SKINVISIBLE, INC. - Quarter Report: 2008 March (Form 10-Q)
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 March 31,
2008
|
|
|
[ ]
|
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of
1934
|
|
For
the transition period to __________
|
|
|
Commission
File Number: 000-25911
|
Skinvisible,
Inc.
(Exact
name of small business issuer 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, Nevada
89120
|
|
|
(Address
of principal executive offices)
|
|
702-433-7154
|
|
|
(Issuer’s
telephone number)
|
|
_______________________________________________________________
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Check
whether the issuer (1) 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 issuer 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 is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
|
[ ]
Large accelerated filer Accelerated filer
|
[ ]
Non-accelerated filer
|
|
[X]
Smaller reporting company
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [ ] No
[X]
State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 75,487,238 Common Shares as of March
31, 2008.
|
Page
|
||
|
PART I – FINANCIAL INFORMATION
|
||
|
PART II – OTHER INFORMATION
|
||
PART
I - FINANCIAL INFORMATION
Our
unaudited consolidated financial statements included in this Form 10-Q are as
follows:
These
unaudited 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 March 31, 2008 are not necessarily
indicative of the results that can be expected for the full year.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
|
ASSETS
|
March
31, 2008
|
|
|
Current
assets
|
|
|
|
Cash
|
$ | 5,785 |
|
Accounts
receivable
|
11,062 | |
|
Inventory
|
35,462 | |
|
Due
from related party
|
1,196 | |
|
Financing
cost, net of accumulated amortization of $867
|
17,752 | |
|
Prepaid
royalty fees - current portion
|
240,000 | |
|
Prepaid
expense and other current assets
|
4,660 | |
|
Total
current assets
|
315,917 | |
|
Fixed
assets, net of accumulated depreciation of $320,128
|
19,969 | |
|
Intangible
and other assets
|
||
|
Patents
and trademarks, net of accumulated amortization of $42,906
|
31,988 | |
|
License
and distributor rights
|
50,000 | |
|
Prepaid
royalty fees - long term portion
|
120,000 | |
|
Total
assets
|
$ | 537,874 |
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||
|
Current
liabilities
|
||
|
Accounts
payable and accrued liabilities
|
$ | 479,253 |
|
Accrued
interest payable
|
13,606 | |
|
Loans
from related party
|
22,968 | |
|
Loans
payable
|
3,500 | |
|
Convertible
notes payable, net of unamortized debt discount of $34,914
|
55,086 | |
|
Unearned
revenue
|
350,000 | |
|
Total
current liabilities
|
924,413 | |
|
Total
liabilities
|
924,413 | |
|
Commitments
and contingencies
|
-- | |
|
Stockholders'
deficit
|
||
|
Common
stock; $0.001 par value; 100,000,000 shares 75,487,238 shares
issued and outstanding
|
75,486 | |
|
Additional
paid-in capital
|
15,507,876 | |
|
Accumulated
deficit
|
(15,969,902) | |
|
Total
stockholders' deficit
|
(386,539) | |
|
Total
liabilities and stockholders' deficit
|
$ | 537,874 |
See Accompanying Notes to
Consolidated Fiancial Statements
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
|
For
the three months ended March 31,
2008 |
For
the three months ended March 31,
2007 |
||||
|
Revenues
|
$ | 149,411 | $ | 183,316 | |
|
Cost
of revenues
|
10,131 | 10,154 | |||
|
Gross
profit
|
139,280 | 173,162 | |||
|
Operating
expenses
|
|||||
|
Depreciation
and amortization
|
5,356 | 4,671 | |||
|
Stock
based compensation
|
248,442 | 49,475 | |||
|
Selling
general and administrative
|
396,113 | 368,993 | |||
|
Total
operating expenses
|
649,911 | 423,139 | |||
|
Loss
before provision for income taxes
|
(510,631 | (249,977) | |||
|
Other
income (expense)
|
|||||
|
Interest
expense
|
(162,423) | (23,017) | |||
|
Total
other income (expense)
|
(162,423) | (23,017) | |||
|
Provision
for income taxes
|
-- | -- | |||
|
Net
loss
|
$ | (673,054) | $ | (272,994) | |
|
Basic
loss per common share
|
$ | (0.01) | $ | (0.00) | |
|
Basic
weighted average common
|
|||||
|
shares
outstanding
|
75,487,238 | 64,711,248 | |||
See Accompanying Notes to
Consolidated Fiancial Statements
SKINVISIBLE,
INC.
(UNAUDITED)
|
For
the three months ended
March
31, 2008
|
For
the three months ended March 31,
2007 |
||||
|
Cash
flows from operating activities:
|
|||||
|
Net
loss
|
$ | (673,054) | $ | (272,994) | |
|
Adjustments
to reconcile net loss to net
|
|||||
|
cash
used by operating activities:
|
|||||
|
Depreciation
and amortization
|
5,356 | 4,671 | |||
|
Stock
based compensation
|
248,442 | 49,475 | |||
|
Stock
issued for donation
|
-- | -- | |||
|
Interest
expense related to beneficial conversion feature
|
151,613 | -- | |||
|
Changes
in operating assets and liabilities:
|
|||||
|
(Increase)
in inventory
|
(15,007) | (10,239) | |||
|
Increase
(Decrease) in accounts receivable
|
31,026 | (43,655) | |||
|
Decrease
in prepaid expenses and other current assets
|
477 | 475 | |||
|
Decrease
in prepaid royalty fees
|
60,000 | 60,000 | |||
|
Increase
in accounts payable and accrued liabilities
|
139,299 | 140,727 | |||
|
Increase
in accrued interest
|
6,658 | -- | |||
|
Decrease
in unearned revenue
|
(100,000) | (100,000) | |||
|
Net
cash used in operating activities
|
(145,190) | (171,540) | |||
|
Cash
flows from investing activities:
|
|||||
|
Purchase
of fixed assets and untangible assets
|
-- | (4,662) | |||
|
Net
cash used in investing activities
|
-- | (4,662) | |||
|
Cash
flows from financing activities:
|
|||||
|
Proceeds
from (Payments to) related party loans
|
(30,892) | 70,248 | |||
|
Proceeds
from convertible notes payable
|
115,199 | -- | |||
|
Proceeds
from loan payable
|
3,500 | -- | |||
|
Proceeds
from stock subscription receivable
|
-- | 35,000 | |||
|
Proceeds
from issuance of common stock
|
-- | 25,000 | |||
|
Net
cash provided by financing activities
|
87,807 | 130,248 | |||
|
Net
change in cash
|
(57,383) | (45,954) | |||
|
Cash,
beginning of period
|
63,168 | 50,070 | |||
|
Cash,
end of period
|
$ | 5,785 | $ | 4,116 | |
|
Schedule
of non-cash financing and investing activities:
|
|||||
|
Issuance
of 2,000,000 shares of common stock for conversion of loan at
$0.075 per share
|
$ | 150,000 | $ | -- | |
|
Issuance
of 248,000 shares of common stock for payment of accounts
payable at $0.10 per share
|
$ | 24,800 | $ | -- | |
|
Issuance
of 251,990 shares of common stock for conversion of loan
at $0.10 per share
|
$ | 25,199 | $ | -- | |
|
Issuance
of 1,200,000 shares of common stock for salaries owed at
$0.05 per share
|
$ | 60,000 | $ | -- | |
|
Issuance
of 500,000 shares of common stock in
lieu of debt at
$0.05 per share
|
$ | 25,000 | $ | -- | |
|
Issuance
of 548,000 shares of common stock for salaries owed at
$0.10 per share
|
$ | 54,800 | $ | -- | |
See Accompanying Notes to
Consolidated Fiancial Statements
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
1.
|
DESCRIPTION OF
BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
POLICIES
|
Basis
of presentation – The accompanying unaudited Consolidated Financial
Statements of Skinvisible, Inc. (the “Company”) have been prepared in accordance
with U.S. generally accepted accounting principles (GAAP) for interim financial
information and with the instructions to Form 10-QSB. The financial
statements reflect all adjustments consisting of normal recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the results for the periods shown. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles (GAAP) for complete financial statements.
These
Consolidated Financial Statements should be read in conjunction with the audited
financial statements and footnotes included in Skinvisible, Inc.’s Form 10-KSB
for the year ended December 31, 2007, as filed with the Securities and Exchange
Commission.
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Description
of business - Skinvisible, Inc., (referred to as the “Company”) is
focused on the development and manufacture of innovative topical 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. The
Company’s antibacterial/antimicrobial hand sanitizer formulations, available for
private label commercialization opportunities, offer skincare solutions for the
healthcare, food service, industrial, cosmetic and salon industries, as well as
for personal use in the retail marketplace. The Company maintains manufacturing,
executive and sales offices in Las Vegas, Nevada.
History
- Skinvisible, Inc. ( referred to as the “Company”) was incorporated in
Nevada on March 6, 1998 under the name of Microbial Solutions, Inc. The Company
underwent a name change on February 26, 1999, when it changed its name to
Skinvisible, Inc. The Company’s subsidiary’s name of Manloe Labs, Inc. was also
changed to Skinvisible Pharmaceuticals, Inc.
Skinvisible,
Inc. together with its subsidiary shall herein be collectively referred to as
the “Company”.
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 $15,969,902 since its inception and requires
capital for its contemplated operational and marketing activities to take place.
The Company’s ability to raise additional capital through the future issuances
of common stock 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 ability to successfully resolve
these factors raise substantial doubt about the Company’s ability to continue as
a going concern. The consolidated financial statements of the Company do not
include any adjustments that may result from the outcome of these aforementioned
uncertainties.
Principles
of consolidation - The consolidated financial statements include the
accounts of the Company and its subsidiary. All significant intercompany
balances and transactions have been eliminated.
Definition
of fiscal year - The Company’s fiscal
year end is December 31.
1.
DESCRIPTION
OF BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES (continued)
Use of
estimates - The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue
recognition
Product
sales - Revenues from the sale of products 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 – The Company also recognizes royalty revenue from licensing its
patent and trademarks, 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 – The Company also recognizes revenue from
distribution and license rights 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.
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. At March 31, 2008, the Company had not recorded a reserve
for doubtful accounts.
Inventory
- Substantially all inventory consists of finished goods and are valued
based upon first-in first-out ("FIFO") cost, not in excess of market. The
determination of whether the carrying amount of inventory requires a write-down
is based on an evaluation of inventory.
Fixed
assets - Fixed assets are stated at cost less accumulated depreciation.
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets, which are generally 3 to 10 years. The
cost of repairs and maintenance is charged to expense as incurred. Expenditures
for property betterments and renewals are capitalized. Upon sale or other
disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income
(expense).
The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful life of fixed assets or
whether the remaining balance of fixed assets should be evaluated for possible
impairment. The Company uses an estimate of the related undiscounted cash flows
over the remaining life of the fixed assets in measuring their
recoverability.
Advertising
costs - Advertising costs incurred in
the normal course of operations are expensed as incurred. During the three
months ended March 31, 2008 and 2007, the Company incurred advertising costs
totaling $2,650 and $3,040, respectively.
Research
and development costs - Research and development costs are charged to
expense when incurred. Costs incurred to internally develop the product,
including costs incurred during all phases of development, are charged to
expense as incurred.
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
1.
|
DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES
(continued)
|
Goodwill
and intangible assets - Beginning January 1, 2002, the Company adopted
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
Other Intangible Assets”. According to this statement, goodwill and 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. Fair
value for goodwill is based on discounted cash flows, market multiples and/or
appraised values as appropriate. Under SFAS No. 142, the carrying value of
assets are calculated at the lowest level for which there are identifiable cash
flows.
SFAS
142 requires the Company to compare the fair value of the reporting unit to its
carrying amount on an annual basis to determine if there is potential
impairment. If the fair value of the reporting unit is less than its carrying
value, an impairment loss is recorded to the extent that the fair value of the
goodwill within the reporting unit is less than its carrying value. Upon
adoption and during 2002, the Company completed an impairment review and did not
recognize any impairment of goodwill and other intangible assets already
included in the financial statements. The Company expects to receive future
benefits from previously acquired goodwill over an indefinite period of time.
Accordingly, beginning January 1, 2002, the Company has foregone all related
amortization expense. Prior to January 1, 2002, the Company amortized goodwill
over an estimated useful life ranging from 3 to 15 years using the straight-line
method.
Fair
value of financial instruments - Financial accounting standards Statement
No. 107, “Disclosure About Fair Value of Financial Instruments”, requires the
Company to disclose, when reasonably attainable, the fair market values of its
assets and liabilities which are deemed to be financial instruments. The
carrying amounts and estimated fair values of the Company’s financial
instruments approximate their fair value due to the short-term
nature.
Income
taxes - The Company accounts for its income taxes in accordance with
Statement of Financial Accounting Standards No. 109, 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.
Segment
information - The Company discloses segment information in accordance
with Statements of Financial Accounting Standards (SFAS) No. 131, “Disclosures
about Segments of an Enterprise and Related Information,” which uses the
Management approach to determine reportable segments. The Company operates under
one segment.
Stock-based
compensation - On January 1, 2005, the
Company adopted SFAS No. 123 (R) “Share-Based Payment” 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 a Employee Stock Purchase Plan based on the
estimated fair values.
|
1.
|
DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT POLICIES
(continued)
|
Stock-based
compensation (continued)
The
Company adopted SFAS No. 123(R) using the modified prospective transition
method, which required the application of the accounting standard as of January
1, 2005. The accompanying consolidated financial statements as of and
for the three months ended March 31, 2008 reflect the impact of SFAS No.
123(R). In accordance with the modified prospective transition
method, the Company’s accompanying consolidated financial statements for the
prior periods have not been restated, and do not include the impact of SFAS No.
123(R). Stock based compensation expense
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
recognized
under SFAS No. 123(R) for the three months ended March 31, 2008 and
2007 totaled $248,442 and $49,475, respectively.
Earnings
(loss) per share - The Company reports earnings (loss) per share in
accordance with SFAS No. 128, "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 since the effect of the assumed exercise of options and
warrants to purchase common shares (common stock equivalents) would have an
anti-dilutive effect. For the three months ended March 31, 2008 and 2007,
common stock equivalent shares excluded from the earnings (loss) per share
calculations totaled 8,472,500 and 7,230,000,
respectively.
Recent
accounting pronouncements - In March 2008, the FASB issued SFAS
No. 161, “Disclosures about Derivative Instruments and Hedging Activities –
an amendment of FASB Statement No. 133,” (SFAS “161”) as amended and
interpreted, which requires enhanced disclosures about an entity’s derivative
and hedging activities and thereby improves the transparency of financial
reporting. Disclosing the fair values of derivative instruments and
their gains and losses in a tabular format provides a more complete picture of
the location in an entity’s financial statements of both the derivative
positions existing at period end and the effect of using derivatives during the
reporting period. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows. SFAS No. 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008.
Early adoption is permitted.
At
March 31, 2008, the Company did not have any derivative instruments or
hedging activities. Management is aware of the requirements
of SFAS 161 and will disclose when appropriate.
Reclassification
– The financial statements from 2007 reflect certain reclassifications,
which will have no effect on net income, to conform to classifications in the
current year.
2. FIXED
ASSETS
Fixed
assets consist of the following as of March 31, 2008:
| Machinery and equipment | $ | 55,463 |
|
Furniture
and fixtures
|
113,635 | |
| Computers, equipment and software | 42,484 | |
| Leasehold improvements | 12,569 | |
| Lab equipment | 115,946 | |
| 340,097 | ||
| Less: accumulated depreciation | 320,128 | |
| Fixed assets, net of accumulated depreciation | $ | 19,969 |
Depreciation
expense for the three months ending March 31, 2008 and 2007 was $2,471 and
$2,108, respectively.
|
|
3.
INTANGIBLE AND
OTHER ASSETS
|
Patents
and trademarks are capitalized at its historical cost and are amortized over
their useful lives. As of March 31, 2008, patents and trademarks total $74,894,
and amortization expense for the three months ended March 31, 2008
and 2007 were $2,885 and $2,563, respectivley.
License
and distributor rights (“agreement”) was acquired by the Company in January 1999
and provides 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
(UNAUDITED)
has
determined that no impairment write-down is considered necessary as of March 31,
2008.
Future
amortization expense for patents and trademarks as of March 31, 2008 are as
follows:
|
2008
|
$ 8,442
|
|
2009
|
11,256
|
|
2010
|
3,223
|
|
2011
|
3,223
|
|
2012
|
3,223
|
Prepaid
royalties fees are amounts prepaid by the Company related to the license and
distributor rights. The future royalties payments required by the Company total
$2,000,000. The royalties fees are to be paid in an amount equal to the greater
of (a) $6,000 per month; or (b) 1.5% of net revenues realized by the sale of the
associated polymer products subject to a cap of $2,000,000. The Company will
make payments of $6,000 per month, and by a payment on any royalties in excess
of $72,000 in each year payable on an annual basis calculated within 60 days of
each anniversary date of the agreement. The future royalties payments are to be
amortized over eight years, which is the life of the agreement. As of
March 31, 2008, the Company has paid a total of $1,880,000 of which
$1,280,000 has been expensed and $360,000 has been recorded as prepaid
royalties. The Company will expense the prepayment in the future in
accordance to the terms of the agreement. The remaining future royalties
payments related to the agreement approximates $120,000.
|
4.
|
UNEARNED
REVENUE
|
|
|
Unearned
revenue totaling $350,000 as of March 31, 2008 relates to two marketing
and distribution rights agreements entered into during 2004 for which
monies were received and not considered earned. (See Note 7 for further
discussion.)
|
5. ACCOUNTS
PAYABLE AND ACCRUED
LIABILITIES
Accounts
payable and accrued liabilities consist of the following as of March 31,
2008:
| Accounts payable | $ | 299,646 |
|
Credit
card payable
|
119,299 | |
| Accrued officers salary payables | 55,693 | |
| Accrued payroll taxes | 4,038 | |
|
Other accrued expenses
|
577 | |
| $ | 479,253 |
|
6.
|
STOCK OPTIONS AND
WARRANTS
|
Stock
options employees and directors – During the three months ended March 31,
2008 and 2007, the Company granted stock options to employees and directors
totaling 925,000 and -0- shares of its common stock with a
weighted average strike price of $0.12 and $-0- per share, respectively. Certain
stock options were exercisable upon grant and have a life ranging from 3 months
to 5 years. The stock options have been valued at $221,867 using the
Black-Scholes option pricing model based upon the following assumptions: term of
5 years, risk free interest rates ranging from 3.5% to 4.5%, a
dividend yield of 0% and volatility rates ranging from 109 % to
110%. All stock options were exercisable
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
b
upon
grant. The Company has recorded an expense of $128,356 and
$13,475 for the three months ended March 31, 2008 and 2007,
respectively.
Stock
options non-employees and directors – During the three months ended March
31, 2008 and 2007, the Company granted stock options for services
totaling 875,000 and -0- shares of its common stock with a
weighted average strike price of $0.13 and $-0- per share, respectively. All
stock options were exercisable upon grant. The stock options have been
valued at $120,086 using the Black-Scholes option pricing model based
upon the following assumptions: term of 5 years, risk free interest
rates ranging from 3.5% to 4.5%, a dividend yield of 0% and volatility rates
ranging from 109% to 112%.
The
following is a summary of option activity during the three months ended March
31, 2008 and for the year ended December 31, 2007:
|
Number Of |
Weighted Average |
|||
|
Balance,
December 31, 2006
|
4,200,000 | $ | 0.11 | |
|
Options granted and assumed
|
2,075,000 | 0.24 | ||
|
Options expired
|
-- | -- | ||
|
Options canceled
|
-- | -- | ||
|
Options exercised
|
760,000 | 0.05 | ||
|
Balance,
December 31, 2007
|
5,515,000 | $ | 0.17 | |
|
Options granted and assumed
|
1,800,000 | 0.24 | ||
|
Options expired
|
100,000 | 0.18 | ||
|
Options canceled
|
-- | -- | ||
|
Options exercised
|
1,200,000 | 0.05 | ||
|
Balance,
March 31, 2008
|
6,015,000 | $ | .17 | |
As
of March 31, 2008, 5,856,667 stock options are exercisable.
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
|
6.
|
STOCK OPTIONS AND
WARRANTS (continued)
|
Stock
warrants -
The
following is a summary of warrants activity during the three months ended March
31, 2008 and for the year ended December 31, 2007:
|
Number Of |
Weighted Average |
|||
|
Balance,
December 31, 2006
|
3,030,000 | $ | 0.11 | |
|
Warrants granted and assumed
|
1,911,500 | 0.25 | ||
|
Warrants expired
|
-- | -- | ||
|
Warrants canceled
|
-- | -- | ||
|
Warrants exercised
|
710,000 | 0.05 | ||
|
Balance,
December 31, 2007
|
4,231,500 | $ | 0.15 | |
|
Warrants granted and assumed
|
1,125,000 | -- | ||
|
Warrants expired
|
-- | -- | ||
|
Warrants canceled
|
-- | -- | ||
|
Warrants exercised
|
500,000 | 0.05 | ||
|
Balance,
March 31, 2008
|
4,856,500 | $ | 0.16 | |
All
warrants outstanding as of March 31, 2008 are exercisable.
7. LETTER OF
INTENT AND DEFINITIVE
AGREEMENT
In
March 2004, the Company entered into a letter of intent (“LOI”) with Dermal
Defense, Inc. for the exclusive marketing and distribution rights to its
patented Antimicrobial Hand Sanitizer product for North America. Terms of the
LOI require Dermal Defense, Inc. to pay a fee of $1 million comprising of a
non-refundable deposit of $250,000 with the balance of $750,000 payable as to
$75,000 per calendar quarter or 5% of product sales (whichever is greater) until
the entire $750,000 is received. The $1 million fee will be recognized as
revenue ratably over a five year period. As of March 31, 2008, the Company has
received $1,000,000 and has reflected $150,000 as unearned revenue and $850,000
as revenue on cumulative basis of which $50,000 has been recorded as revenue for
both three months ended March 31, 2008 and 2007. In addition and further to the
payment fee of $1 million, Dermal Defense, Inc. agrees to pay a royalty fee of
5% on product sales of the Antimicrobial Hand Sanitizer.
In
June 2004, the Company entered into a definitive agreement with Cross Global,
Inc. (“Cross Global”) whereby, the Company would provide exclusive marketing and
distribution rights to its proprietary "Sunless Tanning Spray Formulation" for
Canada, the United States, Mexico, Austria, Belgium, Denmark, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain,
Sweden, United Kingdom and Israel. In addition CGI is granted the right to use
the name "Solerra(TM)" within the territory. Terms of the agreement require
Cross Global to pay a fee of $1 million comprising of a non-refundable deposit
of $200,000 with the balance of $800,000 payable as $200,000 due August 30,
2004, November 30, 2004, February 28, 2005 and May 30, 2005. The $1 million fee
will be recognized as revenue ratably over a five year period. As of March 31,
2008, the Company has received $1,000,000 and has reflected $200,000 as unearned
revenue and $800,000 as revenue on a cumulative basis of which $50,000 has been
recorded as revenue for both three months ended March 31, 2008 and
2007. In addition and further to the payment fee of $1 million, Cross
Global agrees to pay a royalty fee of 5% on product sales of the Sunless Tanning
Spray Formulation.
7.
LETTER
OF INTENT AND DEFINITIVE AGREEMENT (continued)
On
April 11, 2007, we entered into a Licensing Agreement (“Agreement”) with DRJ
Group, Inc. (“DRJ”), a California corporation. Under the terms of this
Agreement, we granted DRJ the exclusive right to distribute, market, sell, and
promote a topical analgesic that incorporates our proprietary and patented
Invisicare polymer in North America. DRJ manufactures STOPAIN®, a cream product
topically applied which is designed to provide relief to people suffering from
muscle stiffness, arthritis or muscle strains. Under the terms of the Agreement,
the Company will generate revenues from product sales of Invisicare to DRJ and
be entitled to receive royalties
SKINVISIBLE,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
from
all product sales generated by DRJ. For the three months ended March
31, 2008, the Company has received $3,303 in royalties from DRJ.
8. CONVERTIBLE
NOTES PAYABLE
During
2008, the Company issued an aggregate of $115,000 consisting of promissory
convertible notes to three individuals. Two of the notes are due by May 5, 2008
and one note is due by May 29, 2008, accruing interest at 10% per annum. At the
investor’s option until the repayment date, and the note can be converted to
shares of the Company’s common stock at a fixed price of $0.10 per
share along with additional warrants to purchase one share per every two shares
issued at the exercise price of $0.25 per share if exercised in year one and
$0.30 per share if exercised in year two and available only upon conversion of
the note payable. As of March 31, 2008, $90,000 convertible
notes payable remains outstanding while $25,000 plus accrued interest of $199
were converted into 251,990 shares.
In
accordance with EITF 00-27, the Company has determined the value associated with
the conversion feature and detachable warrants issued in connection with these
convertible notes payable. The Company has determined the debentures to have a
beneficial conversion feature totaling $34,914. The beneficial
conversion feature has been recorded as a debt discount which will be amortized
over the life of the loan. The beneficial conversion feature is
valued under the intrinsic value method and warrants were valued under the
Black-Scholes option pricing model using the following assumptions: a stock
price of $0.12, life of 3 years, a dividend yield of 0%,
volatility raging from 111% to 112%, and a debt discount rate of
4.50%. The investor shall have three years from February 5,
2008 and February 29, 2008 to exercise 450,000 warrants. The warrant
strike price shall be $0.12 per share. The Company has determined the
warrants to have a value of $18,619 which has been reflected as a financing cost
and will be amortized over the life of the loan. As
of March 31, 2008, financing costs totaled $17,752, net of
accumulated amortization of $867.
9.
RELATED PARTY
TRANSACTIONS
As of
March 31, 2008, the Company had an unsecured loan payable due to the
CEO with an interest rate of 10% per annum, due on demand totaling
$22,968.
As of
March 31, 2008, the Company had a receivable due to them from a shareholder
totaling $1,196.
10. COMMITMENTS AND
CONTINGENCIES
Lease obligations –
The Company has operating leases for its offices. The lease for its
offices expires on December 29, 2009. Future minimum lease payments
under the operating leases for the facilities as of March 31, 2008 are as
follows:
2008 $ 70,375
2009 98,622
Rental
expense, resulting from operating lease agreements for the three months ended
March 31, 2008 and 2007, was $26,653 and $26,215, respectively.
|
11.
|
SUBSEQUENT
EVENTS
|
|
|
Subsequent
to March 31, 2008, the Company issued 152,000 shares of common stock for
payment on accounts payable at $0.10 per share totaling
$15,200.
|
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates,
projections, statements relating to our business plans, objectives, and expected
operating results, and the assumptions upon which those statements are based,
are “forward-looking statements” 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
We
develop innovative polymer delivery vehicles and related compositions that
hold active ingredients on the skin for up to four hours when applied
topically. We designed a process for combining water soluble and insoluble
polymers that is specifically formulated to carry water insoluble active
ingredients in water-based products without the use of alcohol, silicones,
waxes, or other organic solvents. This enables active agents the ability to
perform their intended functions for an extended period of time. Our polymer
delivery vehicles trademarked Invisicare® allow normal skin respiration and
perspiration. The polymer compositions we develop wear off as part of the
natural exfoliation process of the skin's outer layer cells.
Products
that successfully incorporate Invisicare to date include antimicrobial hand
sanitizer lotions, suncare products, skincare moisturizers, sunless tanning
products as well as various dermatology products for various skin
disorders. On an ongoing basis, we are seeking to develop polymer
formulations that can successfully be incorporated into other
products.
Our
primary objective is to license Invisicare to established brand
manufacturers and marketers of prescription and over-the-counter
products in the dermatological, medical, cosmetic, and skincare
markets. With the exception of sales to one vendor, our management’s policy is
to only sell Invisicare to vendors that have executed a license agreement with
us. We conduct our research and development in-house. We engage an outside party
that currently handles all of our manufacturing and distribution
needs.
Developments
in our Current Products and Agreements
Aside
from disclosures provided below, we have no developments to report in our
current product line or distribution agreements in place for those
products.
Acne
Formulations
On
January 30, 2008, our wholly-owned subsidiary, Skinvisible Pharmaceuticals,
Inc., entered into a Trademark License Agreement and Distribution Agreement
("Distribution Agreement") with Panalab Internacional S.A. ("Panalab"). The
Agreement is for the right to develop and commercialize Skinvisible's
prescription anti-acne products formulated with adapalene and Invisicare® in
Argentina, Brazil and Chile.
Under the
terms of the agreement Panalab, a multi-national dermatology company
headquartered in Panama with subsidiaries and partners in most Latin American
countries, will be responsible for filing and obtaining marketing approval in
the countries they have licensed. Skinvisible will receive a research and
development fee plus a licensing fee allocated as an upfront fee plus milestone
payments. In addition the Company will receive royalties based on revenues
generated by the sale of the products. According to the agreement, Panalab will
have the right to manufacture, distribute, market, sell and promote the
Adapalene formulations in the specified territory.
On May 9,
2008, our wholly-owned subsidiary, Skinvisible Pharmaceuticals, Inc., entered
into a Trademark License Agreement and Distribution Agreement ("Distribution
Agreement") with Embil Pharmaceutical Co. Ltd. ("Embil"). The Agreement is for
the right to develop and commercialize two of Skinvisible's prescription
anti-acne products formulated with Invisicare® and the active ingredients
Clindamycine HCL and Retinoic Acid in Turkey, Azerbaijan, Kazakhstan,
Kyrgyzstan, Turkmenistan, and Uzbekistan as well as 3 countries in S.E. Asia,
Indonesia, Malaysia and the Philippines.
Under the
terms of the agreement Embil, a multi-national dermatology company headquartered
in Instanbul, Turkey with subsidiaries and partners in S.E. Asia, will be
responsible for filing and obtaining marketing approval in the countries they
have licensed. Skinvisible will receive a research and development fee plus a
licensing fee allocated as an upfront fee plus milestone payments. In addition
the Company will receive royalties based on revenues generated by the sale of
the products. According to the agreement, Embil will have the right to
manufacture, distribute, market, sell and promote the Clindamycin HCL and
Retinoic Acid formulations for acne in the specified
territory.
Status
of Research and Development for New Applications
We
believe that the enhancement and extension of our existing products and the
development of new product categories have contributed significantly to our
growth to date and are necessary for our continued growth. Our management
evaluates new ideas and seeks to develop new products and improvements to
existing products to satisfy industry requirements and changing consumer
preferences. We seek to identify trends in consumer preferences and to generate
new product ideas. Specific to the objective of generating new products, we are
continuing our research and development toward developing additional
applications with Invisicare. We are currently at various development stages for
the following potential applications using Invisicare:
Skinvisible’s
Formulas with Invisicare:
|
ACTIVE
INGREDIENT
|
TYPE
|
Availability
|
Patent
|
|
Acne
|
|||
|
Adapalene
Cream (0.1% & 0.3%)
|
Rx
|
yes
|
pending
|
|
Adapalene
Gel (0.1% & 0.3%)
|
Rx
|
yes
|
pending
|
|
Clindamycin
Hydrochloride Cream (1%)
|
Rx
|
yes
|
pending
|
|
Retinoic
Acid Cream (0.1%)
|
Rx
|
yes
|
pending
|
|
Analgesics
|
|||
|
Topical
Spray with Menthol (6% & 8%)
|
OTC
|
yes
|
technology
|
|
Topical
Roll-On with Menthol (6% & 8%)
|
OTC
|
yes
|
technology
|
|
Topical
Cream with Salicylate (10%)
|
OTC
|
yes
|
technology
|
|
Anti-Aging
|
|||
|
Retinol
Cream & Lotion (0.15% )
|
Cosmetic
|
yes
|
technology
|
|
Retinol
Cream (0.3%)
|
Cosmetic
|
yes
|
technology
|
|
Anti-Fungal
|
|||
|
Terbinafine
Cream, Gel (1%)
|
OTC
|
yes
|
pending
|
|
Naftifine
Cream (1%)
|
Rx
|
yes
|
pending
|
|
Clotrimazole
Cream (1%)
|
OTC
|
yes
|
pending
|
|
Anti-Inflammatory
|
|||
|
Hydrocortisone
Cream (1%)
|
OTC
|
yes
|
technology
|
|
Triamcinolone
(1%)
|
Rx
|
yes
|
technology
|
|
Triamcinolone
Acetonide (1%)
|
Rx
|
yes
|
technology
|
|
Clobetasole
Proprionate (0.3%)
|
Rx
|
in-progress
|
technology
|
|
Betamethasone
(1%)
|
Rx
|
yes
|
technology
|
|
Antimicrobial
Hand Sanitizing Lotion
|
|||
|
Triclosan
Lotion (1%) with Nonoxynol-9
|
OTC
|
yes*
|
granted
|
|
Triclosan
Lotion (1%) with Tomadol 901
|
OTC
|
yes*
|
granted
|
|
Benzalkonium
Chloride Lotion (0.13%)
|
OTC
|
yes*
|
granted
|
|
Chlorhexidine
Gluconate Lotion (4%)
|
OTC
/ NDA
|
in-progress
|
pending
|
|
Moisturizers
|
|||
|
Non-Steroidal
Atopic Dermatitis Cream
|
Rx
/ Cosmetic
|
yes
|
technology
|
|
Skin
Protectant Lotion with Allantoin (0.5%)
|
OTC
|
yes
|
technology
|
|
Super
Moisturizer with Ectoin
|
Cosmetic
|
yes
|
technology
|
|
UVA
/ UVB Sunscreen
|
|||
|
Parsol
1789 - SPF 30 Lotion
|
OTC
|
in-progress
|
pending
|
|
Tinosorb
S – SPF 30 Lotion
|
OTC
|
in-progress
|
pending
|
|
Other
Skin / Hair
|
|||
|
Skin
Whitening, Hyperpigmentation
|
Cosmetic
|
in-progress
|
technology
|
|
Scar
Lotion with Onion Bulb
|
Cosmetic
|
yes
|
technology
|
|
Glycolic
Acid Cream (5% & 10%)
|
Cosmetic
|
yes
|
technology
|
|
Fragrance
– Long Lasting Gel
|
Cosmetic
|
yes
|
technology
|
*excludes North America
Results
of Operations for the Three Months Ended March 31, 2008 and 2007
Revenues
Our total
revenue reported for the three months ended March 31, 2008 was $149,411, a
decrease from $183,316 for the three months ended March 31, 2007. The
decrease in revenues for the three months ended March 31, 2008 from the same
period in the prior year is attributable to decreased sales of polymers to our
licensees.
Cost
of Revenues
Our cost
of revenues for the three months ended March 31, 2008 decreased to $10,131 from
the prior period when cost of revenues was $10,154. Our cost of revenues
remained roughly equal in both periods despite an increase in revenues for the
three months ended March 31, 2007 as a result of sales of finished formulas
versus polymer sales only in this quarter.
Gross
Profit
Gross
profit for the three months ended March 31, 2008 was $139,280, or approximately
93% of sales. Gross profit for the three months ended March 31, 2007 was
$173,162, or approximately 94% of sales. The decrease in total gross profit for
the three months ended March 31, 2008 from the prior period is largely
attributable to lower sales of polymers the three months ended in March 31, 2008
compared with March 31, 2007.
Operating
Expenses
Operating
expenses increased to $649,911 for the three months ended March 31, 2008 from
$423,139 for the three months ended March 31, 2007. Our operating expenses for
the three months ended March 31, 2008 consisted of depreciation and amortization
expenses of $5,356, stock based compensation of $248,442, and selling, general
and administrative expenses of $396,113. Our operating expenses for the three
months ended March 31, 2007 consisted of depreciation and amortization expenses
of $4,671, stock based compensation of $49,475, and selling, general and
administrative expenses of $368,993. The increase in operating
expenses for the three months ended March 31, 2008 from the prior period is
primarily attributable to higher stock based compensation expenses associated
with the issuance of stock options and warrants.
Other
Expenses
We
recorded other expenses of $162,423 for the three months ended March 31, 2008
compared with $23,017 for the same period ended March 31, 2007. For
both periods, the other expenses consisted entirely of interest
expenses. The increase in interest expenses for the three months
ended March 31, 2008 compared to the same period in the prior is associated with
the valuation of convertible debts.
Net
Loss
Net loss
for the three months ended March 31, 2008 was $673,054, compared to net loss of
$272,994 for the three months ended March 31, 2007. The increase in net loss was
attributable to decreased revenues and increased operating
expenses.
Liquidity
and Capital Resources
As of
March 31, 2008, we had total current assets of $315,917 and total assets in the
amount of $537,874. Our total current liabilities as of March 31, 2008 were
$924,413. We had a working capital deficit of $608,496 as of March
31, 2008.
Operating
activities used $145,000 in cash for three months ended March 31, 2008. Our net
loss of $673,054 was the primary component of our negative operating cash flow.
Cash flows provided by financing activities during the three months ended March
31, 2008 was $87,807 consisting of $115,199 as proceeds from the issuance of
convertible notes payable, and $3,500 as proceeds from the issuance of loans
payable offset by $30,892 paid on related party loans.
Based
upon our current financial condition, we do not have sufficient cash to operate
our business at the current level for the next twelve months. We intend to fund
operations through increased sales and debt and/or equity financing
arrangements, which may be insufficient to fund expenditures or other cash
requirements. We plan to seek additional financing in a private equity offering
to secure funding for operations. There can be no assurance that we will be
successful in raising additional funding. If we
are not
able to secure additional funding, the implementation of our business plan will
be impaired. There can be no assurance that such additional financing will be
available to us on acceptable terms or at all.
Off
Balance Sheet Arrangements
As of
March 31, 2008, there were no off balance sheet arrangements.
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
approximately $15,969,902 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 the 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. Our consolidated financial
statements do not include any adjustments that may result from the outcome of
these aforementioned uncertainties.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their three to five
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. We believe that the following accounting policies fit this
definition.
Revenue
Recognition
Revenues
are recognized during the period in which the revenues are earned. Costs and
expenses are recognized during the period in which they are
incurred.
Fixed
Assets
Fixed
assets are stated at cost less accumulated depreciation. Depreciation is
provided principally on the straight-line method over the estimated useful lives
of the assets, which are generally 3 to 10 years. The cost of repairs and
maintenance is charged to expense as incurred. Expenditures for property
betterments and renewals are capitalized. Upon sale or other disposition of a
depreciable asset, cost and accumulated depreciation are removed from the
accounts and any gain or loss is reflected in other income
(expense).
We
periodically evaluate whether events and circumstances have occurred that may
warrant revision of the estimated useful life of fixed assets or whether the
remaining balance of fixed assets should be evaluated for possible impairment.
We use an estimate of the related undiscounted cash flows over the remaining
life of the fixed assets in measuring their recoverability.
Goodwill
and Intangible Assets
Beginning
January 1, 2002, we adopted Statement of Financial Accounting Standards (“SFAS”)
No. 142, “Goodwill and Other Intangible Assets”. According to this statement,
goodwill and 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. Fair value for goodwill is based on discounted cash
flows, market multiples and/or appraised values as appropriate. Under SFAS No.
142, the carrying value of assets are calculated at the lowest level for which
there are identifiable cash flows.
SFAS 142
requires us to compare the fair value of the reporting unit to its carrying
amount on an annual basis to determine if there is potential impairment. If the
fair value of the reporting unit is less than its carrying value, an impairment
loss is recorded to the extent that the fair value of the goodwill within the
reporting unit is less than its carrying value. Upon adoption and during 2002,
we completed an impairment review and did not recognize any impairment of
goodwill and other intangible assets already included in the financial
statements. We expect to receive future benefits from previously acquired
goodwill over an indefinite period of time. Accordingly, beginning January 1,
2002, we have foregone all related amortization expense. Prior to January 1,
2002, we amortized goodwill over an estimated useful life ranging from 3 to 15
years using the straight-line method.
Recently Issued Accounting
Pronouncements
In
September 2006, the FASB issued SFAS No. 157 “Fair Value
Measurements”. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosure about fair values. This statement is effective
for financial statements issued for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. Management
believes that the adoption of SFAS No. 157 will not have a material impact on
our consolidated financial results.
In
September 2006, the FASB issued Statement No. 158, "Employer's Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106, and 132(R)" (FAS 158). FAS 158 requires that
employers recognize the funded status of their defined benefit pension and other
postretirement plans on the balance sheet and recognize as a component of other
comprehensive income, net of tax, the plan-related gains or losses and prior
service costs or credits that arise during the period but are not recognized as
components of net periodic benefit cost. We will prospectively adopt FAS 158 on
April 30, 2007. Management believes that the adoption of SFAS No. 158
will not have a material impact on the consolidated financial results of the
Company.
In
February 2007, the FASB issued Statement No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115" (FAS 159). FAS 159 permits companies to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The provisions of FAS 159 become effective as of the beginning of
our 2009 fiscal year. We are currently evaluating the impact that FAS 159 will
have on our financial statements.
In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 which applies to
all entities that prepare consolidated financial statements, except
not-for-profit organizations, but will affect only those entities that have an
outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. The statement is effective for annual periods
beginning after December 15, 2008.
At
December 31, 2007, the Company did not have any derivative instruments or
hedging activities. Management is aware of the requirements of SFAS 161 and will
disclose when appropriate.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities – an amendment of FASB Statement No. 133,” (SFAS “161”)
as amended and interpreted, which requires enhanced disclosures about an
entity’s derivative and hedging activities and thereby improves the transparency
of financial reporting. Disclosing the fair values of derivative
instruments and their gains and losses in a tabular format provides a more
complete picture of the location in an entity’s financial statements of both the
derivative positions existing at period end and the effect of using derivatives
during the reporting period. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS No. 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Early adoption is
permitted.
A smaller
reporting company is not required to provide the information required by this
Item.
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 March 31, 2008. This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, Mr. Terry
Howlett. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of March 31, 2008, our disclosure
controls and procedures are effective. There have been no significant
changes in our internal controls over financial reporting during the quarter
ended March 31, 2008 that have materially affected or are reasonably likely to
materially affect such controls.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Limitations on the
Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon 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.
Over time, control
may
become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate.
PART
II – OTHER INFORMATION
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.
A smaller
reporting company is not required to provide the information required by this
Item.
The
information set forth below relates to our issuances of securities without
registration under the Securities Act during the reporting
period which were not previously included in a Current Report on Form
8-K.
During
the three months ended March 31, 2008, we issued 248,000 restricted shares of
our common stock as a result of entering into debt conversion agreements with
three lenders to convert total principal balances of $24,800 into equity. These
shares were issued pursuant to Section 4(2) of the Securities Act. The lenders
represented their intention to acquire the securities for investment only and
not with a view towards distribution. The lenders were given adequate
information about us to make an informed investment decision. We did not engage
in any general solicitation or advertising. We directed our transfer agent to
issue the stock certificates with the appropriate restrictive legend affixed to
the restricted stock.
During
the three months ended March 31, 2008, we issued 2,799,990 restricted shares of
our common stock as a result of entering into loan conversion agreements with
lenders to convert total principal balances and interest of $227,599 into
equity. These shares were issued pursuant to Section 4(2) of the Securities Act.
The lenders represented their intention to acquire the securities for investment
only and not with a view towards distribution. The lenders were given adequate
information about us to make an informed investment decision. We did not engage
in any general solicitation or advertising. We directed our transfer agent to
issue the stock certificates with the appropriate restrictive legend affixed to
the restricted stock.
During
the three months ended March 31, 2008, we issued 1,200,000 shares of our common
stock in exchange for the exercise of options previously issued to Mr. Terry
Howlett. We received gross proceeds of $60,000 upon the exercise of these
options. These securities were issued pursuant to an effective registration
statement on Form S-8.
During
the three months ended March 31, 2008, we issued 500,000 shares of our common
stock in exchange for the exercise of warrants previously issued. We received
gross proceeds of $25,000 upon the exercise of these warrants. These securities
were issued pursuant to Section 4(2) of the Securities Act of 1933. We did not
engage in any general solicitation or advertising. We issued the stock
certificates and affixed the appropriate legends to the restricted
stock.
During
the three months ended March 31, 2008, we issued options to purchase 1,800,000
shares of our common stock at $0.10 per share under our 2006 Stock Option Plan
to employees and consultants.
During
the three months ended March 31, 2008, we issued warrants to purchase 2,399,000
shares of our common stock at strike prices ranging from $0.12 to $0.15 per
share.
None
No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended March
31, 2008.
None
|
Exhibit
Number
|
Description
of Exhibit
|
SIGNATURES
In
accordance with the requirements of the Securities and 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:
|
May 13, 2008
|
|
By: /s/Terry
Howlett
Terry
Howlett
Title: Chief
Executive Officer, Chief Financial Officer, and
Director
|