgave all of the unpaid fees except for $20,031 which was transferred, together with the associated share conversion, to the balance of Mr. Puseljic.
 
Balance owing to Mercuriali Ltd.

On July 12, 2010 the Company entered into a Termination and Settlement Agreement (the "Settlement Agreement") with Mercuriali Ltd. (“Mercuriali”), a company controlled by Donald Nicholson, a then director of the Company and now a director and the Company’s President, Chief Executive Officer and Chief Financial Officer. The Settlement Agreement terminated a Letter of Intent between the Company and Mercuriali regarding a proposed merger between the Company and Mercuriali as part of a larger transaction involving the reverse merger of the Company into a company listed on AIM, a sub-market of the London Stock Exchange. Neither the merger between Mercuriali and the Company, nor the reverse merger of the Company and the AIM listed company took place.  Under the Settlement Agreement, the Company agreed to pay Mercuriali expenses incurred pursuant to the Letter of Intent of GBP 22,082 payable at a rate of 5% of gross funds raised by the Company. After receiving proceeds from financing the Company will pay 5% of the gross proceeds to Mercuriali until the obligation has been paid.  Other than the items provided for in the Termination Agreement, the Company and Mercuriali released each other from all claims relating to the Letter of Intent.  Through the previous year ended April 30, 2012 the Company has raised $60,000 of funds from the issuance of Common Stock, 5% of this or $3,000 should have been paid to satisfy this obligation; however, only $1,500 was paid during the previous fiscal years ended April 30, 2013. As of October 31, 2014 the balance owed to Mercuriali is $33,188. The balance is secured by the assets of the Company.  Upon the Company restructuring at least seventy five percent (75%) of its outstanding debt substantially in accordance with the Restructuring Plan and upon the Company raising additional financing of at least $250,000, Mercuriali shall  convert the total amounts owed to it under the Loan Agreement into common shares of the Company at a conversion price of $0.00376 per share.


 
 
 
ENHANCE SKIN PRODUCTS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2014 (Unaudited)
 

NOTE 4.   RELATED PARTY TRANSACTIONS AND BALANCES (continued)
 
ADVANCES FROM A RELATED PARTY

As of July 31, 2014, the Company owes $96,489 (April 30, 2014 - $96,489) in respect of advances from Dr. Asculai, its former CEO and current Chief Scientific Officer and Chairman of the Board, pursuant to a loan agreement entered between the Company, Dr. Asculai and Mercuriali Ltd. dated March 4, 2013.  This balance is to be paid in quarterly installments after the Company has cumulatively raised one million United States dollars. The Advances are secured by all of the assets of the Company and do not bear interest.

ADVANCES FROM A RELATED PARTY CONVERTIBLE INTO SHARES

These advances are from Mercuriali Ltd. pursuant to a loan agreement entered between the Company, Dr. Asculai and Mercuriali Ltd. on March 4, 2013.   As at October 31, 2014, Mercuriali has advanced a total of $152,871 (April 30, 2014 - $119,709) to the Company pursuant to the Loan Agreement.  Mercuriali shall  convert the amounts owed to it under the Loan Agreement into common shares of the Company at a conversion price of $0.00376 per share upon the Company restructuring at least seventy five percent (75%) of its outstanding debt substantially in accordance with the Restructuring Plan and upon the Company raising additional financing of at least $250,000.  The Company completed the Restructuring Plan during the year ended April 30, 2013.  The Advances are secured on all of the assets of the Company and do not bear interest.
  
NOTE 5.   STOCKHOLDERS' DEFICIT
 
COMMON SHARES - AUTHORIZED
 
As at October 31, 2014, the Company has 300,000,000 common shares authorized.  The common shares have a $0.001 par value.  All common stock shares have equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors of the Company.

COMMON SHARES - ISSUED AND OUTSTANDING

In May 2014, the Company issued 750,000 common shares to Beauty Scouts against a liability of $6,000 pursuant to a consulting agreement dated January 21, 2014.  These shares were presented as shares to be issued as at April 30, 2014.

As at October 31, 2014 there were 101,017,881 shares of common stock issued out of the authorized 300,000,000 common shares.  

NOTE 6.   SUBSEQUENT EVENTS
 
The Company’s management has evaluated subsequent events through the filing date of these financial statements and has determined that there are no material subsequent events to report.

 

 

 
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains “forward-looking statements” that involve risk and uncertainties.  The Company uses forward-looking statements that you can identify by words or terminology such as “may”, “should”, “could”, “predict”, “potential”, “continue”, “expect”, “anticipate”, “future”, “intend”, “plan”, “believe”, “estimate”, and similar expressions (or the negative of these expressions).  This quarterly report includes statements that are “forward-looking statements,” including statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future in particular statements relating to the Restructuring Plan and Future Funding.  All statements regarding our financial position, funding plans, business strategy and other plans and objectives for future operations, and future product demand, supply, costs, marketing, and pricing factors, are forward-looking statements.  Actual results, levels of activity, performance, achievements and events are most likely to vary materially from those implied by the forward-looking statements.  All forward-looking statements included in this quarterly report are based on information available to us on the date hereof, and we assume no obligation to update such forward-looking statements.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct or that we will take any actions that may presently be planned.  Certain important factors could cause actual results to differ materially from our expectations.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this quarterly report.  Readers should carefully review this report in its entirety, including, but not limited to, our financial statements and the notes thereto.  Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.
 
Review of Operations
 
During the quarter the Company has continued prosecution and protection of  its patent and  trademark portfolio. In addition discussions have continued with potential marketing and licensing partners for the US and Europe in respect of our Visible Youth professional and consumer products. During the period we have also been evaluating potential formulation and manufacturing partners with a view to being in a position to commence reformulation, start pilot manufacture and undertake two further marketing clinical studies for our Visible Youth Repairing Serum and our Visible Youth  Hydrating Moisturizer as soon as resources are available. It is expected that study results could be available approximately six months after funding is obtained. In the opinion of the board these further marketing studies will be necessary to obtain further funding on acceptable terms for further development of the Company’s remaining products and marketing materials and to further discussions with licensing and marketing partners.
 
If study results are satisfactory and necessary funding can be obtained, management aims to re-launch the Visible Youth products in the consumer market approximately six to nine months from clinical study completion depending on the marketing approach adopted. The Board intends to evaluate the alternative marketing strategies for the consumer products upon completion of the clinical studies which may include building our own US consumer marketing structure or out-licensing to a marketing partner. We currently only intend to progress our professional products in association with an established marketing partner.
 
There can be no assurances, however, that management’s efforts to obtain additional funding and licensing or marketing partners on terms satisfactory to the Company, or at all will, be realized or that future sales will be realized.

Balance sheet – October 31, 2014 balances compared to April 30, 2014
 
Cash
 
As at October 31, 2014 the Company had $2,575 of cash on hand, an increase of $1,439 from the April 30, 2014 balance of $1,136, mainly due to advances from a related party.
 
 

 
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
Prepayments
 
As at October 31, 2014 the Company had $600 of prepayments, representing advance payments in connection with annual patent fees to be expensed in subsequent quarter.

Accounts payable and accrued liabilities
 
As at October 31, 2014 accounts payable and accrued liabilities was $240,293, an increase of $10,190 from the April 30, 2014 balance of $230,103.  The increase is mainly due to an increase in professional charges relating to patents and our Visible Youth trademark offset by a fall in other outstanding invoices settled during the period.
 
Advances from a related party convertible into shares
 
As at October 31, 2014 advances from a related party convertible into shares was $152,871, an increase of $33,162 from the April 30, 2014 balance of $119,709.  The increase represents additional advances from a related party during the six month period ended October 31, 2014.
 
Common Stock

As at October 31, 2014, there were 101,017,881 shares of common stock issued and outstanding as compared to common stock 100,267,881 as at April 30, 2014.  The increase represents issuance of 750,000 common stock to Beauty Scouts against a liability of $6,000 pursuant to a consulting agreement dated January 21, 2014.

Accumulated other comprehensive loss
 
The Company has a 100% owned subsidiary in Canada.  In the consolidation of the Canadian subsidiary a translation adjustment was resulted which is not reflected in the statement of operations.  This translation adjustment is maintained in the consolidated statement of stockholders’ equity.  The balance at October 31, 2014 was $1,154, a decrease of $103 from the April 30, 2014 balance of $1,257.
 
Statement of Operations – Three and six months ended October 31, 2014 balances compared to three and six   months ended October 31, 2013
 
Sales
 
Management is currently seeking additional financing to reformulate the first two Visible Youth products; namely, the Visible Youth Repairing Serum and the Visible Youth  Hydrating Moisturizer, and undertake two marketing clinical studies on these products, to pay on-going patent costs and to provide working capital. Current and previous period nominal sales represent sales of our existing Visible Youth products through the Company’s existing website primarily to existing customers..

Expenses
 
Our operating expenses are classified primarily into the following categories.
 
General & administrative. 

General & administrative expenses incurred for the three and six months ended October 31, 2014 were $8,449 and $12,062 compared to $4,236 and $25,143 for the three and six months ended October 31, 2013, respectively.  Major variation in these expenses is the reduction in current period six months expenses as compared to previous period, primarily the result of the recording of directors’ expenses of $14,096 during the quarter ended July 31, 2013. No similar director’s expenses were recorded during the current periods.
 
 
 

ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
Professional fees.

Professional fees incurred for the three and six months ended October 31, 2014 were $12,415 and $29,444 compared to $53,631 and $105,057 for the three and six months ended October 31, 2013, respectively.  The reduction is due primarily to a fall in patent costs as a number of the Company’s patent applications have now been granted and a fall in professional costs associated with the development of the company’s consumer marketing plan.
 
Liquidity and Capital Resources
 
During the three months ended October 31, 2014 Mercuriali Ltd made advances to the Company of $11,862.  At October 31, 2014 the total advances from the related parties were $152,871.

At October 31, 2014, the Company had a working capital deficit of $560,185 compared to a working capital deficit of $518,872 at April 30, 2014.  The increase in working capital deficit is due entirely to the continued losses of the Company.
 
At October 31, 2014 the total assets were $3,175 as compared to the total assets $1,136 at April 30, 2014.  The increase of $2,039 mainly represents advances from a related party.

Income Taxes
 
At October 31, 2014, the Company had potential unused net operating loss carry overs of approximately $2,373,398 (April 30, 2014: $2,331,982).  These losses may be available to offset taxable income in the future and to the extent available will expire between 2027 and 2032. The Company has not filed tax returns in the US since 2011 and has filed no Federal or Provincial returns in Canada to date. The Company is in the process of filing overdue tax returns which may have an impact on the amount of net operating loss carry overs which might be available to the Company. No deferred tax asset attributable to the net operating loss carry forward has been recognized, as 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.
 
Financing
 
During the three months ended October 31, 2014 the Company relied on advances from Mercuriali Ltd,  a related party.
 
ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk
 
Not applicable.
 
ITEM 4.   Controls and Procedures
 
Evaluation of disclosure controls and procedures.

We recently evaluated the effectiveness of our disclosure controls and procedures, as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, being October 31, 2014.  This evaluation was conducted with the participation of our principal executive officer and our principal accounting officer.

 
 
 
ITEM 4.   Controls and Procedures (continued)
 
We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on their evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective in giving us reasonable assurance that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. This conclusion was based on the existence of significant deficiencies in our internal control over financial reporting previously disclosed and discussed below.
 
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 
Management Report on internal control over financial reporting.
 
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected.
 
Management conducted an evaluation of the effectiveness of our internal control over financial reporting and identified significant deficiencies in internal control over financial reporting.
 
A material weakness is a deficiency, or combination of deficiencies, in internal control over the financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. 
 
A significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.  Currently, we do not have sufficient in-house expertise in US GAAP reporting.  Instead, we rely very much on the expertise and knowledge of external financial advisors in US GAAP conversion.  External financial advisors have helped prepare and review our consolidated financial statements.   To remediate this situation, we are seeking to recruit experienced professionals to augment and upgrade our financial staff to address issues of timeliness and completeness in US GAAP financial reporting as soon as resources are available.  In addition, we do not believe we have sufficient documentation with our existing financial processes, risk assessment and internal controls.  We plan to work closely with external financial advisors to document the existing financial processes, risk assessment and internal controls systematically as soon as resources are available. To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls appropriate to a business of its size and scale as our financial position and capital availability improves.  In addition the Company intends to seek to strengthen the composition of its Board of Directors.
 
Although we have not identified any  material weaknesses with our financial reporting or any other significant deficiencies with our internal controls, no assurances can be given that there are no such material weaknesses or significant deficiencies existing.  
 
Changes in internal control over financial reporting.
 
There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarters and  have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
 
 
 
 
PART II – OTHER INFORMATION
 
ITEM 1.   Legal Proceedings
 
The Company received a Section 45 Notice from the Canadian Intellectual Property Office dated December 18, 2012 requesting that the Company, in accordance with Section 45 of the Trade-marks Act, furnish evidence within three months from the date of the notice demonstrating use of the trademark Visible Youth in Canada at any time during the three year period immediately preceding the date of the notice. The Company provided such evidence in the form of an affidavit on March 14, 2013. On August 26, 2013 the Company received a copy of Glycobiocsiences response, dated August 12, 2013, to its evidence.  The Company filed its response to that submission on December 23, 2013.  On January 9, 2014 Glycobiosciences requested an oral hearing, which was held on June 25, 2014.   On September 17, 2014 the Company was informed that the Canadian Intellectual Property Office issued a decision dated September 7, 2014 rejecting the Section 45 application and maintaining Enhance’s Canadian trademark. On November 13, 2014 the Company was informed that the applicant has appealed this decision to the Federal Court of Canada. The Company filed a Notice of Appearance with the Federal Court of Canada on November 21, 2014 indicating that it intends to oppose this application. It is understood that the appeal process may take up to 12 months.

In the course of preparing its affidavit in the Section 45 proceedings, the Company discovered that Glycobiosciences Inc has been offering for sale and selling "VISIBLE YOUTH VY” anti-aging revitalizing formula containing hyaluronate sodium to the public.
 
The Company also discovered that on December 20, 2012, Glycobiosciences Inc. filed a Canadian trademark application to register VISIBLE YOUTH for cosmetics. On March 13, 2013, the Company filed a Notice of Infringement of Trademark on Glycobiosciences. The Company intends to vigorously defend its Visible Youth trademark.

On June 19, 2012, the Company entered into a written Agreement and Plan of Merger (the “Merger Agreement”) with Age Reversal, Inc., a Maryland corporation (“ARI”) as disclosed in Note 12 to the financial statements for the year ended April 30, 2012. On January 14, 2013, the Company received notice from ARI that ARI was withdrawing from the proposed merger with the Company to pursue other options. ARI thereby terminated the Agreement and Plan of Merger entered into on June 19, 2012 and the Amendment to Agreement and Plan of Merger entered into on August 31, 2012 between the Company and ARI. The Company and ARI have had discussions over ARI’s obligations on termination of the Merger Agreement to reimburse the company for certain expenses of the Merger. Pursuant to Section 7.1(b) of the Merger Agreement, the Company has demanded payment of the ESP Expense Reimbursement (as defined in the Merger Agreement) of $40,000 it claims is due under the Merger Agreement. ARI claims that it has reimbursed, advanced or otherwise paid to date amounts that satisfy this obligation. The Company continues to maintain that ARI owes the ESP Expense Reimbursement of $40,000 under the Merger Agreement. The Company has not as yet started legal proceeding against ARI due to its financial position, but reserves the right to commence proceedings once it has obtained adequate funding.
 
We are not aware of any other material legal proceedings, other than ordinary routine litigation incidental to the business, to which our Company or any of our subsidiaries are a party or of which any of their property is the subject. We are not aware of any material proceedings to which any director, officer or affiliate of the our Company, any owner of record or beneficially of more than five percent of any class of voting securities of our Company, or any associate of any such director, officer, affiliate of our Company, or security holder is a party adverse to our Company or any of its subsidiaries or has a material interest adverse to our Company any of its subsidiaries.
 
ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

None.
 
ITEM 3.   Defaults Upon Senior Securities
 
None.
 
 
 
 
 
ITEM 4.   Mine Safety Disclosures
 
None.
 
ITEM 5.   Other Information
 
None.
 
ITEM 6.   Exhibits.
 
 
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 20th day of January 2015 .
 
 
ENHANCE SKIN PRODUCTS INC.
     
     
Date:  January 20, 2015
By:
/s/ Donald Nicholson
   
Name:  Donald Nicholson
   
Title:    CEO, Chief Financial Officer and Principal Executive Officer


 

 





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