UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 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)
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)
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702-433-7154
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(Issuer's telephone number)
---------------------------
_________________________________________________________________
(Former name, former address and former fiscal year if changed since last
report)
Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act: 100,000,000 shares
of common stock
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part iii of this Form 10-
KSB or any amendment to the Form 10-KSB. [ ]
Revenues for 2002 were $183,690.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the last reported sale price of such stock as of December 31,
2002 is $1,051,865.
The number of shares of the issuer's Common Stock outstanding as of December
31, 2002 is 38,789,808.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART I
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Actual results could differ materially from those projected in
the forward-looking statements as a result of the risk-related factors set
forth herein.
ITEM 1. Description of Business
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.
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 past two years 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. This company
received patent approval in February 2002.
Marketing of any or all existing or identified delivery systems, technologies,
and formulations is subject to the Company's ability to obtain funding to
successfully implement its corporate strategies, to proceed with its planned
research & development, and achieve positive results in laboratory and clinical
tests.
Results of Research on the Company's Products
The Company, through its wholly owned subsidiary Skinvisible Pharmaceuticals,
Inc. ("SPI"), conducts in-house research, development and testing of its
polymer delivery systems and a variety of formulations which incorporate them.
In addition, where appropriate for validation and independent verification of
marketing claims, it utilizes FDA-registered independent laboratories with
extensive qualifications for carrying out investigative product studies,
utilizing protocols incorporating Good Lab Practice and Good Clinical Practice
("GLP/GCP") standards.
To date, through recognized independent laboratories, the Company has
extensively tested its antibacterial/anti-microbial formulations that
incorporate its proprietary polymer delivery systems and technologies and
utilize the active ingredient Triclosan 1%. Tests undertaken include
Persistence (Duration of Action); Adherence to Skin's External Surface;
Desorption Studies; Atomic Force Microscopy; Permeation Studies; Safety & Skin
Sensitivity; Skin Moisturizing Ability; Antimicrobial Efficacy; Toxicology; and
Product Stability & Aged Product Bio-Activity.
In January 2001, clinical tests were performed by Suncare Research Laboratories
in Memphis, TN revealing that the Company's sunscreen formula produced
successful results which allow labeling as "Very Water Resistant with an SPF of
30" in accordance with FDA Final Sunscreen Monograph requirements. Under the
Monograph the labeled SPF (Sun Protection Factor) of a "Very Water Resistant"
sunscreen product is the "largest whole number that is excluded by a 95%
confidence interval for the mean SPF after 80 minutes of water immersion." The
Company's sunscreen formulation incorporating its proprietary delivery system
combines water soluble and insoluble polymers without requiring conventional
sunscreen delivery ingredients such as petrolatum, silicones or waxes. This is
anticipated to be a significant advantage for sunscreen providers, and
accordingly the Company is actively pursuing major established sunscreen
manufacturers to license its technology and/or sell its polymer-based delivery
system designed for sunscreens.
The Company is currently investigating and undergoing internal research to
demonstrate the capabilities of its polymer delivery systems for the following
topical applications that have been identified both independently and in
conjunction with established product manufacturers or marketers.
* Cosmetic skincare creams & lotions
* Acne treatment
* Anti-microbial burn-care treatment
* Eczema and psoriasis treatment
* Anti-fungal treatment
* Lip-care products
* Nail-care products
* Insect repellants
In January 2000, the Company's wholly owned subsidiary, Skinvisible
Pharmaceuticals, Inc. filed a patent application that focused on its delivery
technology for dermal barrier compositions. This company received patent
approval in February 2002. In August 2001 Skinvisible Pharmaceuticals, Inc.
filed an additional patent application that encompasses at least twelve
structural variations for its topical polymer-based delivery systems, related
technologies and manufacturing methods. The new application is significantly
more extensive and includes drugs or other substances intended for the
diagnosis, mitigation, treatment or prevention of skin diseases and conditions
and/or skincare moisturizers, protectants, and repellants.
Corporate History and Subsidiaries
The Company is a Nevada corporation that was incorporated on March 5, 1998
under the name "Microbial Solutions, Inc.". On February 26, 1999, the Company
filed an amendment to its articles of incorporation changing its corporate name
to "Skinvisible, Inc."
The Company carries on its business through three wholly owned subsidiaries, as
described below:
Name of Subsidiary Date of Incorporation Jurisdiction of
Incorporation
--------------------- --------------------- ------------------
Skinvisible
Pharmaceuticals, Inc. June 30, 1995 Nevada
(formerly Manloe
Labs Inc.)
Safe4Hours, Inc. April 20, 2000 Nevada
Skinvisible
Pharmaceuticals
(Canada) Inc. October 20, 1998 Canada
(federal)
The Company's primary business activities, including all research, development
and manufacturing of its products, are carried on through Skinvisible
Pharmaceuticals, Inc. ("SPI"). The name of this subsidiary company was changed
from "Manloe Labs Inc." to "Skinvisible Pharmaceuticals, Inc." effective
February 22, 1999. Marketing and sales are also performed by SPI in the United
States and Skinvisible Pharmaceuticals (Canada) Inc. ("SPCI") as applicable in
Canada.
Scientific Advisory Committee
The Company formed a Scientific Advisory Committee to advise its Board of
Directors on research and development matters and scientific issues relative to
the Company's products. The Company's Scientific Advisory Committee currently
consists of Dr. Stuart Maddin, MD, FRCPC, Dr. Jim Roszell, PhD., and Bruce
Jezior. Dr. Maddin, a resident of Vancouver, British Columbia, is with the
Faculty of Medicine, Division of Dermatology at the University of British
Columbia. Dr. Roszell, the Company's full-time Chemist, is a doctoral chemist
with experience in product formulation, experimental design, analysis, and
method validation. Bruce Jezior is the inventor of the original proprietary
polymer-based technology.
Members of the Scientific Advisory Committee, with the exception of Dr.
Roszell, the Company's Chemist, spend only a minimal portion of their business
time on the Company's business. They are consulted by the Company on an as
needed basis relative to research and development matters. Members of the
Scientific Advisory Committee do not conduct any research or development
activity for the Company's products. Research and development of the Company's
products is carried on by the Company itself and through independent
laboratories, as discussed above in the section titled - "Results of Research
on the Company's Products."
Research and Development Expenditures
Since the acquisition of Skinvisible Pharmaceuticals, Inc. in 1998, the Company
spent the following amounts on research and development activities:
Year Ended
-----------
December 31, 1998 $ 384,550
December 31, 1999 $ 68,228
December 31, 2000 $ 68,626
December 31, 2001 $ 39,840
December 31, 2002 $ 5,000
Manufacturing of the Skinvisible Products
Manufacturing is performed by SPI at its facility at 6320 S. Sandhill Road,
Unit #10, Las Vegas, Nevada 89120. The manufacturing process consists of the
manufacture of proprietary polymer-based delivery systems or product
formulations incorporating the delivery systems and additional ingredients
including active agents for specific applications. The manufacturing process
starts with the delivery system ingredients and other ingredients in accordance
with the amounts and the process prescribed by the proprietary formula. The
combined ingredients are heated to critical temperatures as required to
complete the manufacturing of the final polymer delivery system or formulation.
The product is ready for bottling once the final polymer delivery system
ingredients or product formulation has cooled. Once manufactured, the
delivery system or product formulations utilizing it are stored on site pending
shipment.
SPI has the capacity to produce approximately 500 gallons of formulated product
per day.
The various ingredients used for the Company's formulations are supplied by a
number of different chemical manufacturers. Neither the Company nor SPI have
any long-term contractual arrangements with any of its suppliers. Ingredients
are available from alternate suppliers in the event that the Company is not
able to obtain ingredients from its current suppliers.
Marketing Efforts and Distribution Methods of the Products
On April 18, 2000, the Company's wholly owned subsidiary SPCI received its
Establishment License from Health Canada - Therapeutic Products Program - that
allows it to import and distribute SPI's polymer-based delivery system product
formulations in Canada. SPCI entered into a Warehouse & Distribution Agreement
with Western Drug Distribution Center Limited ("WDDC"), whereby that company
provided warehouse facilities and services in Edmonton, Alberta for SPCI's
imported products, and acted on its behalf for Canadian product distribution
requirements. SPCI entered into a separate agreement dated April 14, 2000,
with WDDC whereby it would sell its Medical Formula antimicrobial skin care
protector to WDDC on a wholesale basis, and they in turn would retail the
product to veterinarian clinics in Western Canada. Canadian sales were less
than anticipated during the term of the contracts and both agreements were
terminated consistent with the cancellation provisions in November 30, 2001.
During the quarter ended March 31, 2000, the Company completed clinical
laboratory tests for a new spray formulation of its brand name Safe4Hours
Antibacterial Hand Sanitizer. On April 20, 2000, the Company formed a
subsidiary named Safe4Hours, Inc. for the purpose of marketing Safe4Hours
products, initially targeting retail markets.
In October 2000, the Company commenced a retail test-marketing program for its
Safe4Hours 2oz. spray formula in 250 corporate-owned outlets of a specialty
retailer of vitamins and nutritional supplements. In February 2001, the
retailer due to the negative economic climate and a significant downturn in its
overall sales discontinued the program.
The Company is currently re-evaluating its short-term strategies, in particular
the viability of directly pursuing the highly competitive retail market versus
focusing on the pursuit of private label business opportunities with existing
retail suppliers/distributors that may offer higher revenue potential and
significantly less strain on the Company's resources.
The Company has three Sales Agent Agreements with Minnesota based Glenn
Corporation, New Jersey based Ultra Chemical Inc., and California based Coast
Chemical, Inc. for the marketing and sales of its polymer-based delivery
systems to established manufacturers and providers of topically administered
products in the cosmetic and personal care industries.
Through one of its Sales Agents, the Company has received and shipped several
orders for one of its polymer delivery systems to a major cosmetic manufacturer
for pilot testing of lip care and skincare products. This manufacturer began
purchasing production quantities in the third quarter of 2002.
In January 2002, the Company received and shipped a private label order for
twelve 55-gallon drums of its sunscreen formulations, as well as three skin
moisturizing products incorporating its proprietary polymer system. The
purchaser, a direct sales company, has requested the Company to reformulate
twenty additional products. The Company earns product development fees for
products formulated.
In the fourth quarter of 2001, the Company entered into an agreement with a
Biotech company to incorporate their active ingredient into one of the
Company's proprietary polymer systems. This new product development continued
into the first quarter of 2002.
The Company continues to pursue its primary long-term marketing objectives of
licensing its delivery system technologies and/or selling its delivery systems
to established manufacturers for enhanced product formulations and applications
in the cosmetic, over-the-counter, and pharmaceutical skincare markets. In
doing so, the Company presently relies on direct/internal sales efforts as well
as a sales agent/broker network.
As part of its short-term strategy, the Company also continues to actively
pursue private label business opportunities for its hand sanitizer and
sunscreen formulations.
Competition
In terms of its current focus and long-term strategy, the Company's primary
products have been identified as the licensing of its polymer-based delivery
system technologies and sale of its delivery systems as ingredients for
topically administered finished product applications in the prescription Rx and
OTC treatment, cosmetic, and skincare formulations. Market research undertaken
to date has indicated that at present there is reasonably limited competition
for the Company's polymer-based delivery systems and related technologies; more
specifically for delivery vehicles and technologies that offer the same
performance capabilities for topically administered products. Two products
and/or product developers identified as significant competitors have both been
acquired by larger organizations during the past three years - in one case a
competitive company was purchased by a significantly larger corporation who is
presently utilizing the delivery system and technologies for internal finished
product development; and in the second case, a competitive skincare delivery
system and technology product was acquired by another company for continued
marketing and sales purposes.
In terms of its short-term strategy for Safe4Hours antibacterial/antimicrobial
hand sanitizers and private label business opportunities for the hand sanitizer
formulations, it has been determined that the retail and commercial markets for
hand care/instant hand sanitizers are highly competitive and dominated by
large, established manufacturers. There are currently a number of products in
the marketplace that make claims similar to the claims allowable for the
Company's hand sanitizer products under the FDA's OTC Healthcare Antiseptic
Tentative Final Monograph. In most cases, these products are offered by
companies with well established and specialized distribution channels and
significantly greater financial resources, thereby posing a strong competitive
threat and creating a formidable barrier to the Company's direct entry into
these markets.
In the medical and healthcare arena, the market is largely dominated by
competitive instant hand sanitizer products such as Prevacare (Johnson &
Johnson) and Purell (GOJO Industries). Other identified competitive products
in this arena include Pure Guard and BioShield.
Key Employees
The Company has 1 employee, its President and SPI currently employs 3
individuals. All employees of the Company and SPI are full-time employees.
Mr. Terry Howlett, President of the Company, is paid a salary of $11,667 per
month. The Company also reimburses Mr. Howlett for expenses incurred in
connection with his duties as President of the Company.
Any growth in the number of employees will be largely dependent on the success
of the Company's continuing sales efforts.
None of the employees of the Company or its subsidiaries are subject to
collective bargaining agreements, nor have they been on strike, or threatened
to strike, within the past three years.
Government Approvals and Regulation
State and federal authorities, most notably the Federal Food and Drug
Administration, regulate the Company's products as they are used in final
product formulations in both the Pharmaceutical and Cosmetic industries.
The Company is not subject to any significant or material environmental
regulation in the normal operation of its business.
ITEM 2. Description of Property
The Company's head office is located in premises leased by SPI at 6320 South
Sandhill Road, Suite 10, Las Vegas, Nevada 89120, where research & development,
manufacturing, marketing and operational activities are carried on. The
premises are comprised of 8,556 square feet of a mixed office and industrial
facility, and are leased for a term of 4 years, which expired on May 31, 2002.
The Company is currently leasing on a month-to-month In connection with the
lease arrangement, SPI is obligated to make rental payments of $7,095 per
month with minimal annual increases of 3%. Minimum rental commitments under
the lease for this property for the period from January 1, 2002 to May 31, 2002
are $35,475. Negotiations are currently underway for a renewal of the lease
for these premises.
The Company does not lease or own any real estate or personal property,
however; SPI leases its telephone systems and owns a number of personal
property items, including certain manufacturing and laboratory equipment,
computers, fax machines, office furniture and furnishings.
ITEM 3. 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 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 2002.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders
Matters
Market Information
The shares of Skinvisible, Inc. are currently trading on the OTC Bulletin Board
under the stock symbol SKVI. The first day in which the Company's shares
traded was January 8, 1999. The high and the low bids for the Company's shares
for each quarter of actual trading were:
Quarter High Low
- ---------- ------ ------
1st Quarter 2000 $4.13 $2.13
2nd Quarter 2000 $2.38 $0.44
3rd Quarter 2000 $1.06 $0.28
4th Quarter 2000 $1.25 $0.31
1st Quarter 2001 $0.66 $0.22
2nd Quarter 2001 $0.40 $0.13
3rd Quarter 2001 $0.28 $0.08
4th Quarter 2001 $0.22 $0.08
1st Quarter 2002 $0.08 $0.08
2nd Quarter 2002 $0.07 $0.07
3rd Quarter 2002 $0.05 $0.05
4th Quarter 2002 $0.06 $0.05
The quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and may not represent actual transactions.
As of December 31, 2002, Skinvisible, Inc. had approximately 192 registered
shareholders. The Company has never issued any dividends and is unlikely to do
so in the near future. There are no legal restrictions on the Company's
ability to pay dividends on its common stock.
Recent Sales of Unregistered Securities
The following is a list of unregistered securities sold by the Company within
the past fiscal year.
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.
On November 12, 2002, the Company completed an offering of 6,478,000 restricted
shares of the common stock at a price of $0.05 per share to a total of nineteen
(19) accredited investors pursuant to Rule 506 of Regulation D of the 1933 Act.
Skinvisible, Inc. also issued warrants for the purchase of 3,239,000 shares of
the common stock. A commission in the amount of $25,900 was paid to 3 parties
in connection with the completion of this offering.
ITEM 6. Management's Discussion and Analysis or Plan of Operation
The following is a discussion of certain factors affecting Registrant's results
of operations, liquidity and capital resources. You should read the following
discussion and analysis in conjunction with the Registrant's consolidated
financial statements and related notes that are included herein under Item 7
below.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are historical
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements represent the
Registrant's present expectations or beliefs concerning future events. The
Registrant cautions that such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Registrant to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the uncertainty as to the Registrant's future profitability; the
uncertainty as to the demand for Registrant's services; increasing competition
in the markets that Registrant conducts business; the Registrant's ability to
hire, train and retain sufficient qualified personnel; the Registrant's ability
to obtain financing on acceptable terms to finance its growth strategy; and the
Registrant's ability to develop and implement operational and financial systems
to manage its growth.
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.
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 past two years 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. This company
received patent approval in February 2002.
Results of Operations
Net revenue for the twelve months ended December 31, 2002 increased to $183,690
from $55,800 for the twelve months ended December 31, 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 twelve months ended December 31, 2002 increased to
$133,559 from $47,515 for the twelve months ended December 31, 2001.
The Company's operating expenses decreased to $989,215 for the twelve months
ended December 31, 2002 from $1,606,207 for the twelve months ended December
31, 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 $8,124 for the twelve months ended December 31, 2002 compared with
$26,408 for the twelve months ended December 31, 2001.
The Company incurred general and administrative costs in the amount of $981,091
for the twelve months ended December 31, 2002 compared with $1,579,799 for the
twelve months ended December 31, 2001. Some of these general and
administrative costs included the following: Professional fees in the amount
of $36,449 for the twelve months ended December 31, 2002 compared to $42,418
for the same period in 2001; Salaries and Wages which decreased to $407,575 for
the twelve months ended December 31, 2002, compared with $540,128 for the
twelve months ended December 31, 2001; and Outside Management Consultant costs
in the amount of $30,824 for the twelve months ended December 31, 2002,
compared to $342,559 for the twelve months ended December 31, 2001.
The Company had net losses of $855,656 for the twelve months ended December 31,
2002, down from $1,558,692 for the same period ended December 31, 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 twelve
months ended December 31, 2002, was $0.03, down from a loss of $0.09 per share
for the same period in 2001.
During the period ended December 31, 2002 the Company retired and abandoned
leasehold improvements and an outdated computer system with an original cost of
$64,599 and accumulated depreciation of $64,169 resulting in a net loss of
$430.
The Company anticipates that losses will likely continue into the foreseeable
future, until sufficient revenues are generated to cover its reduced operating
expenditures.
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 $4,622 as of December 31, 2002, compared to $2,335 as
of December 31, 2001. The Company has outstanding loans payable with interest
in the amount of $149,124 as of December 31, 2002.
The Company had accounts payable and accrued expenses in the amount of $463,187
as of December 31, 2002, compared to $424,094 as of December 31, 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 twelve months ended December 31, 2002
decreased to $786,066 down from $1,186,289 for the twelve months ended
December 31, 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 twelve months ended December 31, 2002
and 2001, was $16,907 and $26,467 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 twelve months ending December 31, 2003, the Company expects to realize
approximately $897,000 from operating revenues after deduction of costs of
goods sold. These projected revenues are comprised of private label sales of
the polymer-based formulations, product development fees, royalties, as well as
sales of its polymer-based delivery systems or licensing of its polymer-based
delivery system technologies. In that same twelve-month period, the Company
anticipates incurring approximately $745,000 in operating expenses. Additional
debt or equity financing may need to be raised if the company has a shortfall
in projected operating revenue to cover the projected operating expenses.
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 as well a pay accounts payable. 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.
ITEM 7. Financial Statements
The information required by this item is set forth in Item 13 of this Report.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company had no changes in or disagreements with its accountants on
accounting or financial disclosures.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following information sets forth the names of the officers and directors,
their present positions, and some brief information about their background.
Skinvisible, Inc.
-------------------
Name Office(s) Held
------ ---------------
Terry Howlett Director, President,
Secretary,Treasurer
Carol Patterson Neves Director
Jost Steinbruchel Director
Skinvisible Pharmaceuticals, Inc.
------------------------------------
Name Office(s) Held
------ ---------------
Terry Howlett Director, President
Secretary & Treasurer
Safe4Hours, Inc.
-------------------
Name Office(s) Held
------ ---------------
Terry Howlett Director, President,
Secretary & Treasurer
Skinvisible Pharmaceuticals (Canada) Inc.
----------------------------------------------
Name Office(s) Held
------ ---------------
Terry Howlett President, Director,
Secretary & Treasurer
Mr. Terry H. Howlett, (age 55) has been the Company's President & Director
since March 5, 1998. Mr. Howlett has a diversified background in market
initialization and development, sales and venture capital financing for
emerging growth companies. He has held senior management, marketing and sales
positions with various companies, including the Canadian Federation of
Independent Business, Family Life Insurance, and Avacare of Canada and founded
Presley Laboratories, Inc., which marketed cosmetic and skin, care products on
a direct sales basis. For the ten years prior to becoming President of the
Company, Mr. Howlett was the President and CEO of Voice-it Solutions, Inc., a
publicly traded company on the Vancouver Stock exchange that made voice
response software for order entry systems.
Ms. Carol Patterson Neves, (age 67) has been the Company's Director since
October 31, 2000. Ms. Neves has over 40 years of experience in financial
markets. She worked with Merrill Lynch, Pierce, Fenner & Smith (New York) from
1955, to 1996, in a number of capacities including ten years as Vice
President/Senior Research Analyst and subsequently another ten years as First
Vice President. She is a graduate of the Harvard Business School and received
her MBA in Finance from New York University. Ms. Neves was elected to
``Institutional Investor Magazine's All-American Research Team'' for thirteen
consecutive years; and in 1989 was named one of the world's top eight financial
analysts by UK's ``Corporate Finance'' magazine. Ms. Neves currently provides
financial analysis and conclusions to clients on a contractual fee basis.
Jost Steinbruchel, (age 62) has been the Company's Director since February 17,
1999. Mr. Steinbruchel has operated his own company since 1984, in Geneva
Switzerland specializing in financial engineering in international trade
throughout a wide network of banking relations, principally in Europe, China,
Australia and Africa. Previously, he spent 20 years of his professional career
as an executive in international banking with Lloyds of London, Citicorp and
Credit Suisse. Mr. Steinbruchel has a law degree from Sorboure, Paris.
Terms of Office
The Company's directors are appointed for one year terms to hold office until
the next annual general meeting of the stockholders or until removed from
office in accordance with the Company's by-laws. Officers of the Company are
appointed by its board of directors and hold office until removed by the board.
Significant Employees
The Company does not have any employees who are not directors or officers that
are expected to make a significant contribution to the business.
Section 16(a) Beneficial Ownership Reporting Compliance
The following persons have failed to file, on a timely basis, the identified
reports required by section 16(a) of the Exchange Act during the most recent
fiscal year.
-----------------------------------------------------------------------------
Number Transactions Known Failures
of Late Not Timely To File a
Name and principal position Reports Reported Required Form
-----------------------------------------------------------------------------
Terry Howlett, Director, 0 0 None
President, CEO
Carol Patterson Neves, 0 0 None
Director
Jost Steinbruchel, 0 0 None
Director
James Pesklevits
Secretary & Treasurer 0 0 None
-----------------------------------------------------------------------------
ITEM 10. Executive Compensation
The following table sets forth certain information as to the Company's highest
paid executive officers and directors for the last three fiscal years.
Annual Compensation Table
-----------------------------------------------------------------------------
Annual Compensation Long Term Compensation
---------------------------- ------------------------
Other All
Annual
Other
Com-
Com-
pen- Restricted
pen-
Fiscal sa- Stock Options/ LTIP sa-
Name Title Year Salary Bonus tion Awarded
SARs*(#)payouts($)tion
----- ----- ---- ------ ----- ------ ------- ------- -----------
Terry
Howlett President 2000 120,000 0 0 0 300,000 0
Director 2001 66,568 0 0 0 300,000 0
2002 27,836 0 0 0 0 0
Carol Director 2000 $ 0 0 0 0 50,000 0
Patterson 2001 0 0 0 0 0 0
Neves 2002 0 0 0 0 0 0
Jost Director 2000 $ 0 0 0 0 50,000 0
Steinbruchel 2001 0 0 0 100,000 100,000 0
2002 0 0 0 0 0 0
Jan Director 2000 $ 0 0 0 0 50,000 0
Mellegers* 2001 0 0 0 0 0 0
2002 0 0 0 0 0 0
James Past Sec. 2001 62,869 $0 0 60,000 50,000 0
PesklevitsTreas. 2002 0 0 0 0 0 0
Cheryl Past Dir., 2000 $ 0 0 $58,718 0 60,000 0
Claeys** Sec. Treas.2001 $ 0 0 54,225 60,000 0 0
(Canada) 2002 0 0 0 0 0 0
In addition, certain of the officers are provided an automobile allowance for
use of their vehicles for Company business and have and/or will receive stock
options to purchase shares of the Company.
Stock options that were granted to previous officers and directors expired
shortly days after their respective resignation dates.
----------------
* Jan Mellegers did not run for re-election as a Director at the Company's
Annual General Meeting of the Shareholders of Skinvisible, Inc. held on July
20, 2001.
** The annual compensation listed above for Cheryl Claeys was in exchange for
services rendered relative to business consulting, corporate development, and
general communications, and was paid to her company CJ Claeys Consulting
Services.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of December 31, 2002, the beneficial
ownership of the Company's Common Stock by each person known by the Company to
beneficially own more than 5% of the Company's Common Stock outstanding as of
such date and by the officers and directors of the Company individually and as
a group. Except as otherwise indicated, all shares are owned directly.
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class(1)
--------------- ------------------- -------------------- -----------
Common Terry Howlett 5,425,000 15.6%
Director, President
Secretary, Treasurer
Common Carol Patterson Neves 150,000 0.39%
Director
Common Jost Steinbruchel 750,000 1.93%
Director
Common Lutz Family Trust. 11,117,500 31.09%
Common All Officers and
Directors 6,635,000 17.92%
as a Group ( 3 persons)
(1) Based on 38,789,808 shares of common stock issued and outstanding as of
December 31, 2002.
-----------------------------------------------------------------------------
The following table shows the issued and outstanding stock options held by the
officers and directors of the Company as of December 31, 2002. The options
were granted in accordance with the adoption of the Stock Option plan of the
Company on January 8, 1999.
Exercise
Name Price No. of Options Term of Option
----- --------------- ---------------- ------------
Terry Howlett $0.05 900,000 5 years
Carol Patterson Neves $0.05 150,000 5 years
Jost Steinbruchel $0.05 200,000 5 years
ITEM 12. Certain Relationships and Related Transactions
None of the following persons has any direct or indirect material interest in
any transaction to which the Company is a party since the incorporation of the
Company in March 1998, or in any transaction to which the Company is proposed
to be a party:
(a) any director or officer;
(b) any proposed nominee for election as a director;
(c) any person who beneficially owns, directly or indirectly, shares carrying
more than 10% of the voting rights attached to the Company's common stock;
or
(d) any relative or spouse of any of the foregoing persons, or any relative of
such spouse, who has the same house as such person or who is a director or
officer of any parent or subsidiary
The Company's policy regarding related transactions requires that any director
or officer who has an interest in any transaction disclose the presence and the
nature of the interest to the board of directors prior to any approval of the
transaction by the board of directors. The transaction may then be approved by
a majority of the disinterested directors, provided that an interested director
may be counted in determining the presence of a quorum at the meeting of the
board of directors to approve the transaction. The Company's policy regarding
compensation for directors and officers is that the board of directors may,
without regard to personal interest, establish the compensation of directors
for services in any capacity.
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibits and Reports Filed on Form 8K
None
Financial Statements
The Company's audited financial statements as described below, are attached
hereto.
1. Audited Consolidated Financial Statements for the periods ending
December 31, 2002, and 2001, including:
(a) Independent Auditors' Report;
(b) Consolidated Balance Sheet;
(c) Consolidated Statement of Operations and Accumulated Deficit;
(d) Consolidated Statement of Changes in Shareholders' Equity;
(e) Consolidated Statement of Cash flows;
(f) Notes to Consolidated Financial Statements
SKINVISIBLE, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
WITH
INDEPENDENT AUDITOR'S REPORT THEREON
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Skinvisible, Inc.
We have audited the accompanying consolidated balance sheet of Skinvisible,
Inc., and subsidiaries as of December 31, 2002, and 2001 and the related
consolidated statements of operations and accumulated deficit, changes in
stockholders' equity, and statement of cash flows for the years then ended.
These consolidated financial statements are the responsibility of management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Skinvisible, Inc.
and subsidiaries as of December 31, 2002, and 2001, and the results of their
operations, changes in stockholders' equity and cash flows for the year ended
December 31, 2002, and 2001, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has suffered recurring losses from
operations, which raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding those matters also are described
in Note 7. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Sarna & Company
Westlake Village, California
March 28, 2003
SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS DECEMBER 31
2002 2001
Current Assets
Cash $ 4,622 $ 2,335
Accounts Receivable 44,773 7,904
Inventory 123,706 124,328
Prepaid Expenses 3,088 3,321
Prepaid License Fee 50,000 50,000
Total Current Assets 226,189 187,888
Property and Equipment
Furniture and Equipment 138,767 135,434
Laboratory Build-Out 268,754 332,318
Total Property and Equipment 407,521 467,752
Less Accumulated Depreciation (216,046) (214,634)
Net Property and Equipment 191,475 253,118
Other Assets - Exclusive Distribution Rights 200,000 200,000
- Patents & Trademarks 30,071 17,532
- Prepaid Royalty 1,000,000 1,000,000
- Deposits 225 725
Total Other Assets 1,230,296 1,218,257
TOTAL ASSETS $1,647,960 $1,659,263
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $ 463,187 $ 424,094
Loan Payable 149,124 242,992
Total Current Liabilities 612,311 667,086
Stockholders' Equity
Common Stock, $0.001 par value
100,000,000 shares authorized,
38,789,808 and 21,052,033 shares issued 38,790 21,052
Additional paid in capital 9,442,838 8,561,448
Accumulated Deficit (8,445,979) (7,590,323)
Total Stockholders' Equity 1,035,649 992,177
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,647,960 $1,659,263
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED
DECEMBER 31
2002 2001
Revenues $ 183,690 $ 55,800
Cost of Sales
Beginning Inventory 124,328 141,354
Purchases 51,723 12,888
Total Available 176,051 154,242
Less: Ending Inventory (123,706) (124,328)
Sample Distribution (2,214) (21,629)
Total Cost of Sales 50,131 8,285
Gross Profit 133,559 47,515
Operating Expenses (989,215) (1,606,207)
Loss Before Provision for
Income Taxes (855,656) (1,558,692)
Provision for Income Taxes (0) (0)
Net Loss (855,656) (1,558,692)
Accumulated Deficit, Beginning
of Year (7,590,323) (6,031,631)
Accumulated Deficit, End of Year $(8,445,979) $(7,590,323)
Net Loss per Share $ (0.03) $ (0.09)
Weighted Average Shares Outstanding 25,658,525 16,992,033
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED
DECEMBER 31
2002 2001
Shares of Common Stock Issued:
Beginning Balance 21,052,033 14,122,033
Issuance Pursuant to:
Stock Offering 17,448,000 6,930,000
Stock Option Plan 0 0
Contract Settlements 289,775 0
Ending Balance 38,789,808 21,052,033
Common Stock Par Value
Beginning Balance $ 21,052 $ 14,122
Issuance Pursuant to:
Stock Offering 17,448 6,930
Stock Option Plan 290 0
Ending Balance 38,790 21,052
Additional Paid in Capital
Beginning Balance 8,561,448 7,361,778
Issuance Pursuant to:
Stock Offering 853,952 1,199,670
Stock Option Plan 27,438 0
Ending Balance 9,442,838 8,561,448
Accumulate Deficit
Beginning Balance (7,590,323) (6,031,631)
Net Loss ( 855,656) (1,558,692)
Ending Balance (8,445,979) (7,590,323)
Total Stockholders' Equity $1,035,649 $ 992,177
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SKINVISIBLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31
2002 2001
Cash Flows from Operating Activities:
Net Loss $( 855,656) $(1,558,692)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation 65,581 78,798
Loss on Disposal of Fixed Assets 430 0
(Increase) Decrease in:
Accounts Receivable (37,121) 3,992
Inventory 622 17,026
Advances 252 (1,455)
Other Assets - Deposits 500 0
- Prepaid Expenses 233 9,451
Increase (Decrease) in:
Accounts Payable and
Accrued Expenses 39,093 264,591
Net Cash Used by Operating Activities ( 786,066) (1,186,289)
Cash Flows from Investing Activities:
Purchases of Property and Equipment (4,368) (8,935)
Patents & Trademarks
(12,539) (17,532)
Net Cash Used by Investing Activities (16,907) (26,467)
Cash Flows from Financing Activities:
Payment of Loan Principal (93,868) (382)
Net Proceeds from the Issuance of
Common Stock 899,128 1,206,600
Net Cash Provided by Financing Activities 805,260 1,206,218
Net Increase (Decrease) in Cash 2,287 (6,538)
Cash at Beginning of Year 2,335 8,873
Cash at End of Year $ 4,622 $ 2,335
Supplemental Disclosure:
Interest Paid $ 31,627 $ 29,722
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SKINVISIBLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Skinvisible, Inc. (formerly Microbial Solutions, Inc.) was incorporated on
March 6, 1998 in the state of Nevada. Skinvisible, Inc. immediately acquired
100% ownership of Skinvisible Pharmaceutical, Inc. (formerly Manloe Labs, Inc.)
also a Nevada corporation.
Skinvisible, Inc. and its subsidiaries, (collectively referred to as the
"Company" or "SKVI") 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. Skinvisible'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 at Las Vegas, Nevada.
Name Change
On February 26, 1999, the company completed the legal process of changing its
name from Microbial Solutions, Inc. to Skinvisible, Inc. The subsidiary's name
of Manloe Labs, Inc. was also changed on February 26, 1999 to Skinvisible
Pharmaceuticals, Inc.
During 1999, the company also formed a subsidiary titled Skinvisible
International, Inc. and Skinvisible Pharmaceuticals (Canada), Inc. On January
1, 2000, the Company decided to discontinue operations of its subsidiary,
Skinvisible International, Inc.
On April 20, 2000, the Company formed a subsidiary titled Safe4Hours, Inc. for
the purpose of marketing its own proprietary brands of products.
Basis of Presentation
The consolidated financial statements include the accounts of Skinvisible, Inc.
and it's subsidiaries, Skinvisible Pharmaceuticals, Inc., Skinvisible
Pharmaceuticals (Canada), Inc., and Safe4Hours, Inc. All material intercompany
balances have been eliminated.
The Company reports revenue and expenses using the accrual method of accounting
for financial and tax reporting purposes. All reported amounts are in US
dollars.
SKINVISIBLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses.
Pro Forma Compensation Expense
SKVI accounts for costs of stock-based compensation in accordance with APB No.
25, "Accounting for Stock Based Compensation" instead of the fair value based
method in SFAS No. 123. No pro forma compensation expense is reported in these
financial statements for the period ended December 31, 2002.
Inventories
Inventories are accounted for on an average cost first-in first-out basis.
Inventory at any given time consists of raw materials, products and packaging
held for resale.
Property and Equipment
Property and equipment are stated at historical cost.
Depreciation, Amortization and Capitalization
The Company records depreciation and amortization using both straight-line and
declining balance methods over the estimated useful life of the assets (five to
seven years).
Expenditures for maintenance and repairs are charged to expense as incurred.
Additions, major renewals and replacements that increase the property's useful
life are capitalized. Property sold or retired, together with the related
accumulated depreciation, is removed from the appropriate accounts and the
resultant gain or loss is included in net income.
SKINVISIBLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
The company accounts for its income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
Statement 109, a liability method is used whereby deferred tax assets and
liabilities are determined based on temporary differences between basis used
for financial reporting and income tax reporting purposes. Income taxes are
provided based on tax rates in effect at the time such temporary differences
are expected to reverse. A valuation allowance is provided for certain
deferred tax assets if it is more likely than not, that the Company will not
realize the tax assets through future operations.
Fair Value of Financial Instruments
Financial accounting Standards Statement No. 107, "Disclosures 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 Company's financial instruments
consist primarily of cash and certain investments.
Per Share Information
The Company computes per share information by dividing the net loss for the
period presented by the weighted average number of shares outstanding during
such period. The effect of common stock equivalents would be antidilutive and
is not included in net loss per share calculations.
NOTE 2 - PROVISION FOR INCOME TAXES
The provision for income taxes for the periods ended December 31, 2002, and
2001 represents the minimum state income tax expense of the Company, which is
not considered significant.
NOTE 3 - LOAN PAYABLE
During the periods ended December 31, 2002, and 2001 the Company had unsecured
loans payable with an interest rate of 10% per annum. As of December 31, 2002,
outstanding loans payable with interest were in the amount of $149,124.
SKINVISIBLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - LOSS ON DISPOSAL OF ASSETS
During the period ended September 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 $64,169 resulting in a net loss of
$430.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Operating Leases
The company presently leases 8556 square feet of manufacturing and office space
on a month-to-month basis. The company's operating lease terminated on May 31,
2002 and negotiations are currently underway for a renewal of the lease for
these premises.
Litigation
In September 2001, the Company was served as a defendant in a lawsuit involving
Great America Leasing Corporation. The case related to the lease of a
telephone system and was settled out of court in October 2002. The settlement
did not have any material financial impact on the Company.
Licensing, Royalty and Consulting Agreements
The Company has currently entered into, and will continue to enter into,
product licensing, royalty and consulting agreements that the Company's board
of directors determines will enhance the Company's ability to market innovative
products in a competitive field.
At December 31, 2002, the company has future royalty payment commitments
totaling approximately $778,000.
NOTE 6 - STOCK OPTIONS
During the period ended December 31, 2002, the Company had outstanding stock
options with exercise prices of $0.05 per share, as incentives for employee and
consultant performance. Options on 1,732,000 shares of common stock were
outstanding at December 31, 2002. The exercise of any or all of these options
would cause reported losses per share to decrease.
SKINVISIBLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - GOING CONCERN
Future issuances of the Company's equity or debt securities will be required in
order for the Company to continue to finance its operations, as the Company's
present revenues are insufficient to meet operating expenses.
The consolidated financial statements of the Company have been prepared
assuming that the Company will continue as a going concern, which contemplates,
among other things, the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
cumulative net losses of $8,445,979 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.
29
SIGNATURES
Pursuant to the requirements of Section 12 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.
/s/ Terry Howlett
- - -------------------
Terry Howlett,
President and Director
Date: March 31, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons on behalf of the registrant and in the capacities and on the
dates indicated have signed this report below.
Nutek, Inc.
/s/ Terry Howlett
- - ------------------------
Terry Howlett, President
Date: March 31, 2003
CONSENTS OF EXPERTS AND COUNSEL
Sarna & Company
Certified Public Accountants
Street address
West Lake Village, CA
INDEPENDENT AUDITORS' REPORT
Board of Directors
Skinvisible, Inc.
6320 S. Sandhill Rd.d, Suite #10
Las Vegas, Nevada 89120
March 31, 2003
To Whom It May Concern:
Sarna & Company., consents to the inclusion of our report of March 28, 2003 on
the Financial Statements of Skinvisible, Inc., as of December 31, 2002 and
2001, in any filings that are necessary now or in the near future with the U.S.
Securities and Exchange Commission.
Very Truly yours,
/s/ Sarna & Company
- - --------------------------------
Sarna & Company
Exhibit 99(i)
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350
AS ADOPTED PURSUANT TO
SECITON 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Skinvisible, Inc. (the
"Company") on Form 10-K for the fiscal year ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date therein specified (the
"Report"), I, Terry Howlett, Chief Executive Officer of the Company, certify
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Terry Howlett
------------------------------------------
TERRY HOWLETT, Chief Executive Officer
Dated: March 31, 2003