10QSB/A 1 j10qsba03312003.txt 10QSB/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB/A [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended MARCH 31, 2003 [ ] 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. (Exact name of Small Business Issuer as specified in its charter) NEVADA 88-0344219 (State or other jurisdiction of (IRS Employer incorporation) Identification No.) 6320 SOUTH SANDHILL ROAD, SUITE 10, LAS VEGAS, NEVADA 89120 (Address of principal executive offices) 702-433-7154 (Issuer's telephone number) _________________________________________________________________ (Former name, former address and former fiscal year if changed since last report) State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 38,839,808 SHARES OF COMMON STOCK AS OF MARCH 31, 2003. Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENERAL The Company's unaudited financial statements for the three months ended March 31, 2003 are included with this Form 10-QSB. The unaudited financial statements for the three months ended March 31, 2003 include: (a) Consolidated Balance Sheet as of March 31, 2003, March 30, 2002 and December 31, 2002; (b) Consolidated Statement of Operations and Accumulated Deficit - Three months ended March 31, 2003 and March 30, 2002; (c) Consolidated Statement of Cash flows - Three months ended March 31, 2003 and March 31, 2002 The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B, and therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2003 are not necessarily indicative of the results that can be expected for the year ending December 31, 2003. SKINVISIBLE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31 MARCH 31 DECEMBER 31 2003 2002 2002 Current Assets (unaudited) (unaudited) (audited) Cash $ (2,596) $ 1,455 $ 4,622 Accounts Receivable 54,495 9,668 44,773 Inventory 118,776 118,126 123,706 Prepaid Expenses & Advances 6,913 2,901 3,088 Prepaid License Fee 50,000 50,000 50,000 ---------- --------- ---------- Total Current Assets 227,588 213,005 226,189 Property and Equipment Furniture and Equipment 138,767 135,434 138,767 Laboratory Build-Out 268,754 332,318 268,754 ---------- --------- ---------- Total Property and Equipment 407,521 467,752 407,521 Less Accumulated Depreciation (232,441) (234,743) (216,046) ---------- --------- ---------- Net Property and Equipment 175,080 233,009 191,475 Other Assets - Exclusive Distribution Rights 200,000 200,000 200,000 - Patents & Trademarks 30,071 18,232 30,071 - Prepaid Royalty 1,000,000 1,000,000 1,000,000 - Deposits 225 725 225 ---------- --------- ---------- 1,230,296 1,218,957 1,230,296 TOTAL ASSETS $1,632,964 $1,634,116 $ 1,647,960 ========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable and Accrued Expenses $ 485,893 $ 513,322 $ 463,187 Loan Payable 148,722 333,681 149,124 ---------- --------- ---------- Total Current Liabilities 634,615 847,003 612,311 Stockholders' Equity Common Stock, $0.001 par value 100,000,000 shares authorized, 38,839,808,21,316,808 and 38,789,808 shares issued 38,840 21,317 38,790 Additional paid in capital 9,466,950 8,587,661 9,442,838 Accumulated Deficit (8,507,441) (7,821,865) (8,445,979) ---------- --------- ---------- Total Stockholders' Equity 998,349 787,113 1,035,649 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,632,964 $1,634,116 $1,647,960 ========== ========== ===========
SKINVISIBLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT (unaudited) THREE MONTHS ENDED MARCH 31 MARCH 31 2003 2002 Revenues $ 65,509 $ 55,620 Cost of Sales Beginning Inventory 123,706 124,328 Purchases 14,865 10,604 Total Available 138,571 134,932 Less: Ending Inventory (118,776) (118,126) ---------- ----------- Total Cost of Sales 19,795 6,806 Gross Profit 45,714 38,814 Operating Expenses (107,176) (270,356) Loss Before Provision for Income Taxes (61,462) (231,542) Provision for Income Taxes (0) (0) ---------- ----------- Net Loss (61,462) (231,542) ========== =========== Accumulated Deficit, Beginning Of Period (8,445,979) (7,590,323) Accumulated Deficit, End of Period $(8,507,441)$(7,821,865) Net Loss per Share $ (.00)$ (.01) Weighted Average Shares Outstanding 38,820,539 21,311,675
SKINVISIBLE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) THREE MONTHS ENDED MARCH 31 MARCH 31 2003 2002 Cash Flows from Operating Activities: Net Loss $ (61,462) $ (231,542) Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation 16,395 20,109 (Increase) Decrease in: Accounts Receivable (9,722) (3,952) Inventory 4,930 6,202 Advances (3,825) 2,188 Other Assets - Prepaid Expenses 0 420 Increase (Decrease) in: Accounts Payable and Accrued Expenses 22,706 89,228 ----------- ----------- Net Cash Used by Operating Activities (30,978) (117,347) Cash Flows from Investing Activities: Patents & Trademarks 0 (700) ----------- ----------- Net Cash Used by Investing Activities 0 (700) Cash Flows from Financing Activities: Payment of Loan Principal (402) (90,689) Net Proceeds from the Issuance of Common Stock 24,162 26,478 ----------- ----------- Net Cash Provided by Financing Activities 23,760 117,167 ----------- ----------- Net Increase (Decrease) in Cash (7,218) (880) Cash at Beginning of Period 4,622 2,335 Cash at End of Period $ (2,596) $ 1,455 Supplemental Disclosure: Interest Paid $ 2,526 $ 5,719
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 1 above. 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. GENERAL Skinvisible, Inc. (the "Company") is focused on the development of innovative topical polymer-based delivery systems and technologies, incorporating its proprietary process for combining hydrophilic and hydrophobic polymers into stable water emulsions. The Company's primary marketing objectives are to license its technologies and/or sell its delivery systems to established brand manufacturers and marketers of topical prescription Rx, over-the-counter, cosmetic and skincare products to provide enhanced performance capabilities. When topically applied, products incorporating the Company's delivery systems adhere to the skin's outer layers, forming a protective bond, resisting wash- off, and delivering targeted levels of therapeutic or cosmetic skincare agents to the skin. Proven or potential applications identified to date include antimicrobial hand sanitizers, suncare and lipcare formulations, skincare moisturizers, anti-fungals, insect repellents, and acne, eczema and psoriasis treatment applications. The Company's short-term strategy includes revenue generation from private label business opportunities for its antimicrobial hand sanitizer formulations. The Company is also offering private label opportunities for its clinically tested sunscreen formulation which allows labeling as "Very Water Resistant with an SPF of 30" in accordance with FDA Final Sunscreen Monograph requirements. In January 2002 the Company received trademark approval in the U.S. for the name "Invisicare" to identify its family of polymer delivery systems. The Company is currently in the process of filing this trade name with the Cosmetic, Fragrance and Toiletries Association ("CFTA") as an ingredient for use in skincare and cosmetic formulations. It is the Company's intention to direct its ongoing energies and resources towards: Expanding research and development of its Invisicare delivery systems and related technologies; Identifying additional applications and opportunities for its Invisicare delivery systems, either independently or in collaboration with established manufacturing and/or marketing companies; Maximizing efforts for the licensing of its technologies and/or sale of its Invisicare delivery systems to manufacturers/marketers of topically administered Rx prescription, over-the-counter, cosmetic, and skincare products. 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. The application is pending. Subsequent Event: On April 29, 2003, a press release was issued that discussed the following event: Skinvisible, Inc. (OTC Bulletin Board: SKVI / Website: www.skinvisible.com) announced that its patent-pending antimicrobial hand sanitizer is receiving strong interest from several Asian countries searching for protective advantages in their fight against the SARS virus. Due to its proven, long- lasting sanitizing capabilities against a wide range of pathogens tested, the formulation may be a significant factor in assisting to reduce transmission through hand contact. The Company is currently in discussions with distributors for the areas Hong Kong, China, Singapore, Malaysia and Taiwan. In addition, negotiations are underway with Canadian and U.S. distributors and product manufacturers. BACKGROUND & HISTORY OF OPERATIONS: At its inception, the Company's strategy was to develop and market a line of antimicrobial protective hand-care products that incorporated its proprietary polymer emulsion invention. These finished products were intended for a variety of industries, including medical, food service, industrial, salon, and personal-care markets. The Company also marketed and sold its antibacterial/antimicrobial skincare sanitizers under the trade name Safe4Hours to the retail/commercial market. After extensive ongoing market investigations, analysis of regulatory requirements and strategic planning and evaluation, the Company subsequently determined that the highest and best use of its resources would be achieved by focusing on development of topical polymer-based delivery systems and related technologies, rather than pursuing the commercialization of its own antimicrobial and/or dermal barrier formulations that would require extensive lead-times and regulatory processes for each product application, significant human and financial resources for a variety of specialized markets, and extensive marketing efforts to compete in a saturated marketplace dominated by large established suppliers. The Company redefined its long-term strategies and objectives to focus on independent and collaborative research & development of its Invisicare polymer delivery systems and related technologies for a variety of product applications. RESULTS OF OPERATIONS Net revenue for the three months ended March 31, 2003 increased to $65,509 from $55,620 for the three months ended March 31, 2002. This increase in revenue was mainly due to private label sales, 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 three months ended March 31, 2003 increased to $45,714 from $38,814 for the three months ended March 31, 2002. The Company's operating expenses decreased to $107,716 for the three months ended March 31, 2003 from $270,356 for the three months ended March 31, 2002. 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 $107 for the three months ended March 31, 2003 compared with $48,731 for the three months ended March 31, 2002. The Company incurred general and administrative costs in the amount of $107,609 for the three months ended March 31, 2003 compared with $221,625 for the three months ended March 31, 2002. Some of these general and administrative costs included the following: Professional fees in the amount of $19,607 for the three months ended March 31, 2003 compared to $8,802 for the same period in 2002; and Outside Management Consultant costs in the amount of $7,047 for the three months ended March 31, 2003, compared to $16,542 for the three months ended March 31, 2002. The Company had net losses of $61,462 for the three months ended March 31, 2003, down from $231,542 for the same period ended March 31, 2002. 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 three months ended March 31, 2003, was $0.00, up from a loss of $0.01 per share for the same period in 2002. 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 $(2,596) as of March 31, 2003, compared to $1,455 as of March 31, 2002. The Company has outstanding loans payable with interest in the amount of $148,722 as of March 31, 2003. The Company had accounts payable and accrued expenses in the amount of $485,893 as of March 31, 2003, compared to $513,322 as of March 31, 2002. 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 three months ended March 31, 2003 decreased to $30,978 down from $117,347 for the three months ended March 31, 2002. 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 three months ended March 31, 2003 and 2002, was $0 and $700 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 nine months remaining in the fiscal year ending December 31, 2003, the Company expects to realize an increase in 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. Additional debt or equity financing will need to be raised to cover the operating expenses incurred. The Company is presently undertaking a search for additional equity financing in the form of a private placement to cover these anticipated expenses and expected operational losses. The failure to obtain such financing in a timely manner would have a significant negative effect on the future operations and may result in the Company being forced to cease operations. As of the date of the filing, the Company has raised $216,500 on the private placement. Item 3. Controls and Procedures Within 90 days prior to the date of this quarterly report on Form 10-QSB for the first quarter ended March 31, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and President, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that evaluation, these principal executive officers and principal financial officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company, including its consolidated subsidiaries, required to be included in the Company's periodic SEC filings. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any material legal proceedings and, to the Company's knowledge, no such proceedings are threatened or contemplated. Item 2. Changes in Securities and Use of Proceeds: During the first quarter of 2003, an option for 50,000 shares was exercised by by a former employee. Item 3. Defaults Upon Senior Securities: NONE Item 4. Submission of Matters to a Vote of Security Holders: NONE Item 5. Other Information: NONE Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: - Exhibit 99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Exhibit 99.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K: NONE SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SKINVISIBLE, INC. Date: May 22, 2003 By: /s/ Terry Howlett ---------------------------------- ---- Terry Howlett Chief Executive Office