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7. CONVERTIBLE NOTES PAYABLE

6 Months Ended

Jun. 30, 2021


Convertible Notes Payable consists of the following:	June 30,		December 31,
	2021		2020
$40,000 face value 9% secured notes payable to investors, due in 2015. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90% of the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of June 30, 2021, the fair value of the derivative is $49,205. The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.		40,000		40,000
Original issue discount		—		—
Unamortized debt discount		—		—
Total, net of unamortized discount		40,000		40,000

On October 26, 2015 the Company issued a $135,000 face value 9% unsecured notes payable to investors, due October 26, 2017. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90% of the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®. The note has reached maturity and is in default. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. During the three months ended June 30, 2021, the Company made payments of $50,000 on the balance of the note. The fair value of the embedded derivative associated with the payments was $43,305 and was recorded to additional paid in capital. As of June 30, 2021, the fair value of the derivative is $104,561. The Company determined the derivative was immaterial as of December 31, 2020. The note has reached maturity and is now in default, under the notes default provisions the entire balance is now due upon demand.		85,000		135,000
Unamortized debt discount		—		—
Total, net of unamortized discount		85,000		135,000

On February 17, 2016, the Company entered into a convertible promissory note pursuant to which it borrowed $20,000. Interest under the convertible promissory note is 9% per annum, and the principal and all accrued but unpaid interest is due on February 17, 2018. The note is convertible at any time following 90 days after the issuance date at noteholders option into shares of our common stock at a variable conversion price of 90% of the average five day market price of our common stock during the 5 trading days prior to the notice of conversion, subject to adjustment as described in the note. The holder’s ability to convert the note, however, is limited in that it will not be permitted to convert any portion of the note if the number of shares of our common stock beneficially owned by the holder and its affiliates, together with the number of shares of our common stock issuable upon any full or partial conversion, would exceed 4.99% of the Company’s outstanding shares of common stock. The note has reached maturity and is in default. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of June 30, 2021, the fair value of the derivative is $24,603. The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.		20,000		20,000
Unamortized debt discount		—		—
Total, net of unamortized discount		20,000		20,000

On August 11, 2016, the Company entered into a convertible promissory note pursuant to which it borrowed $15,000. Interest under the convertible promissory note is 9% per annum, and the principal and all accrued but unpaid interest is due on August 11, 2018. The note is convertible into shares of our common stock at a variable conversion price of 90% of the average market price of our common stock during the 5 trading days prior to the notice of conversion, subject to adjustment as described in the note. The note has reached maturity and is in default. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. During the three months ended June 30, 2021, the Company made payments of $15,000 on the balance of the note and the note was paid in full. The fair value of the embedded derivative associated with the payments was $10,000 and was recorded to additional paid in capital.	—		15,000
Unamortized debt discount	—		—
Total, net of unamortized discount	—		15,000

On January 27, 2017, the Company entered into a convertible promissory note pursuant to which it borrowed $10,000. Interest under the convertible promissory note is 9% per annum, and the principal and all accrued but unpaid interest is due on January 27, 2019. The note is convertible into shares of our common stock at a variable conversion price of 90% of the average market price of our common stock during the 5 trading days prior to the notice of conversion, subject to adjustment as described in the note. The note has reached maturity and is in default. The Company evaluated the conversion feature of the note and concluded that it represents an embedded derivative. As of June 30, 2021, the fair value of the derivative is $12,301. The Company determined the derivative was immaterial as of December 31, 2020. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand.	10,000		10,000
Unamortized debt discount	—		—
Total, net of unamortized discount	10,000		10,000

On June 30, 2019, the Company renegotiated accrued salaries and interest and outstanding convertible notes for a former employee. Under the terms of the agreements, all outstanding notes totaling $224,064, accrued interest of $119,278, accrued salaries of $7,260 and accrued vacation of $1,473 were converted to a promissory note convertible into common stock with a warrant feature. The convertible promissory note is unsecured, due five years from issuance, and bears an interest rate of 10%. At the noteholder’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.20 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.30 per share for three years after the conversion date. The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $280,076 as valued under the intrinsic value method. The aggregate beneficial conversion feature has been accreted and charged to interest expenses in the amount of $25,208 and $25,348 for the six months ended June 30, 2021 and 2020, respectively.	352,075		352,075
Unamortized debt discount	(178,268	)	(203,476)
Total, net of unamortized discount	173,807		148,599

Total Convertible Notes $ 328,807 $ 368,599

Current portion: 155,000 220,000

Total long-term convertible notes $ 173,807 $ 148,599

8. COMMITMENTS AND CONTINGENCIES

License Agreement

On October 17, 2019, Skinvisible entered an Exclusive License Agreement with Quoin pursuant to which Skinvisible granted to Quoin a license to certain patents for the development of products for commercial sale. In exchange for the license, Quoin agreed to pay to Skinvisible a license fee of $1,000,000 and a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations. The agreement also requires that Quoin make certain milestone payments to Skinvisible upon achieving regulatory approval milestones for certain drug products.

The agreement is subject to termination, if among other things, 50% of the license fee is not paid by December 31, 2019 and if the full License Fee is not paid by March 31, 2020. No payments were made by Quoin and the agreement was terminated on December 31, 2019. Both Parties subsequently determined that they continue to see the value in a partnership and therefore on May 8, 2020 and again on July 31, 2020 the companies agreed to extend the Exclusive License Agreement, as amended under the same terms to expire on September 30, 2020 and on January 27, 2021 the companies agreed to revise the milestone payments due under the agreement and to extend the agreement indefinitely.

On June 14, 2021, the Company entered into an amendment to change the terms of the license Fee as shown below.

As partial consideration for the rights conveyed by Skinvisible under this Agreement, Licensee agrees to pay to Skinvisible a one-time, non-refundable, non-creditable license issue fee of one million USD dollars (USO $1,000,000) (''License Fee''). To date, Licensee has paid three hundred ninety-two thousand five hundred US dollars (USD $392,500) of this fee as part of the First Half Payment of the License Fee, $125,000 of which was paid in the year ending December 31, 2020 and $267,500 in the six months ended June 30, 2021. The balance due of the First Half Payment is one hundred seven thousand five hundred US dollars (USD $107,500) which was received on July 7, 2021. A further payment of two hundred and fifty thousand dollars ($250,000) is due no later than ten (10) business days after receipt by Licensee of additional funding from Altium Capital which coincides with the approval from the SEC on Quoin’s merger with a NASDAQ listed company, expected in September. The remaining balance of two hundred and fifty thousand dollars ($250,000) will be paid on December 31, 2021.

As of June 30, 2021the Company has recognized $392,500 under the agreement including $267,500 during the six months ended June 30, 2021. The balance of licensing fee has not yet been recognized as it is not yet probable that substantially all of the consideration will be collected.

On February 3, 2020, we entered into a License Agreement with Ovation Science Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture and distribution rights to its hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations plus a license fee payable in year 3 of the agreement if it chooses to continue the license. On June 10, 2020, the agreement was further amended to provide additional assignment rights for its hand sanitizer products in exchange for $100,000.