UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended  September 30, 2020
[  ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________  to __________
	Commission File Number: 000-25911

 

Skinvisible, Inc.

(Exact name of Registrant as specified in its charter)

 

Nevada	88-0344219
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

6320 South Sandhill Road, Suite 10, Las Vegas, NV 89120

(Address of principal executive offices)

 

702.433.7154

(Registrant’s telephone number)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

 

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 [X] Yes [ ] No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

[  ] Large accelerated filer	[  ] Accelerated filer
[  ] Non-accelerated filer	[X] Smaller reporting company
	[  ] Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

 

Securities registered pursuant to Section 12(b) of the Act: None

 

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,539,843 common shares as of November 20, 2020.

 

 

 

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	8
Item 4:	Controls and Procedures	8
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	9
Item 1A:	Risk Factors	9
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	\9
Item 3:	Defaults Upon Senior Securities	9
Item 4:	Mine Safety Disclosure	9
Item 5:	Other Information	9
Item 6:	Exhibits	9

 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

Our consolidated financial statements included in this Form 10-Q are as follows:

 

 

F-1

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited);

 

F-2

Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited);

 

F-3

Consolidated Statements of Stockholders’ Deficit for the nine months ended September 30, 2020 and 2019 (unaudited);

 

F-4

Consolidated Statements of Cash Flow for the three and  nine months ended September 30, 2020 and 2019 (unaudited);

 

F-5

Notes to Consolidated Financial Statements.

 

 

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended September 30, 2020 are not necessarily indicative of the results that can be expected for the full year.

 

 

SKINVISIBLE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS  

		September 30, 2020 (Unaudited)				December 31, 2019
ASSETS
Current assets
Cash		$	11,819			$	1,298
Accounts receivable			10,848				10,204
Prepaid expense and other current assets			3,250				4,875
Total current assets			25,917				16,377
Patents and trademarks, net of accumulated amortization of $557,388 and $533,415, respectively			158,179				165,385
Total assets		$	184,096			$	181,762
							.
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities		$	842,769			$	597,291
Accounts payable related party			12,807				9,274
Accrued interest payable			890,310				491,601
Loans from related party			58,599				46,899
Loans payable			552,000				552,000
Convertible notes payable, current portion			220,000				220,000
Total current liabilities			2,576,485				1,917,065
Convertible notes payable related party, net of unamortized discount of $2,603,581 and $3,060,970 respectively			1,631,628				1,174,239
Convertible notes payable, net of current portion and unamortized debt discount of $216,289 and $254,450, respectively			135,786				97,625
Total liabilities			4,343,899				3,188,929
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 September 30, 2020 and December 31, 2019, respectively			4,540				4,472
Shares payable			—				59,602
Additional paid-in capital			30,241,089				30,181,555
Accumulated deficit			(34,405,432	)			(33,252,796)
Total stockholders' deficit			(4,159,803	)			(3,007,167)
Total liabilities and stockholders' deficit		$	184,096			$	181,762

 See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 

SKINVISIBLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		Three Months Ended								Nine Months Ended
		September 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Revenues		$	4,183			$	11,295			$	21,592			$	31,279
Revenues related party			2,633				—				121,246				1,100
Cost of revenues			—				250				—				7,199
Gross profit			6,816				11,045				142,838				25,180
Operating expenses
Amortization			4,292				10,185				23,973				29,815
Selling general and administrative			121,146				137,785				380,241				417,678
Total operating expenses			125,438				147,970				404,214				447,493
Loss from operations			(118,622	)			(136,925	)			(261,376	)			(422,313)
Other income and (expense)
Other income - related party			—				93,192				—				105,692
Loss on extinguishment of debt			—				—				—				(247,998)
Interest expense			(291,137	)			(305,009	)			(891,260	)			(710,233)
Total other expense			(291,137	)			(211,817	)			(891,260	)			(852,539)
Net loss		$	(409,759	)		$	(348,742	)		$	(1,152,636	)		$	(1,274,852)
Basic loss per common share		$	(0.09	)		$	(0.12	)		$	(0.26	)		$	(0.44)
Diluted loss per common share		$	(0.09	)		$	(0.12	)		$	(0.26	)		$	(0.44)
Basic weighted average common shares outstanding			4,471,746				2,896,689				4,476,468				2,896,689
Diluted weighted average common			4,471,746				2,896,689				4,476,468				2,896,689

 

 See Accompanying Notes to Condensed Consolidated Financial Statements.

 

 

SKINVISIBLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(UNAUDITED)

 

			Common Stock
			Shares				Amount				Additional Paid-in Capital				Shares payable				Accumulated Deficit				Total Stockholders'  Deficit
Balance, December 31, 2019			4,471,746			$	4,472			$	30,181,555			$	59,602			$	(33,252,796	)		$	(3,007,167)
Net loss			—				—				—				—				(430,084	)			(430,084)
Balance, March 31, 2020			4,471,746			$	4,472			$	30,181,555			$	59,602			$	(33,682,880	)		$	(3,437,251)
Net loss			—				—				—				—				(312,793	)			(312,793)
Balance, June 30, 2020			4,471,746			$	4,472			$	30,181,555			$	59,602			$	(33,995,673	)		$	(3,750,044)
Shares issued for shares payable			68,097				68				59,534				(59,602	)			—				—
Net loss			—				—				—				—				(409,759	)			(409,759)
Balance, September 30, 2020			4,539,843			$	4,540			$	30,241,089			$	—			$	(34,405,432	)		$	(4,159,803)

 

 

   

 

			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)
Net loss			—				—				—				—				(343,099	)			(343,099)
Balance, March 31, 2019			2,896,689			$	2,897			$	24,774,887			$	2,053,466			$	(31,893,764	)		$	(5,062,514)
Settlement of debts			—				—				—				7,028				—				7,028
Beneficial conversion feature on convertible notes issued as settlement on existing payables			—				—				3,649,320				—				—				3,649,320
Beneficial conversion feature repurchase			—				—				(241,969	)			—				—				(241,969)
Net loss			—				—				—				—				(583,011	)			(583,011)
Balance, June 30, 2019			2,896,689			$	2,897			$	28,182,238			$	2,060,494			$	(32,476,775	)		$	(2,231,146)
Net loss			—				—				—				—				(348,742	)			(348,742)
Balance, September 30, 2019			2,896,689			$	2,897			$	28,182,238			$	2,060,494			$	(32,825,517	)		$	(2,579,888)

 

 

 See Accompanying Notes to Condensed Consolidated Financial Statements.

 

  

SKINVISIBLE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		Nine Months Ended
		September 30, 2020				September 30, 2019
Cash flows from operating activities:
Net loss		$	(1,152,636	)		$	(1,274,852)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Amortization			23,973				29,816
Amortization of debt discount			495,550				690,886
Gain on extinguishment of debt			—				(34,972)
Changes in operating assets and liabilities:
Decrease in inventory			—				7,152
Decrease in prepaid assets			1,625				9,000
Increase in accounts receivable			(644	)			(990)
Increase in accounts payable and accrued liabilities			249,011				253,768
Increase in accrued interest			398,709				278,216
Net cash provided (used) by operating activities			15,588				(41,976)
Cash flows from investing activities:
Purchase of intangible assets			(16,767	)			(24,320)
Net cash used in investing activities			(16,767	)			(24,320)
Cash flows from financing activities:
Payments on related party loans			(15,300	)			(35,000)
Proceeds from related party loans			27,000				109,644
Net cash provided by financing activities			11,700				74,644
Net change in cash			10,521				8,348
Cash, beginning of period			1,298				2,482
Cash, end of period		$	11,819			$	10,830
Supplemental disclosure of cash flow information:
Cash paid for interest		$	—			$	17,088
Cash paid for income taxes		$	—			$	—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash investing and financing activities:
Beneficial conversion feature on convertible debt		$	—			$	3,646,320
Common stock issued for settlement of shares payable		$	59,602			$	42,000

 See Accompanying Notes to Condensed Consolidated Financial Statements.

 

SKINVISIBLE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

  

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.

 

On September 26, 2017, the Company purchased 5,750,000 shares of common stock of Ovation Science Inc. (“Ovation”) for $32,286, which at the time of purchase the Company’s ownership represented 99.9% of the then issued and outstanding common stock. On March 28, 2018 the Company sold its interest in Ovation to officers of the Company for $500,000 which at the time represented a 37.80% interest in Ovation.

 

Skinvisible, Inc., together with its subsidiaries, shall herein be collectively referred to as the “Company.”

 

2.       BASIS OF PRESENTATION AND GOING CONCERN

 

Basis of presentation – The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X , and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements on Form 10-K filed with the SEC on May 14, 2020. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted.

 

The condensed consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements.

 

Going concern –   The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $34,405,432 since its inception and requires capital for its contemplated operational and marketing activities to take place. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. 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 Quarterly Report on Form 10-Q. 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 condensed consolidated financial statements. The condensed 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 condensed consolidated financial statements.  

 

Principles of consolidation – The condensed 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. There are $11,189 and $1,298 in cash as of September 30, 2020 and December 31, 2019 respectively.

 

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) identity the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation.

 

Product sales – Revenues from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the customer and only when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive reasonably assured payments for products sold and delivered.

 

Royalty sales – We also recognize royalty revenue from licensing our patented product formulations only when earned, with no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.

 

Distribution and license rights sales – We also recognize revenue from distribution and license rights when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments.

 

The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are collected by the Company from its customers (sales and use taxes, value added taxes, some excise taxes).

 

Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Management reviews each accounts receivable balance that exceeds 30 days from the invoice date and, based on an assessment of creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of September 30, 2020 and December 31, 2019, the Company had not recorded a reserve for doubtful accounts.

 

Intangible assets – The Company follows Financial Accounting Standard Board’s (FASB) Codification Topic 350-10 (“ASC 350-10”), “Intangibles – Goodwill and Other”. According to this statement, intangible assets with indefinite lives are no longer subject to amortization, but rather an annual assessment of impairment by applying a fair-value based test.  Under ASC 350-10, the carrying value of assets are calculated at the lowest level for which there are identifiable cash flows.

 

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 three and nine months ending September 30, 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 28,167,881 additional shares issuable in connection with outstanding options, warrants, stock payable and convertible debts as of September 30, 2020. The shares issuable under each instrument is as follows; 100,000 shares issuable for options, 60,000 shares issuable for warrants, 28,007,881 shares issuable under convertible notes. There were 27,228,407 additional shares issuable in connection with outstanding options, warrants, stock payable and convertible debts as of September 30, 2019. The shares which were issuable at that date under each instrument were as follows; 135,000 shares issuable for options, 72,000 shares issuable for warrants, 1,614,305 shares issuable for shares payable and 25,407,102 shares issuable under convertible notes.

  

Recently issued accounting pronouncements – The Company has evaluated all other recent accounting pronouncements and believes that none of them will have a material effect on the Company's financial position, results of operations or cash flows.

 

4.       INTANGIBLE AND OTHER ASSETS

 

Patents and trademarks and other intangible assets are capitalized at their historical cost and are amortized over their estimated useful lives. As of September 30, 2020 intangible assets total $715,567, net of $557,388 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 nine months ended September 30, 2020.

 

Amortization expense for the three months ended September 30, 2020 and 2019 was $4,292 and $10,186, respectively.

 

Amortization expense for the nine months ended September 30, 2020 and 2019 was $23,973 and $29,698, respectively.

 

License and distributor rights were acquired by the Company in January 1999 and provide exclusive use distribution of polymers and polymer based products. The Company has a non-expiring term on the license and distribution rights. Accordingly, the Company annually assesses this license and distribution rights for impairment and has determined that no impairment write-down is considered necessary as of September 30, 2020.

 

5.       STOCK OPTIONS AND WARRANTS

 

Stock options

 

The following is a summary of option activity during the nine months ended September 30, 2020.

 

		Number of Shares				Weighted Average Exercise Price
Balance, December 31, 2019			100,000				1. 51
Options granted and assumed			—				—
Options expired			—				—
Options canceled			—				—
Options exercised			—				—
Balance, September 30, 2020			100,000				1. 51

 

The following is a summary of option activity during the nine months ended September 30, 2019.

 

 

		Number of Shares				Weighted Average Exercise Price
Balance, December 31, 2018			161,000			$	1.80
Options granted and assumed			—				—
Options expired			(26,000	)			2.00
Options canceled			—				—
Options exercised			—				—
Balance, September 30, 2019			135,000			$	1.76

 

As of September 30, 2020, all stock options outstanding are exercisable.

 

Stock warrants

 

The following is a summary of warrants activity during the nine months ended September 30, 2020

 

		Number of Shares				Weighted Average Exercise Price
Balance, December 31, 201 9			72,200			$	1.18
Warrants granted and assumed			—				—
Warrants expired			(12,200	)			1.50
Warrants canceled			—				—
Warrants exercised			—				—
Balance, September 30, 2020			60,000			$	1.11

 

 The following is a summary of warrants activity during the nine months ended September 30, 2019.

		Number of Shares				Weighted Average Exercise Price
Balance, December 31, 2018			72,200			$	1.18
Warrants granted and assumed			—				—
Warrants expired			—				—
Warrants canceled			—				—
Warrants exercised			—				—
Balance, September 30, 2019			72,200			$	1.18

 

As of September 30, 2020 , all stock warrants outstanding are exercisable.

  

 

6.       NOTES PAYABLE

 

Secured debt offering

During the period from May 22, 2013 and December 31, 2018, the Company entered into a 9% notes payable to nineteen investors and received proceeds of $552,000. The notes were due two years from the anniversary date of execution. The Notes are secured by the US Patent rights granted for the Company's Sunscreen Products: US patent number #8,128,913: "Sunscreen Composition with Enhanced UV-A Absorber Stability and Methods.”

 

As of September 30, 2020, $552,000 of the outstanding notes payable are past due and in default and have been classified as current notes payable.

 

7.        RELATED PARTY TRANSACTIONS

 

During the nine months ended September 30, 2020, $27,000 was advanced by an officer and $15,300 was repaid to another officer.

 

As of September 30, 2020, $58,599 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 additonal  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 nine months ending September 30, 2020 and recognized $100,000 in revenue.

 

The Company earned $2,633 in royalties under the license agreement during the three months ending September 30, 2020.

 

The Company earned $14,114 in royalties under the license agreement during the nine months ending September 30, 2020.

 

The Company sold polymer products to Ovation Science Inc and earned $0 and $7,132 during the three and nine months ending September 30, 2020, respectively

 

 

8.       CONVERTIBLE NOTES PAYABLE

 

Convertible Notes Payable consists of the following:		September 30,				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 as a financing expense in the amount of $38,161 during the nine months ended September 30, 2020 and $12,813 for the nine months ended September 30, 2019.   The aggregate beneficial conversion feature has been accreted and charged to interest expenses as a financing expense in the amount of $12,731 during the three months ended September 30, 2020 and $12,813 for the three months ended September 30, 2019.			352,075				352,075
Unamortized debt discount			(216,289	)			(254,450)
Total, net of unamortized discount			135,786				97,625

 

Total Convertible Notes		$	355,786			$	317,625
Current portion:			220,000				220,000
Total long-term convertible notes		$	135,786			$	97,625

 

 

9.       CONVERTIBLE NOTES PAYABLE RELATED PARTY 

 

Convertible Notes Payable Related Party consists of the following:		September 30, 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 amortized and charged to interest expenses as a financing expense in the amount of $457,389 during the nine months ended September 30, 2020 and 152,463 for the nine months ended September 30, 2019.   The aggregate beneficial conversion feature has been amortized and charged to interest expenses as a financing expense in the amount of $152,463 during the three months ended September 30, 2020 and 152,463 for the three months ended September 30, 2019.		$	4,235,209			$	4,235,209
Unamortized debt discount			(2,603,581	)			(3,060,970	)
Total, net of unamortized discount		$	1,631,628			$	1,174,239

 

10.       STOCKHOLDERS’ DEFICIT

 

The Company is authorized to issue 200,000,000 shares of $0.001 par value common stock. The Company had 4,539,843 and 4,471,746 issued and outstanding shares of common stock as of September 30, 2020 and December 31, 2019, respectively.

 

During the nine months ended September 30, 2020, the Company issued 68,097 shares to investors as a result of agreements settled during the year ended December 31, 2019 and recorded as stock payable valued at $59,602.

 

 11.       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 now on September 30, 2020.  As of the date of this filing no payments had been received.

 

12.       SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to September 30, 2020 to the date these financial statements were issued and has determined that it does not have any material subsequent events to disclose in these financial statements.  

 

 

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

 

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. 

  

 

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.

 

 

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.

 

 

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.

 

 

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.

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

  

A smaller reporting company is not required to provide the information required by this Item.

 

Item 4.     Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2020. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September30, 2020, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2020: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended September 30, 2020 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

 

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

 

Item 1A.

Risk Factors

 

See risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2019 filed on May 14, 2020.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None

 

Item 3.

Defaults upon Senior Securities

 

None

 

Item 4.

Mine Safety Disclosures

 

Not applicable.

 

Item 5.

Other Information

 

None

 

Item 6.

Exhibits

 

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101**	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 formatted in Extensible Business Reporting Language (XBRL).
**Provided herewith

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

	Skinvisible, Inc.
Date:	November 23, 2020
	By: /s/ Terry Howlett Terry Howlett Title:   Chief Executive Officer, Chief Financial Officer and Director