UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2002
[ ] Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from __________ to __________
Commission File Number 0-25911
SKINVISIBLE, INC.
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(Exact name of Small Business Issuer as specified in its charter)
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Nevada 88-0344219
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(State or other jurisdiction of (IRS Employer
incorporation) Identification No.)
6320 South Sandhill Road, Suite 10, Las Vegas, Nevada 89120
(Address of principal executive offices)
702-433-7154
(Issuer's telephone number)
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(Former name, former address and former fiscal year if changed since last
report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 27,566,808 shares of Common Stock as
of July 31, 2002.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL
The Company's unaudited financial statements for the six months ended June 30,
2002 are included with this Form 10-QSB. The unaudited financial statements for
the six months ended June 30, 2002 include:
(a) Consolidated Balance Sheet as of June 30, 2002, June 30, 2001 and
December 31, 2001;
(b) Consolidated Statement of Operations and Accumulated Deficit - Six
months ended June 30, 2002 and June 30, 2001;
(c) Consolidated Statement of Changes in Shareholders' Equity - Six months
ended June 30, 2002 and June 30, 2001;
(d) Consolidated Statement of Cash flows - Six months ended June 30, 2002
and June 30, 2001
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B, and
therefore, do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the six months ended June 30, 2002 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2002.
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SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30 DECEMBER 31
2002 2001 2001
(unaudited) (unaudited) (audited)
--------------------------- ---------
Current Assets
Cash $ 583 $ 1,400 $ 2,335
Accounts Receivable 33,482 3,268 7,904
Inventory 114,946 138,973 124,328
Prepaid Expenses 1,385 5,590 3,321
Prepaid License Fee 50,000 50,000 50,000
------------ ------------ ------------
Total Current Assets 200,396 199,231 187,888
Property and Equipment
Furniture and Equipment 134,999 135,434 135,434
Laboratory Build-Out 268,754 323,518 332,318
------------ ------------ ------------
Total Property and Equipment 403,153 458,952 467,752
Less Accumulated Depreciation (186,611) (174,846) (214,634)
------------ ------------ ------------
Net Property and Equipment 216,542 284,106 253,118
Other Assets - Exclusive Distribution
Rights 200,000 200,000 200,000
- Patents & Trademarks 23,003 0 17,532
- Prepaid Royalty 1,000,000 1,000,000 1,000,000
- Deposits 225 725 725
------------ ------------ ------------
1,223,228 1,200,725 1,218,257
------------ ------------ ------------
TOTAL ASSETS $ 1,640,166 $ 1,684,062 $ 1,659,263
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $ 542,785 $ 213,129 $ 424,094
Loan Payable 232,622 213,291 242,992
------------ ------------ ------------
Total Current Liabilities 775,407 426,420 667,086
Stockholders' Equity
Common Stock, $0.001 par value
100,000,000 shares authorized,
27,566,808, 16,832,033 and
21,052,033 shares issued 27,567 16,832 21,052
Additional paid in capital 8,893,911 8,135,648 8,561,448
Accumulated Deficit (8,056,719) (6,894,858) (7,590,323)
------------ ------------ ------------
Total Stockholders' Equity 864,759 1,257,642 992,177
------------ ------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,640,166 $ 1,684,062 $ 1,659,263
============ ============ ============
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SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(unaudited)
SIX MONTHS ENDED
JUNE 30
2002 2001
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Revenues $ 106,859 $ 19,733
Cost of Sales
Beginning Inventory 124,328 141,354
Purchases 17,538 6,048
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Total Available 141,866 147,402
Less: Ending Inventory (114,946) (138,973)
Sample Distribution
& Inventory Adjustments (137) (2,318)
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Total Cost of Sales 26,783 6,111
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Gross Profit 80,076 13,622
Operating Expenses (546,472) (876,849)
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Loss Before Provision for
Income Taxes (466,396) (863,227)
Provision for Income Taxes (0) (0)
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Net Loss (466,396) ( 863,227)
Accumulated Deficit, Beginning
Of Period (7,590,323) (6,031,631)
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Accumulated Deficit, End of Period $(8,056,719) $(6,894,858)
============ ============
Net Loss per Share $ (.02) $ (.06)
============ ============
Weighted Average Shares Outstanding 23,439,241 15,332,033
============ ============
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SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
SIX MONTHS ENDED
JUNE 30
2002 2001
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Shares of Common Stock Issued:
Beginning Balance 21,052,033 14,122,033
Issuance Pursuant to:
Stock Offering 6,250,000 2,730,000
Stock Option Plan 264,775 0
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Ending Balance 27,566,808 16,852,033
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Common Stock Par Value
Beginning Balance $ 21,052 $ 14,122
Issuance Pursuant to:
Stock Offering 6,250 2,730
Stock Option Plan 265 0
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Ending Balance 27,567 16,852
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Additional Paid in Capital
Beginning Balance 8,561,448 7,361,778
Issuance Pursuant to:
Stock Offering 306,250 773,870
Stock Option Plan 26,213 0
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Ending Balance 8,893,911 8,135,648
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Accumulate Deficit
Beginning Balance (7,590,323) (6,031,631)
Net Loss (466,396) (863,227)
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Ending Balance (8,056,719) (6,894,858)
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Total Stockholders' Equity $ 864,759 $ 1,257,642
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SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
SIX MONTHS ENDED
JUNE 30
2002 2001
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Cash Flows from Operating Activities:
Net Loss $(466,396) $(863,227)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation 36,148 39,010
Loss on Disposal of Fixed Assets 428 0
(Increase) Decrease in:
Accounts Receivable (24,366) 7,284
Inventory 9,382 2,381
Advances (1,212) (111)
Other Assets - Prepaid Expenses 1,936 7,182
- Deposits 500 0
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses 118,691 (53,626)
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Net Cash Used by Operating Activities (324,889) (753,855)
Cash Flows from Investing Activities:
Patents & Trademarks (5,471) 0
Purchases of Property and Equipment 0 (135)
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Net Cash Used by Investing Activities (5,471) (135)
Cash Flows from Financing Activities:
Payment of Loan Principal (10,370) (30,083)
Net Proceeds from the Issuance of
Common Stock 338,978 776,600
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Net Cash Provided by Financing Activities 328,608 746,517
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Net Increase (Decrease) in Cash (1,752) (7,473)
Cash at Beginning of Period 2,335 8,873
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Cash at End of Period $ 583 $ 8,873
========== ==========
Supplemental Disclosure:
Interest Paid $ 21,551 $ 14,941
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Skinvisible, Inc. (the "Company") is focused on the development of innovative
topical polymer-based delivery systems and technologies, incorporating its
proprietary process for combining hydrophilic and hydrophobic polymers into
stable water emulsions. The Company's primary marketing objectives are to
license its technologies and/or sell its delivery systems to established brand
manufacturers and marketers of topical prescription Rx, over-the-counter,
cosmetic and skincare products to provide enhanced performance capabilities.
When topically applied, products incorporating the Company's delivery systems
adhere to the skin's outer layers, forming a protective bond, resisting
wash-off, and delivering targeted levels of therapeutic or cosmetic skincare
agents to the skin. Proven or potential applications identified to date include
antimicrobial hand sanitizers, suncare and lipcare formulations, skincare
moisturizers, anti-fungals, insect repellents, and acne, eczema and psoriasis
treatment applications.
The Company's short-term strategy includes revenue generation from private label
business opportunities for its antimicrobial hand sanitizer formulations. The
Company is also offering private label opportunities for its clinically tested
sunscreen formulation which allows labeling as "Very Water Resistant with an SPF
of 30" in accordance with FDA Final Sunscreen Monograph requirements.
In January 2002 the Company received trademark approval in the U.S. for the name
"Invisicare" to identify its family of polymer delivery systems. The Company is
currently in the process of filing this trade name with the Cosmetic, fragrance
and Toiletries Association ("CFTA") as an ingredient for use in skincare and
cosmetic formulations.
It is the Company's intention to direct its ongoing energies and resources
towards:
Expanding research and development of its Invisicare delivery systems and
related technologies;
Identifying additional applications and opportunities for its Invisicare
delivery systems, either independently or in collaboration with established
manufacturing and/or marketing companies;
Maximizing efforts for the licensing of its technologies and/or sale of its
Invisicare delivery systems to manufacturers/marketers of topically administered
Rx prescription, over-the-counter, cosmetic, and skincare products.
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The Company is pursuing potential business opportunities, strategic alliances
and collaborations directly and through sales agents/brokers. In this activity,
the Company has targeted Rx pharmaceutical, over-the-counter, cosmetic,
healthcare, and other brand manufacturers.
The Company has entered into a number of Confidentiality/Non-Disclosure
Agreements during 2001 and is presently undergoing negotiations or actively
working with a variety of existing or potential customers for the purpose of
developing or selling its products.
Patent Applications:
The Company filed a patent application in August 2001 for its Invisicare topical
compositions and its methodology for manufacturing and utilization of numerous
delivery systems and related applications.
In January 2000 the Company filed a patent application for its antimicrobial
dermal barrier formulation, which utilized one of the Invisicare delivery
systems. This initial application was intended to obtain patent protection for
the Company's original finished skin protector product.
Background & History of Operations:
At its inception, the Company's strategy was to develop and market a line of
antimicrobial protective hand-care products that incorporated its proprietary
polymer emulsion invention. These finished products were intended for a variety
of industries, including medical, food service, industrial, salon, and
personal-care markets. The Company also marketed and sold its
antibacterial/antimicrobial skincare sanitizers under the trade name Safe4Hours
to the retail/commercial market.
After extensive ongoing market investigations, analysis of regulatory
requirements and strategic planning and evaluation, the Company subsequently
determined that the highest and best use of its resources would be achieved by
focusing on development of topical polymer-based delivery systems and related
technologies, rather than pursuing the commercialization of its own
antimicrobial and/or dermal barrier formulations that would require extensive
lead-times and regulatory processes for each product application, significant
human and financial resources for a variety of specialized markets, and
extensive marketing efforts to compete in a saturated marketplace dominated by
large established suppliers.
The Company redefined its long-term strategies and objectives to focus on
independent and collaborative research & development of its Invisicare polymer
delivery systems and related technologies for a variety of product applications.
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RESULTS OF OPERATIONS
Net revenue for the six months ended June 30, 2002 increased to $106,859 from
$19,733 for the six months ended June 30, 2001. This increase in revenue was
mainly due to private label sales, product development fees charged to other
pharmaceutical companies, and polymer sales to cosmetic manufacturers through
the Company's sales agent/broker network. This is in line with the Company's
re-directed focus of directly pursuing private label business opportunities with
existing retail suppliers/distributors, as well as selling or licensing its
delivery systems to established manufacturers for enhanced product formulations
and applications in the cosmetic, over-the-counter, and pharmaceutical skincare
markets.
Gross profit for the six months ended June 30, 2002 increased to $80,076 from
$13,622 for the six months ended June 30, 2001.
The Company's operating expenses decreased to $546,472 for the six months ended
June 30, 2002 from $876,849 for the six months ended June 30, 2001. This
decrease in expenses was due to management's continuing efforts to reduce costs.
The Company incurred marketing and selling expenses in the amount of $68,245 for
the six months ended June 30, 2002 compared with $225,756 for the six months
ended June 30, 2001.
The Company incurred general and administrative costs in the amount of $478,227
for the six months ended June 30, 2002 compared with $651,093 for the six months
ended June 30, 2001. Some of these general and administrative costs included
the following: Professional fees in the amount of $21,011 for the six months
ended June 30, 2002 compared to $25,468 for the same period in 2001; Salaries
and Wages which decreased to $237,526 for the six months ended June 30, 2002,
compared with $340,266 for the six months ended June 30, 2001; and Outside
Management Consultant costs in the amount of $16,347 for the six months ended
June 30, 2002, compared to $188,237 for the six months ended June 30, 2001.
The Company had net losses of $466,396 for the six months ended June 30, 2002,
down from $863,227 for the same period ended June 30, 2001. The losses were
funded by various financings and short-term loans obtained during the period.
Generally, the reduction in net losses was the result of the cost savings
realized by the Company's change in marketing focus and its continuing efforts
to trim operating expenditures. The loss per share for the six months ended
June 30, 2002, was $0.02, down from a loss of $0.06 per share for the same
period in 2001.
During the period ended June 30, 2002 the Company retired and abandoned
leasehold improvements and an outdated computer system with an original cost of
$64,599 and accumulated depreciation of $64,171 resulting in a net loss of $428.
The Company anticipates that losses will likely continue into the foreseeable
future, until sufficient revenues are generated to cover its reduced operating
expenditures.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been financed principally through a combination of
private sales of the Company's equity securities and short-term loans.
The Company had cash of $583 as of June 30, 2002, compared to $1,400 as of June
30, 2001. The Company has outstanding loans payable with interest in the amount
of $232,622 as of June 30, 2002.
The Company had accounts payable and accrued expenses in the amount of $542,785
as of June 30, 2002, compared to $213,129 as of June 30, 2001. Until revenues
increase or the Company receives additional funding, certain creditors and
employees have agreed to defer receipt of payments or salaries, respectively.
This accounts for the rise in our accounts payable and accrued expenses.
Cash used in operating activities for the six months ended June 30, 2002
decreased to $324,889 down from $753,855 for the six months ended June 30,
2001. This can be mainly attributed to a decrease in the use of outside
consultants, a decrease in staffing, and an increase in accounts payable and
accrued expenses as outlined in the previous paragraph.
Cash used in investing activities for the six months ended June 30, 2002 and
2001, was $5,471 and $135 respectively.
Future issuances of the Company's equity or debt securities will be required in
order for the Company to clear up some of its debt and continue to finance its
operations, as the Company's present revenues are insufficient to meet operating
expenses. Present revenues have increased slightly due to the Company's
re-directed focus of pursuing private label business opportunities, charging
product development fees, as well as sales of its polymer delivery systems. The
Company will continue with these efforts as well as pursue possible licensing of
its delivery systems to established manufacturers in the cosmetic,
over-the-counter, and pharmaceutical skincare markets. The Company periodically
revises its plan of operations as new situations arise. Over the next six
months remaining in the fiscal year ending December 31, 2002, the Company
expects to realize approximately $300,000 from operating revenues after
deduction of costs of goods sold, and existing cash reserves. These projected
revenues are comprised of private label sales of the polymer-based formulations,
product development fees, as well as sales of its polymer-based delivery systems
or licensing of its polymer-based delivery system technologies. In that same
six-month period, the Company anticipates incurring approximately $370,000 in
operating expenses. Any revenues that fall short of these projections will need
to be raised through additional debt or equity financing.
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The Company is presently undertaking a search for additional equity financing in
the form of a private placement to cover these anticipated expenses and expected
operational losses. The failure to obtain such financing in a timely manner
would have a significant negative effect on the future operations and may result
in the Company being forced to cease operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings and, to the
Company's knowledge, no such proceedings are threatened or contemplated.
Item 2. Changes in Securities and Use of Proceeds
In January 2002, the Company issued a total of 264,775 shares of common stock to
four (4) employees and one (1) consultant upon the exercise of their stock
options granted pursuant to the Company's incentive stock option plan. These
shares were issued at a price of $0.10 per share, for a total purchase price of
$26,477.50.
On April 26, 2002, in consideration for services provided to the Company, a
total of 1,250,000 restricted common shares were issued to three (3) directors
and three (3) employees of the Company.
On April 26, 2002, as part of a loan conversion agreement, the Company issued
2,000,000 restricted common shares to one (1) accredited investor at a price of
$0.05 per share as well as warrants for the purchase of 1,000,000 shares of
common stock.
On June 7, 2002, as part of a loan conversion agreement, the Company issued
3,000,000 restricted common shares to one (1) accredited investor at a price of
$0.05 per share as well as warrants for the purchase of 1,500,000 shares of
common stock.
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.1 Loan Conversion Agreement with Robert F. Lutz
(b) Reports on Form 8-K: None
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PART III - Certification of Financial Statements
The Company's President and CEO, Mr. Terry Howlett, hereby certifies the
financial statements enclosed. Mr. Howlett also certifies that the enclosed
financial statements comply with the requirements of the Securities Exchange Act
of 1934 and that the information contained in the report fairly presents, in all
material respects, the financial condition and results of the company. The
signing officer, Mr. Terry Howlett, certifies that he has reviewed the report
and to his knowledge does not contain any material misstatements or omissions.
Mr. Howlett further certifies that the signing officers are responsible for
establishing and maintaining internal controls, have designed such internal
controls to ensure that material information relating to the issuer and its
subsidiaries is made known to the officers by those within this entity. Mr.
Howlett certifies that there have been no instances of fraud, whether or not
material, that involves management or employees who have a significant role in
the issuer's internal controls. Mr. Howlett further certifies that he will
evaluate the effectiveness of the issuer's internal controls within 90 days of
this report and report whether any deficiencies in the design or operation of
internal controls could adversely affect the issuer's ability to report
financial data.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SKINVISIBLE, INC.
Date: August 12, 2002 By:_________________________________
Terry Howlett
President
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