<Page 1>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] 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)
Check whether the issuer (1) filed all reports required 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. [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
10,203,000 shares of Common Stock as of June 30, 1999.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<Page 2>
PART 1 B FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL
The Company's unaudited financial statements for the six months
ending June 30, 1999 are included with this Form 10-QSB. The
unaudited financial statements for the six months ending June 30,
1999 include:
(a) Consolidated Balance Sheet as of June 30, 1999 and June
30, 1998;
(b) Consolidated Statement of Operations and Accumulated
Deficit - Six months ended June 30, 1999 and June 30,
1998;
(c) Consolidated Statement of Changes in Shareholders'
Equity - Six months ended June 30, 1999 and June 30, 1998;
(d) Consolidated Statement of Cash Flows - Six months
ended June 30, 1999 and June 30, 1998;
(e) Notes to Consolidated Financial Statements.
The unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, do not include
all information and footnotes necessary for a complete presentation
of financial position, results of operations, cash flows, and
stockholders' equity in conformity with generally accepted
accounting principles. In the opinion of management, all
adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and
all such adjustments are of a normal recurring nature. Operating
results for the six months ended June 30, 1999 are not necessarily
indicative of the results that can be expected for the year ending
December 31, 1999.
FINANCIAL STATEMENTS
2
<Page 3>
SKINVISIBLE, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
<Page 4>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Accountant's Review Report. . . . . . . . . . . . . . . . . . . 1
Consolidated Financial Statements:
Consolidated Balance Sheet. . . . . . . . . . . . . . . . . . 2
Consolidated Statement of Operations
and Accumulated Equity . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Changes in
Stockholders' Equity. . . . . . . . . . . . . . . . . . . .4
Consolidated Statement of Cash Flows. . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . 6-10
Supplemental Statements:
Consolidated Statement of Operating
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 12
Proforma Consolidated
Balance Sheet. . . . . . . . . . . . . . . . . . . . .13
Proforma Consolidated
Statement of Operations and
Accumulated Deficit. . . . . . . . . . . . . . . . . . ..14
Proforma Consolidated
Statement of Operating Expenses. . . . . . .. . . . . . . 15
<Page 5>
To the Board of Directors
Skinvisible, Inc. and Subsidiary
Las Vegas, Nevada
We have reviewed the accompanying consolidated balance sheet of
Skinvisible, Inc., and subsidiary, a development stage company, as
of June 30, 1999 and 1998 and the related consolidated statements
of operations and accumulated deficit, changes in stockholders'
equity, and statement of cash flows for the six months then ended,
in accordance with standards established by the American Institute
of Certified Public Accountants. All information included in these
financial statements is the representation of the management of
Skinvisible, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is
substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements in
order for them to be in conformity with generally accepted
accounting principles.
Our review was made for the purpose of expressing limited assurance
that there are no material modifications that should be made to the
financial statements in order for them to be in conformity with
generally accepted accounting principles. The supplemental
consolidated statement of operating expenses for the six months
ended June 30, 1999 and proforma consolidated balance sheet, as of
June 30, 1999, statement of operations and accumulated deficit, and
statement of operating expenses for the six months ended June 30,
1999 are presented for the purposes of additional analysis and are
not a required part of the basic financial statements. Such
information has been subjected to the inquiry and analytical
procedures applied in the review of the basic financial statements,
and we are not aware of any material modifications that should be
made thereto.
Sarna & Company
Westlake Village, California
July 31, 1999
<Page 6>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
ASSETS JUNE 30
-------
1999 1998
------------------
Current Assets
Cash $ 63,310 $ 459,693
Accounts Receivable 7,368 880
Inventory 167,537 14,915
Prepaid License Fee 50,000 50,000
-------- --------
Total Current Assets 288,215 525,488
Property and Equipment
Furniture and Equipment 92,894 25,144
Laboratory Build-Out 306,048 0
-------- --------
Total Property and Equipment 398,942 25,144
Less Accumulated Depreciation <34,208> <2,064>
-------- --------
Net Property and Equipment 364,734 23,080
Other Assets - Exclusive Distribution Rights 200,000 200,000
- Prepaid Royalty 1,000,000 0
- Deposits 5,886 0
-------- --------
TOTAL ASSETS $1,858,835 $ 748,568
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $ 381,786 $ 83,589
Loan Payable 715,000 0
--------- --------
Total Current Liabilities 1,096,786 83,589
Stockholders' Equity
Common Stock, $0.001 par value
100,000,000 shares authorized,
10,203,000 and 8,200,000 shares issued 10,203 8,200
Additional paid in capital 3,438,897 929,300
Accumulated Deficit <2,687,051> <272,521>
--------- --------
Total Stockholders' Equity 762,049 664,979
--------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,858,835 $ 748,568
========= ========
See Notes to Consolidated Financial Statements
2
<Page 7>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
SIX MONTHS
ENDED JUNE 30
1999 1998
------------------
Revenues $ 48,125 $ 3,422
Cost of Sales
Beginning Inventory 47,530 0
Purchases 136,153 20,606
--------- ---------
Total Available 183,683 20,606
Less: Ending Inventory <167,537> <14,915>
Sample Distribution 0 <6,786>
--------- ---------
Total Cost of Sales <16,146> <1,095>
--------- ---------
Gross Profit 31,979 2,327
Operating Expenses <1,453,590> <274,848>
Loss Before Provision for
Income Taxes <1,421,611> <272,521>
Provision for Income Taxes <0> <0>
--------- ---------
Net Loss <1,421,611> <272,521>
Accumulated Deficit, Beginning
of Period <1,265,440> <0>
--------- ---------
Accumulated Deficit, End of Period $<2,687,051> $ <272,521>
========== ==========
Net Loss per Share $ <.14> $ <.03>
========== ==========
Weighted Average Shares Outstanding 10,202,000 8,200,000
========== =========
See Notes to Consolidated Financial Statements
3
<Page 8>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS
ENDED JUNE 30
1999 1998
------------------
Shares of Common Stock Issued:
Beginning Balance 8,200,000 0
Issuance Pursuant to:
Stock Offering 1,500,000 8,200,000
Royalty Payment Agreement 500,000 0
Stock Option Plan 3,000 0
---------- ----------
Ending Balance 10,203,000 8,200,000
========== ==========
Common Stock Par Value
Beginning Balance $ 8,200 $ 0
Issuance Pursuant to:
Stock Offering 1,500 8,200
Royalty Payment Agreement 500 0
Stock Option Plan 3 0
---------- ----------
Ending Balance 10,203 8,200
---------- ----------
Additional Paid in Capital
Beginning Balance 936,400 0
Issuance Pursuant to:
Stock Offering 1,498,500 929,300
Royalty Payment Agreement 999,500 0
Stock Option Plan 4,497 0
----------- ----------
Ending Balance 3,438,897 929,300
----------- ----------
Accumulate Deficit
Beginning Balance <1,265,440> 0
Net Loss <1,388,023> <272,521>
----------- ----------
Ending Balance <2,653,463> <272,521>
----------- ----------
Total Stockholders' Equity $ 795,637 $ 664,979
=========== ==========
See Notes to Consolidated Financial Statements
4
<Page 9>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS
ENDED JUNE 30
1999 1998
------------------
Cash Flows from Operating Activities:
Net Loss $<1,421,611> $<272,521>
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation 25,350 2,064
<Increase> Decrease in:
Accounts Receivable <2,953> <880>
Inventory <120,007> <14,915>
Other Assets - Prepaid Royalty <1,000,000> 0
- Distribution Rights 0 <200,000>
- Deposits <5,886> 0
- Prepaid Licensing Fee 0 <50,000>
Increase <Decrease> in:
Accounts Payable and
Accrued Expenses 258,063 83,589
---------- ---------
Net Cash Used by Operating Activities <2,267,044> <452,663>
Cash Flows from Investing Activities:
Purchases of Property and Equipment <274,922> <25,144>
---------- ---------
Net Cash Used by Investing Activities <274,922> <25,144>
Cash Flows from Financing Activities:
Payment of Loan Principal <10,000> 0
Net Proceeds from the Issuance of
Common Stock 2,504,500 937,500
---------- ---------
Net Cash Provided by Financing Activities 2,494,500 937,500
---------- ---------
Net Increase <Decrease> in Cash <47,466> 459,693
Cash at Beginning of Period 110,776 0
---------- ---------
Cash at End of Period $ 63,310 $ 459,693
========== =========
Supplemental Disclosure:
Interest Paid $ 29,455 $ 0
========== =========
See Notes to Consolidated Financial Statements
5
<Page 10>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
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 subsidiary, (collectively referred to as
the "Company" or "SKVI") develops and sells various licensed anti-
bacterial and anti-viral protectants and formulations to numerous
industries. 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 Pharmaceutical, Inc.
On February 22, 1999, the company also formed a subsidiary titled
Skinvisible International, Inc. to encompass Canadian and other
international ventures. This subsidiary was inactive at March 31,
1999.
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of
Skinvisible, Inc. and it's subsidiary, Skinvisible Pharmaceutical,
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. The
Company records registration fee income from its multi-level
marketing associates ratably over an estimated useful benefit
period. All reported amounts are in US dollars.
6
<Page 11>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
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.
Development Stage Company
- -------------------------
SKVI meets the guidelines of SFAS No. 7 and as such is classified
as a development stage company.
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. Stock options
issued by SKVI carry exercise prices in excess of prices that
shares can currently be purchased for. Management feels that the
exercise of any substantial amount of options is unlikely until the
company emerges from its development stage. Accordingly, no pro
forma compensation expense is reported in these financial
statements with the exception of the expense recorded on the
exercise of options on 3000 shares during the period.
Inventories
- -----------
Inventories are accounted for on an average cost basis. Inventory
at any given time consists of raw materials and products and
packaging held for resale.
Property and Equipment
- ----------------------
Property and equipment are stated at historical cost.
7
<Page 12>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
- ---------------------------------------------------------------
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.
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.
8
<Page 13>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - PROVISION FOR INCOME TAXES
- -----------------------------------
The provision for income taxes for the periods ended June 30, 1999
and 1998 represents the minimum state income tax expense of the
Company, which is not considered significant.
NOTE 3 - LOAN PAYABLE
- ---------------------
Loan payable at June 30, 1999 consists of monies advanced as a
short term operating loan. This loan is unsecured and bears
interest at the rate of 10% per annum.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Operating Leases
- ----------------
The company leases 8556 square feet of manufacturing and office
space under a noncancelable operating lease. This operating lease
terminates on April 14, 2002. In connection with the lease
arrangement, the Company is obligated to make rental payments of
$6123 per month with annual increases of 3%.
On June 6, 1999 the company entered into an additional lease for
approximately 3,772 square feet of office space. This lease
terminates on June 30,2001 with minimum monthly rental payments
starting at $3,590 and subject to annual cost of living increases.
Future annual minimum rental commitments are as follows:
Year
1999 $ 59,368
2000 $ 121,032
2001 $ 101,832
2002 $ 24,122
9
<Page 14>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Litigation
- ----------
The Company is not presently involved in any litigation.
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 determine will enhance the Company's
ability to market innovative products in a competitive field.
Note 4 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
- --------------------------------------------------
At June 30, 1999, the company has future royalty payment
commitments totaling approximately $1,000,000.
NOTE 5 - STOCK OPTIONS
- ----------------------
During the period ended June 30, 1999 the company issued stock
options with exercise prices ranging from $1.50 to $4.00 per share,
as incentives for employee and consultant performance. Options on
1,228,500 shares of common stock were outstanding at June 30, 1999.
The exercise of any or all of these options would cause reported
losses per share to decrease.
10
<Page 15>
SUPPLEMENTAL INFORMATION
<Page 16>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATING EXPENSES
Operating Expenses
Advertising $ 74,473
Bad Debt Expense 2,996
Bank Charges 7,310
Commissions 71
Consulting - Sales 123,109
Consulting - Technical 12,596
Depreciation 25,350
Director Fees 13,000
Dues and Subscriptions 1,691
Expenses - Canadian Operations 33,293
Insurance 16,646
Interest 29,455
Janitorial 1,845
Office Expenses 21,765
Other Selling Expenses 684
Lab Expenses 16,625
Management Fees 64,000
Marketing Expenses 325,181
Payroll Taxes 28,158
Postage and Freight Out 14,518
Printing 15,084
Professional Fees 137,849
Public Relations 61,815
Rent 47,490
Repair & Maintenance 352
Research and Development 18,486
Royalties 36,000
Security 457
Tax & License 9,066
Telephone 18,044
Trade Show Expenses 1,250
Utilities 3,137
Wages 291,794
-------
Total Operating Expenses $1,453,590
==========
See Notes to Consolidated Financial Statements
12
<Page 17>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PROFORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
ADJUSTMENTS
SKINVISIBLE AND
SKINVISIBLE PHARM. INC. ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
Current Assets
Cash $ 445 $ 62,865 $ $ 63,310
Accounts
Receivable 7,368 7,368
Inventory 167,537 167,537
Investment 25,000 <25,000> -0-
Prepaid
License Fee 50,000 50,000
---------- ----------- ------------ ------------
Total
Current
Assets 25,445 287,770 <25,000> 288,215
Property and
Equipment
Furniture
and
Equipment 92,894 92,894
Laboratory
Build - Out 306,048 306,048
Less
Accumulated
Depreciation <34,208> <34,208>
---------- ----------- ------------ ------------
Net
Property
and
Equipment 364,734 364,734
Other Assets
- Exclusive
Distribution
Rights 200,000 200,000
- Prepaid
Royalty 1,000,000 1,000,000
- Deposits 5,886 5,886
Intercompany
Receivable 2,940,940 <2,940,940> -0-
--------- ----------- ---------- -----------
TOTAL ASSETS $3,966,385 $ 858,390 $<2,965,940> $ 1,858,835
========== ========= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
ADJUSTMENTS
SKINVISIBLE AND
SKINVISIBLE PHARM. INC. ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
Current
Liabilities
Accounts
Payable and
Accrued
Expenses $ $ 381,786 $ $ 381,786
Loan Payable 681,412 33,588 715,000
----------- ---------- ---------
Total
Current
Liabilities 681,412 415,374 1,096,786
Intercompany
Payable -0- 2,940,940 <2,940,940> -0-
Stockholders'
Equity
Common Stock,
$0.001
par value
100,000,000
shares
authorized,
10,203,000
shares
issued 10,203 25,000 <25,000> 10,203
Additional
paid in
capital 3,438,897 -0- 3,438,897
Accumulated
deficit <164,127> <2,522,924> ---------- <2,687,051>
---------- ----------- ---------- ----------
Total
Stock-
holders'
Equity 3,284,973 <2,497,924> <25,000> 762,049
TOTAL
LIABILITIES
AND
STOCKHOLDERS'
EQUITY $3,966,385 $ 858,390 $<2,965,940> $1,858,835
========== ========= ============ ==========
See Notes to Consolidated Financial Statements
13
<Page 18>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PROFORMA
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 1999
ADJUSTMENTS
SKINVISIBLE AND
SKINVISIBLE PHARM. INC. ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
Revenues $ -0- $ 48,125 $ 48,125
Cost of Sales
Beginning
Inventory -0- 47,530 47,530
Purchases -0- 136,153 136,153
------------ ----------- ----------
Total
Available -0- 183,683 183,683
Less:
Ending
Inventory -0- <167,537> <167,537>
----------- ----------- ----------
Total Cost
of Sales -0- <16,146> <16,146>
----------- ----------- ----------
Gross Profit -0- 31,979 31,979
Operating
Expenses <94,743> <1,358,847> <1,453,590>
Loss Before
Provision for
Income Taxes <94,743> <1,326,868> <1,421,611>
Provision for
Income Taxes -0- -0- -0-
----------- ------------ ----------
Net Loss <94,743> <1,326,868> <1,421,611>
Deficit,
Beginning of
Period <69,384> <1,196,056> <1,265,440>
----------- ------------ ---------
Accumulated
Deficit, End
of Period $ <164,127> $<2,522,924> $<2,687,051>
========== =========== ==========
See Notes to Consolidated Financial Statements
14
<Page 19>
SKINVISIBLE, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PROFORMA
CONSOLIDATED STATEMENT OF OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1999
ADJUSTMENTS
SKINVISIBLE AND
SKINVISIBLE PHARM. INC. ELIMINATIONS CONSOLIDATED
----------- ----------- ------------ ------------
Operating
Expenses
Advertising $ $ 74,473 $ 74,473
Bad Debt
Expense 2,996 2,996
Bank Charges 64 7,246 7,310
Commissions 71 71
Consulting
-Sales 123,109 123,109
Consulting
-Technical 12,596 12,596
Depreciation 25,350 25,350
Director
Fees 13,000 -0- 13,000
Dues and
Subscriptions 1,691 1,691
Expenses
-Canadian
Operations 33,293 33,293
Insurance 320 16,326 16,646
Interest
Expense 15,104 -0- 15,104
Janitorial 1,845 1,845
Office
Expenses 21,765 21,765
Other
Selling
Expenses 684 684
Lab Expenses 16,625 16,625
Management
Fees 64,000 -0- 64,000
Marketing
Expenses 1,996 337,536 339,532
Payroll
Taxes 28,158 28,158
Postage and
Freight Out 14,518 14,518
Printing 15,084 15,084
Professional
Fees 137,849 137,849
Public
Relations 61,815 61,815
Rent 47,490 47,490
Repair
and
Maintenance 352 352
Research
and
Development 18,486 18,486
Royalties 36,000 36,000
Security 457 457
Tax and
License 9,066 9,066
Telephone 259 17,785 18,044
Trade Show
Expenses 1,250 1,250
Utilities 3,137 3,137
Wages 291,794 291,794
------- ------- -------
Total
Operating
Expenses $ 94,743 $1,358,847 $1,453,590
======== ========= =========
See Notes to Consolidated Financial Statements
15
<Page 20>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL
Skinvisible, Inc. (the "Company") is in the business of developing,
manufacturing and selling anti-microbial skin protection products
designed to control the effects of occupational hand disease, as
well as prevent the cross contamination of pathogens. The Company
has completed the development of its products and is commencing
production and sales. The Company continues to research and
develop potential additional products.
During the quarter ended June 30, 1999, the Company entered into an
agreement with Aquastel Pacific Environmental Technology Limited of
Hong Kong for the commercial sale and distribution of Skinvisible
products in Hong Kong, Taiwan, Singapore, Malaysia and Thailand.
Subsequent to the end of the quarter ended June 30, 1999, the
Company's subsidiary, Skinvisible Pharmaceuticals, Inc. ("SVP"),
entered into an agreement with Essentially Yours Industries Corp.
of Surrey, British Columbia, Canada ("Essentially Yours") for the
exclusive distribution of Skinvisible's proprietary family of skin
protection products to the retail marketplace within Canada and the
United States. Additionally, SVP signed an agreement with EYI
International Limited under similar terms and conditions for the
exclusive distribution of its product line internationally in the
retail market within the fourteen countries in which they presently
operate.
The North American agreement gives Essentially Yours the exclusive
right to market the Skinvisible name and its existing product line
in North America as well as a right of first refusal on new
products developed under the Skinvisible label for the retail
marketplace. Essentially Yours is obligated to purchase a minimum
of 50,000 oz of Skinvisible Product by December 31, 2000.
Essentially Yours is also obligated to purchase a minimum of
1,000,000 oz for the year ending December 31, 2000, 1,250,000 oz
for the year ending December 31, 2001, and 1,560,000 oz for the
year ending December 31, 2002. Failure of Essentially Yours to
meet these minimum purchase requirements will give the Company the
right to terminate both the North American agreement and the
international agreement, as described below. SVP has received an
order from EYI for 30,000 ounces of product in third quarter of
1999.
The international agreement gives EYI International Limited the
exclusive right to market Skinvisible's existing product line and
the same right of first refusal on new Skinvisible label products
to the retail marketplace in those fourteen countries
internationally where it presently operates as well as a right of
first refusal for other international countries where the Company
does not have an existing agreement in place. EYI International
also has the option to expand the territory for the international
market to include additional countries by purchasing 25,000 oz of
product for each additional country and paying the Company's cost
of achieving regulatory approvals for sales of products in the
additional country.
The Company will continue to market directly, or through other
distribution channels, to the corporate, commercial and industrial
marketplace in both North American and international markets.
20
<Page 21>
RESULTS OF OPERATIONS
Sales. Net sales for the six months ended June 30, 1999 increased
to $48,125 from $3,422 for the six months ended June 30, 1998. The
increase in sales was the result of the Company commencing sales of
its Skinvisible products upon completion of research and
development of the Skinvisible products.
The Company anticipates that sales of its Skinvisible products will
increase in subsequent quarters as the Company is now marketing its
Skinvisible products and has entered into distribution agreements
for its products, as described above. This is a forward looking
financial statement and actual results may differ. The Company has
received an order from Aquastel Pacific Environmental Technology
Limited for approximately $30,000 of Skinvisible products under
this agreement in third quarter of 1999. The Company has received
an order from EYI for 30,000 ounces of Skinvisible products in the
third quarter of 1999.
Gross Profit. Gross profit for the six months ended June 30, 1999
increased to $31,979 or 66.5% of sales from $2,327 or 68% of sales
for the six months ended June 30, 1998. The increase in net profit
is directly attributable to the increase in sales of the Company's
Skinvisible products.
Operating Expenses. The Company's operating expenses increased to
$1,453,590 for the six months ended June 30, 1999 from $274,848 for
the six months ended June 30, 1998.
The Company incurred marketing and selling expenses in the amount
of $673,885 for the six months ended June 30, 1999 in connection
with the establishment of a network marketing distribution system
for the Company's Skinvisible products. The Company anticipates
that marketing and selling expenses attributable to network
marketing will decrease as the Company has entered into
distribution agreements with Essentially Yours and EYI
International for the retail market rather than pursuing the
establishment of its own network marketing system. The Company
continues to pursue its marketing efforts to sell products to the
commercial market.
The Company incurred general and administrative costs of $779,705
for the six months ended June 30, 1999. These general and
administrative costs included professional fees in the amount of
$137,849.
Salaries and wages increased to $319,380 for the six months ended
June 30, 1999, compared with $27,830 for the six months period
ended June 30, 1998. The increase of $292,000 in salaries and
wages reflects the growth in the Company's operations and research
and development and production activities.
The Company anticipates that operating expenses will decrease in
subsequent quarters. This is a forward-looking statement and
actual results may differ. The Company plans to reduce marketing
expenses, salaries and general and administrative costs based on
the determination by the Company not to proceed with the
establishment of its own network marketing system.
The increased operating expenses also reflect the Company's
increased research and development activities. The Company has
made an application for patent protection of its proprietary
polymer structure and certain products developed using the
proprietary polymer structures. The Company's research and
development activities include research on two new products, a sun
screen product and an anti-fungal foot cream for athlete's foot.
The Company expects to do further testing of these potential
products at independent laboratories during the third quarter.
21
<Page 22>
Net Loss. The Company's net loss increased to $1,421,611 for the
six months ended June 30, 1999 compared to $272,521 for the six
months ended June 30, 1998. The increase in the net loss is
attributable to the Company's increased operating expenses. The
increase in operating expenses was not matched by increases in
revenues as the Company has only begun to achieve sales of its
Skinvisible products.
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 $63,310 as of June 30, 1999, representing a
decrease of $47,466 from cash as of December 31, 1998.
The Company had accounts payable of $381,786 as of June 30, 1999,
compared to $83,589 as of June 30, 1998. The Company has a loan
outstanding in the amount of $715,000 as of June 30, 1999. This
loan is an unsecured loan which is payable on demand and remains
outstanding. The Company had no unsecured loans as of June 30,
1998.
Cash used in operating activities for the six months ended June 30,
1999 was $2,267,044 compared to $452,663 for the six months ended
June 30, 1998. The Company realized net proceeds of $2,504,500
from the sales of its equity securities during the six months ended
June 30, 1999. These proceeds were used to finance the Company's
operating activities.
Cash used in investing activities for the six months ended June 30,
1999 and 1998, was $274,922 and $25,144, respectively, resulting
primarily from the purchase of property and equipment in connection
with the Company's research and development and production
facilities.
The Company anticipates that future issuances of its 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 Company is presently
in negotiations for the sale of up to $1,650,000 of convertible
debentures pursuant to Regulation S of the United States Securities
Act of 1933. The Company plans to apply proceeds of the sale of
the convertible debentures to repayment of the Company's accounts
payable and unsecured demand loan, each as described above.
Negotiations have not been finalized and the Company has not
entered into any security purchase agreements for this offering of
convertible debentures. There is no assurance that the Company
will complete all or any portion of this offering of convertible
debentures or any future sale of its equity securities.
YEAR 2000 RISK
Background. Computer systems, software packages, and
microprocessor dependent equipment may cease to function or
generate erroneous data when the Year 2000 arrives. The problem
affects those systems or products that are programmed to accept a
two-digit code in date code fields. To correctly identify the Year
2000, a four-digit date code field will be required to be what is
commonly termed "Year 2000 compliant."
22
<Page 23>
Readiness. The Company has completed an assessment of all internal
systems and operations to determine Year 2000 compliance. The
Company's assessment has included an assessment of computer
hardware systems and computer software. The Company has determined
that its internal computer hardware systems are Year 2000
compliant. As such, the Company does not anticipate any material
adverse operational issues to arise from the Year 2000 problem
affecting internal systems and operations.
The Company has relied upon the written representations of each of
the third parties from whom the Company licenses third party
software that the Company's licensed software is Year 2000
compliant. While the Company has relied upon representations by
third parties, the Company cannot give any assurance that all third
party licensed software will be Year 2000 compliant.
The Company has relied upon representations by hardware
manufacturers that all computer hardware purchased by the Company
since commencement of operations is Year 2000 compliant. While the
Company has relied upon representations by manufacturers, the
Company cannot give any assurance that all computer hardware will
be Year 2000 compliant.
There is no assurance that the Company will not be affected by Year
2000 problems arising from problems with the supply of the
necessary products required to manufacture the Company's
Skinvisible products.
Risks. The Company may realize exposure and risk if the systems
for which it is dependent upon to conduct day-to-day operations are
not year 2000 compliant. The Company's worst case scenario would be
the inability of the Company to continue production of its
Skinvisible products pending resolution of systems problems. In a
worst case scenario, the Year 2000 problem would result in
increased expense to the Company and decreased revenues being
earned from operations or delay the realization of revenues from
the sale of Skinvisible products.
Estimated Year 2000 Costs. The Company has not incurred any
external cost in ensuring Year 2000 compliance in view of the fact
that the Company has only recently commenced operations and has
purchased computer hardware and software on the basis of
representations by manufacturers as to Year 2000 compliance.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending or threatened against the
Corporation.
Item 2. Changes in Securities and Use of Proceeds
The Company issued a total of 3,000 shares of the Company's common
stock during the period from April 1, 1999 to June 30, 1999, the
period covered by this report. The shares were issued to Mr. Bryan
Campbell, a consultant to the Company, upon the exercise by Mr.
Campbell of stock options granted to Mr. Campbell pursuant to the
Company's Stock Option Plan. Mr. Campbell purchased 3,000 shares
at $1.50 per share, for a total purchase price of $4,500.
23
<Page 24>
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 6.1 Distribution Agreement between the Company
and Aquastel Pacific Environmental Technology Limited
Exhibit 6.2 Distribution Agreement between Skinvisible
Pharmaceuticals, Inc. and Essentially Yours Industries
Corp.
Exhibit 6.3 Distribution Agreement between Skinvisible
Pharmaceuticals, Inc. and EYI International Limited
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
24
<Page 25>
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.
- ----------------------
(Registrant)
Date: August 13, 1999 By:
-------------------
Terry Howlett
President
25
<Page 26>
EXCLUSIVE DISTRIBUTION - CONTRACT/AGREEMENT
BETWEEN
Aquastel Pacific Environmental Technology Limited
Hereinafter called and referred to as the "Contractee".
AND
Skinvisible Pharmaceuticals, Inc.
Herein after called and referred to as the "Contractor".
1. The Contractee receives the full and exclusive rights
for the sale and distribution within the following
territory:
Hong Kong, China, Taiwan, Singapore, Malaysia and
Thailand. (Above named countries hereinafter as
"territories" )
The Contractor hereby grants to the Contractee the
full and every rights to purchase the products, as
define hereinafter, from the Contractor in order to
re-sell, market and promote said products.
2. Products: Skinvisible Anti-microbial Skin Protector,
Sun-screen and Sun-tan Skinvisible Protector.
Hereinafter called the "product"; which includes any
and every skin protection affiliate, connected,
substituted, modified product of the named product
during the term of agreement.
3. The Contractee agrees this right will be limited to a
term of three years. The term will begin from the
date of the signing of this contract. In its first
term, there is 8-month cancellation clause by either
party. After first term, Contractee has the right to
renew every 3-year term automatically if meets
mutually agreedable sales volume stated in Clause 10.
4. The Contractor will pass to the Contractee, relevant
data, advertising material, technical documentation,
sale support materials, brochures, promotional
material and material and documents connected and/or
related with the products. The Contractee is
responsible for supplying the above mentioned
materials in the language of the respective
territories.
5. The Contractee agrees to purchase the said product at
the following pricing. Any order placed will be on
the basis of time of delivery shall be approximately
3(three) weeks.
Pricing: Size FOB/Las Vegas, Nevada
2 oz. US$ 1.94
4 oz. US$ 2.78
8 oz. US$ 4.46
16 oz. US$ 7.85
32 oz. US$14.57
6. The sales price fixed in agreements between the two
parties shall have a validity of 6 months and shall be
reviewed at the end automatically.
<Page 27>
7. The Contractor will not appoint during the terms of
this agreement other distributors and/or agents
and/or representative of any kind for the
terms of this contract to sell and/or distribute the
products, directly and/or indirectly whatsoever to end-users
and customers within the territories.
8. The only exception will be in the special case of
recommendation. If Contractee of a certain territory
recommends to end-user to another territory in which
there exists already another Contractee, the
recommending Contractee, will receive 5% commission of
the profit from a successful sale from the Contractee
of this other territory. If in this order territory
exists no Contractee. Contractee from another
territory must inform and consult Contractor for
advice and instruction before taking any action.
9. The Contractor will use his best ability to strictly
observe and/or survey the distribution network within
the territories.
This includes an exclusive distribution being
fulfilled and/or granted by the Contractor towards the
Contractee, the Contractor expressly undertakes to
observe Contractee's exclusive right and to prevent
any and all sale of product from third parties within
the territory.
10. The Contractee agrees to purchase US $30,000 mentioned
products in the first 8-month and another US $30,000
in the following 4-month. Then after shall be a
minimum order of US $100,000 per year, with the first
order US $30,000 placed within 7 days of signing the
agreement and the second order US $30,000 placed
within 7 days of the beginning of the 4-month period.
11. The Contractor's warranty to the Contractee as to the
products is as follows:
The Contractor warrants to the Contractee that each
producer will be free from defects in materials and
workmanship for a period of thirty six (36) months
from the date of manufacture in respect of the
relevant products. The Contractor's sole
responsibility under this warranty will be to replace
at his option and cost.
The Contractee will forward the bacterial testing report
when shipment has arrived.
12. The parties agree herewith that the governing law as
well as situs of court and/or arbitration shall be
Nevada USA law.
All changes and/or modifications must be in written
form and countersigned by both sides.
Signed and accepted this day of May 24th 1999.
Contractor Contractee
For and on behalf of
AQUASTEL Pacific Environmental
Technology Ltd.
/s/ T.H. Howlett /s/ Alan Wen
- ----------------- -----------------------------
Authorized Signature
Skinvisible Pharmaceuticals, Inc. Aquastel Pacific Environmental
Technology Limited
Seal and Signature Seal and Signature
2
<Page 28>
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") dated for reference
the 28th day of July, 1999
BETWEEN:
SKINVISIBLE PHARMACEUTICALS, INC.,
a Nevada Corporation having its head office
at 3095 E. Patrick Lane, Suite 1
Las Vegas, Nevada, USA 89120
Fax # (702) 433-7192
(the "Company")
OF THE FIRST PART
AND:
ESSENTIALLY YOURS INDUSTRIES CORP., a
British Columbia Company having its head office at
Suite 201, 8322 - 130th Street
Surrey, British Columbia, Canada V3W 8J9
Fax # (604) 502-5119
(the "Distributor")
OF THE SECOND PART
WHEREAS:
1. The Company has developed a line of hand lotion products
which are marketed under the name "Skinvisible".
2. The Distributor wishes to acquire the North American rights to
market and distribute the Company's Skinvisible hand lotion
products on a sole and exclusive basis throughout North
America on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements contained herein, the parties
hereto agree as follows:
1. DEFINITIONS
In this Agreement, the following words and phrases shall have the
following meanings:
(A) "Confidential Information of the Company" means all
business plans, trade secrets, design concepts,
knowledge, information, production technology, processes,
know how, business projections, customer lists and
intellectual property concerning or relating to the
business of the Company and the Products, including the
<Page 29>
-2-
Manufacturing Information, which may be communicated to,
acquired by, or learned of by the Distributor from the
Company, whether or not such information is subject to
proprietary protection at law;
(B) "Confidential Information of the Distributor" means all
customer lists, independent sales agent lists, direct
sales marketing contacts and information, business plans,
trade secrets, knowledge, information, know how,
business projections, computer software programs and
intellectual property concerning or relating to the
business of the Distributor which may be communicated to,
acquired by, or learned of by the Company from the
Distributor, whether or not such information is subject
to proprietary protection at law;
(C) "Direct Selling Market" means that portion of the Retail
Market characterized by person-to-person, multi-level or
network marketing;
(D) "Future Products" means any future products developed by
the Company marketed under the name "Skinvisible" and
using the same polymer base as the Products;
(E) "Industrial Market" means the commercial, institutional
and industrial market for the Products;
(F) "Manufacturing Information" means all information,
technology, data and trade secrets relating to the
manufacture of the Products;
(G) "Patents" means any patents underlying the Products
which are owned or may be owned by the Company or
licensed or which may be licensed to the Company;
(H) "Products" means the following hand lotion products
marketed by the Company under the trade name
"Skinvisible":
(i) Skinvisible Medical Formula;
(ii) Skinvisible Food Service Formula;
(iii) Skinvisible Personal Formula;
(iv) Skinvisible Industrial Formula;
(v) Skinvisible Salon Formula.
(I) "Retail Market" means the retail market for the Products
whereby the Products are sold to the public or to re-
sellers for sale to the public and is deemed to exclude
the Industrial Market;
(J) "Term" has the term described in Section 12.1 of this
Agreement;
<Page 30>
-3-
(K) Territory" means North America. North America shall mean
Canada, the United States and Mexico;
(L) "Trade Name" means the tradename "Skinvisible" and the
trademark "Skinvisible" in the event that the Company is
granted trademark protection by the United States Patent
and Trademark Office.
2. Grant of Exclusive Distribution Rights
2.1 Subject to the terms and conditions of this Agreement, the
Company hereby grants to the Distributor the exclusive right to
market, distribute and sell the Products to the Retail Market
within the Territory for the Term of this Agreement (the
"Distribution Rights"). The Distribution Rights will include the
following rights:
(A) the right to market, distribute and sell the Products;
(B) the right and license to use the Trade Name in connection
with the marketing, distribution and sale of the
Products.
2.2 The Distributor will have the right to market, distribute and
sell Products through the Distributor's independent business
associates who have entered into the Distributor's standard
application and form of agreement. It is expressly acknowledged
and agreed that sales by independent business associates do not
constitute the grant of distribution, marketing or sales rights to
sub-distributors within the meaning of Section 5.1 of this
Agreement.
2.3 The Distribution Rights will extend to the right and license
to use the trademark "Skinvisible" in the event that the Company's
application to the United States Patent and Trademark Office for
the registration of "Skinvisible" as a trademark is approved. The
Distributor acknowledges that there is no assurance that trademark
protection will be granted by the United States Patent and
Trademark Office.
3. Minimum Purchase Requirements and Product Prices
3.1 As a condition of maintaining the Distribution Rights, the
Distributor must purchase the following minimum purchase amounts of
Products for the Retail Market (the "Minimum Purchase
Requirements"):
(A) during the period from the Effective Date of this
Agreement to December 31, 1999, the Distributor must
purchase from the Company a minimum of 50,000 ounces of
the Products at the prices provided for by this
Agreement; and
(B) during the balance of the Term, the Distributor must
purchase from the Company not less than the minimum
purchase requirements set forth in the table below at the
prices provided for by this Agreement:
<Page 31>
-4-
Year Minimum Purchase Requirement
January 1, 2000 to
December 31, 2000 1,000,000 ounces
January 1, 2001 to
December 31, 2001 1,250,000 ounces
January 1, 2002 to
December 31, 2002 1,560,000 ounces
Purchases by Distributor shall be cumulative so that purchases in
excess of the Minimum Purchase Requirements in any applicable
period will count toward Minimum Purchase Requirements in
subsequent periods. The failure of the Distributor to achieve the
Minimum Purchase Requirements in any applicable period will be
deemed to be a default of this Agreement entitling the Company to
terminate in accordance with Section 12.2 of this Agreement. It is
understood and agreed that the only remedy of the Company against
the Distributor for failure to meet Minimum Purchase Requirements
will be to terminate this Agreement in accordance with Section 12.2
herein. The Company shall not have any claim or demand against the
Distributor to make or make payment for any Minimum Purchase
Requirements.
3.2 The prices to be paid by the Distributor to the Company for
the Products are as follows, subject to adjustment as provided in
Section 3.3 (the "Product Prices"):
Product Size Price
2-oz bottle $1.94 US
4-oz bottle $2.78 US
8-oz bottle $4.46 US
16-oz bottle $7.85 US
3.3 The Product Prices will be fixed for the 1999 calendar year.
Such prices shall be exclusive of all city, state and federal
taxes, including, without limitation, manufacture, value added,
sales, use, receipts, gross income, excise, occupation or similar
taxes, which obligations attributable to the manufacture and sale
to the Distributor are the obligations of the Distributor.
Following the initial 1999 period, unless agreed otherwise by the
parties in writing, the Company shall have the right to adjust
prices not more than once per year and then only to the extent
necessary to cover increased costs and expenses. In the event of
such a price increase, the Company will supply the Distributor
written notice of the price increases. Price increases shall take
effect on the date designated by the Company, but in no event
earlier than one hundred twenty (120) days following receipt of
notice of such increase by the Distributor. Any purchase order
placed by the Distributor prior to the expiration of said one
hundred twenty (120) day period shall by filled by the Company at
the pre-increase price.
3.4 The Distributor will pay to the Company 25% of the aggregate
price for all Products at the Product Price ordered (the "Order
Price") upon submission of an order for Products to the Company.
<Page 32>
-5-
3.5 The Company will invoice the Distributor for all Products sold
to the Distributor at the Product Prices. The Distributor will pay
the balance of the Order Price to the Company for all orders of
Products within thirty (30) days of the date of delivery FOB Las
Vegas, Nevada.
3.6 The Distributor shall have the right to establish its own
selling prices for Products to the Retail Market within the
Territory.
3.7 The determination of sales, marketing strategies, and selling
prices for the Products to the Retail Market within the Territory
will be the sole responsibility of the Distributor.
3.8 All references to money or currency herein contained shall
mean lawful money of the United States of America.
3.9 Each order placed by the Distributor for the purchase of any
Products shall be subject to the terms and conditions of this
Agreement.
3.10 All purchases of Products will be in units of 2 ounce, 4
ounce, 8 ounce or 16 ounce bottles.
3.11 The Company will deliver all Products to the Distributor FOB
Las Vegas, Nevada within 42 days of the date of receipt of an order
for Products by the Distributor.
4. Limitations on the Distribution Rights
4.1 The Distributor will use its reasonable best efforts to ensure
that the Distributor does not distribute or sell any Products for
re-sale to any person or Company in the Industrial Market within
the Territory or in any market outside the Territory.
4.2 The Distributor will not, directly or indirectly, sell, assign
or grant to any other person, firm or corporation, the right to
sell, or distribute the Products to the Industrial Market within
the Territory.
4.3 The Distribution Rights do not extend to any products
manufactured by the Company and marketed under the "Skinvisible"
name other than the Products.
4.4 The Distributor will not market, distribute or sell any
products similar to or competitive with the Products during the
Term of this Agreement, save and except those products already part
of Distributor's existing Product line.
4.5 Nothing in this Agreement shall be deemed in any way to
constitute any transfer or assignment by the Company of any Patents
or Confidential Information to the Distributor or to give the
Distributor any right, title or interest in or to any Patents or
Confidential Information. The Distributor acknowledges that all
patents pertaining to the Products or Confidential Information are
and shall remain the exclusive property of the Company.
<Page 33>
-6-
4.6 The Distributor will not purchase Products from any person
other than the Company.
4.7 Nothing in this Agreement shall limit the right of the Company
to market, distribute and sell products with the same or similar
formulations under different product names and labels, not to be
confusing with the name "Skinvisible", with the express exclusion
of the Direct Selling Market.
5. Sub-Distributors
5.1 The Distributor will have the right to appoint sub-
distributors within the Territory, provided that each sub-
distributor is appointed on the following terms and conditions:
(A) each sub-distributor will enter into a sub-
distributorship agreement with the Distributor on terms
and conditions acceptable to the Company and which will
bind the sub-distributor to the terms and conditions set
forth in this Agreement;
(B) the Distributor shall provide the Company a copy of each
executed sub-distributorship agreement within 30 days of
execution in order that the Company can verify compliance
of the sub-distributorship agreement with the terms and
conditions of this Agreement.
(C) each sub-distributor must be an affiliate of the
Distributor, as the term "affiliate" is defined by the
Company Act (British Columbia), or a person with whom the
Distributor has an existing distributorship relationship,
or a person to whom the Company has consented to in
writing as a sub-distributor acceptable to the Company.
In determining whether a person is an acceptable sub-
distributor, the Company will not unreasonably withhold
its consent and will evaluate the potential sub-
distributor based on the business experience and
financial resources of the potential sub-distributor.
Any request by the Distributor for approval for a
potential sub-distributor will be in writing and will
include such written information as is reasonably
necessary for the Company to determine whether or not to
withhold its consent. The Company will advise the
Distributor of its determination in writing within 14
days of the receipt of the written request of the
Distributor and the required information.
5.2 The Distributor will not have any right to assign, sub-license
or otherwise transfer any of the rights granted to the Distributor
in this Agreement except as set forth in this Article 5. Provided
however, in the event of restructuring of the Distributor so that
separate companies are used to sell Products in Canada and in the
United States such separate companies shall collectively be
considered to be parties to this Agreement in place and stead of
the Distributor named herein, without the necessity of any further
documentation.
6. Additional Covenants of the Distributor
6.1 The Distributor will throughout the term of this Agreement:
<Page 34>
-7-
(A) refer to the Company all queries, orders and requests
relating to the purchase of Products intended for the
Industrial Market within the Territory;
(B) purchase and maintain a sufficient liability insurance
policy with reputable insurance companies in those
jurisdictions in which the Distributor markets,
distributes and sells the Products;
(C) ensure that any advertising or promotional efforts
undertaken by the Distributor will be conducted in
compliance with advertising and marketing guidelines
established by the Company in order to ensure a
consistent marketing and brand recognition of the
Products.
(D) not make any claims with regards to the Products other
than those made by the Company; and
(E) comply with all applicable laws and regulations
regarding the distribution, marketing and sale of
the Products within the Territory.
<Page 35>
-8-
7. Additional Covenants of the Company
7.1 The Company will during the term of this Agreement:
(A) refer to the Distributor all queries, orders and requests
relating to the purchase of Products intended for the
Retail Market within the Territory;
(B) provide the Distributor with such information as the
Company considers appropriate in order to assist the
Distributor in the preparation of sales promotion
material and shall provide the Distributor with its sales
promotional material relating to the Products in order to
facilitate advertising of the Products within the
Territory;
(C) ensure all the Products meet the Company's specifications
for the applicable Products;
(D) In addition to any warranty requirements pursuant to the
terms of this Agreement, all Products supplied by the
Company and its manufacturers shall be of merchantable
quality and shall meet any and all U.S. governmental
standards applicable to such Products. The Distributor
shall have the right, through its duly appointed
representative, to examine, inspect and/or test any and
all of the Products supplied by the Company, and the
production lines, production facilities and storage
facilities. Without limiting the forgoing, the Company
shall not alter or substitute any ingredients used in
production of the Products without the prior written
consent of Distributor and without compliance with U.S.
governmental standards applicable to such products. The
Company warrants that the goods delivered in accordance
with this Agreement shall measure up to the same standard
and analysis as the sample Products previously submitted
to Distributor. The Distributor may, but is not required
to do so, from time to time, conduct laboratory tests on
the Products to verify that the content (if applicable)
of the Products conform to a Certificate of Analysis (the
"Certificate") which must be provided to Distributor
within 14 days following each shipment of Product(s).
Such testing shall be conducted to assure quality
control, and any material deviation from the Certificate
shall be deemed a breach of this Agreement, or, at the
election of the Distributor, the Company shall be
required to immediately comply with supplying the
Products in accordance with the criteria in the
Certificate.
(E) permit the Distributor and its independent business
associates to hold themselves out as authorized
distributors of the Products for the Retail Market within
the Territory;
(F) maintain comprehensive product liability insurance
coverage on all Products sold to the Distributor and will
ensure that the Distributor is named as an additional
insured on such product liability insurance. Such
insurance shall have combined single occurrence limit of
not less than One Million Dollars ($1,000,000). Such
insurance
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shall not only provide for consumer physical
injury but also consumer property damage as well.
(G) obtain all applicable permits and product identification
numbers in order that the Products can be distributed in
the Territory.
(H) Company agrees to furnish to the Distributor in a timely
manner Product Information regarding the Products, which
Product Information shall accurately describe the nature,
character and prescribed use of the Products, which
information shall be appropriate for distribution to
Consumers and Associates of Distributor in the discretion
of the Distributor. The Product Information shall not
misrepresent or in any way internationally mislead
Distributor, its Associates or consumers with respect to
the products. Distributor may incorporate such Product
Information in its sales and advertising and promotional
literature and materials (the "Sales Materials") Said
Product Information utilized shall not be deemed as
Confidential Information as set forth in this Agreement.
(I) Company has the right to supply and distribute the
Products and all components thereof, and the Products
shall not and do not, constitute any known infringement
of any license, trademark, copyright, patent or similar
proprietary interest of any third party.
(J) Company represents it has the capability to supply the
Products necessary to meet the anticipated sales of the
Distributor for the duration of this Agreement.
(K) Execution and delivery of this Agreement by the Company
has been duly authorized. The person executing this
Agreement on behalf of the Company has full and proper
authorization to execute same, and this Agreement is the
valid and binding agreement of the Company and is
enforceable against the Company in accordance with its
terms.
(L) The Company warrants that it will provide delivery within
forty two (42) days, or less, of receipt of Distributor
orders except in the case of disruption of transportation
systems by "force majeure" or other factors in or other
factors beyond the control of the Company
8. Indemnification
8.1 Each of the parties agrees to indemnify and hold harmless the
other party from any liability arising out of the act or omission
of the indemnifying party, its servants, agents and
representatives.
9. Right of First Refusal for Future Products
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9.1 The Distributor will have a right of first refusal to acquire
the marketing, distribution and sales rights for Future Products
for the Retail Market within the Territory on the following basis:
(A) Upon the Company intending to market any Future Product
or upon the receipt by the Company from a third party of
a written offer to enter into an agreement for the
marketing, distribution and sale of any Future Product
(the "Third Party Proposal") and the determination of the
Company to accept the Third Party Proposal, subject to
compliance with the terms and conditions of this
Agreement, then the Company will deliver to the
Distributor notice of the Distributor's right to enter
into an agreement with the Company for the marketing,
distribution and sale of the Future Product on the terms
and subject to the conditions of the Company's proposal
or the Third Party Proposal as the case may be (a "Right
of First Refusal Notice");
(B) Upon delivery of a Right of First Refusal Notice, the
Distributor will have a period of thirty (30) days in
which to accept or reject the offer to enter into an
agreement with the Company for the marketing,
distribution and sale of the Future Product on the terms
and subject to the conditions of the Company proposal or
Third Party Proposal; as the case may be;
(C) In the event of acceptance by the Distributor of the
Right of First Refusal Notice, then the Distributor and
the Company will enter into an agreement with the Company
for the marketing, distribution and sale of the Future
Product on the terms and subject to the conditions of the
Company Proposal or Third Party Proposal as the case
maybe;
(D) In the event that the Distributor does not accept the
Company's offer, then the Company will have the right to
commence marketing or to enter into an agreement with the
third party for the marketing, distribution and sale of
the Future Product on the terms and subject to the
conditions of the Third Party Proposal, as the case maybe
In the event the Company does not commence marketing
within six (6) months on the terms of its proposal or the
Company not enter into the agreement with the Third Party
on the terms of the Third Party Proposal, then the terms
and conditions of this Section 9.1 will apply to any new
proposal by the Company or any new proposal or counter-
proposal from the third party or a new Third Party.
10. Confidential Information
10.1 The Company acknowledges that the Confidential Information of
the Distributor is the property of the Distributor and the success,
profitability and competitive position of the Distributor requires
that the Confidential Information of the Distributor be maintained
in
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confidence by the Company. Accordingly, the Company covenants
and agrees with the Distributor, subject to Sections 10.2 and 10.3
of this Agreement, that:
(A) the Company will at all times keep all Confidential
Information in the strictest confidence;
(B) the Company will not use the Confidential Information for
any purpose other than for performing its obligations
pursuant to this Agreement;
(C) the Company will not at any time publish or in any way
participate or assist in the publishing of any
Confidential Information;
(D) the Company will not disclose or assist in the disclosure
of any Confidential Information to any person, firm,
corporation or other entity;
(E) the Company will not contact the Distributor's
independent sales associates directly without the consent
of the Distributor.
10.2 The Company may disclose the Confidential Information of the
Distributor in confidence to its lawyers, accountants and other
professional advisors in connection with the performance of the
business arrangements between the Company and the Distributor, each
of whom shall be advised of the confidential nature of such
confidential information.
10.3 The Company may disclose the Confidential Information of the
Distributor only to the extent necessary in order that the Company
may comply with all applicable laws and regulations, including
compliance with the Company's obligations as a reporting issuer
under the United States Securities Exchange Act of 1934.
10.4 The Distributor acknowledges that the Confidential Information
of the Company is the property of the Company and the success,
profitability and competitive position of the Company requires that
the Confidential Information of the Company be maintained in
confidence by the Distributor. Accordingly, the Distributor
covenants and agrees with the Company, subject to Sections 10.5 and
10.6 of this Agreement, that:
(A) the Distributor will at all times keep all Confidential
Information in the strictest confidence;
(B) the Distributor will not use the Confidential Information
for any purpose other than for performing its obligations
pursuant to this Agreement;
(C) the Distributor will not at any time publish or in any
way participate or assist in the publishing of any
Confidential Information;
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(D) the Distributor will not disclose or assist in the
disclosure of any Confidential Information to any person,
firm, corporation or other entity.
10.5 The Distributor may disclose the Confidential Information of
the Company in confidence to its lawyers, accountants and other
professional advisors in connection with the performance of the
business arrangements between the Company and the Distributor.
10.6 The Distributor may disclose the Confidential Information of
the Company only to the extent necessary in order that the
Distributor may comply with all applicable laws and regulations,
provided that this disclosure will not relate to any Manufacturing
Information.
10.7 No waiver by either party of its rights pursuant to the
confidentiality agreements or any consent to any release of
confidential information shall be effective unless expressed in
writing, and no such waiver or consent shall apply beyond the
specific facts in respect of which the waiver of consent was given.
10.8 This Confidentiality Agreements of each party do not apply to
information which is or becomes publicly available or is lawfully
received by the other party other than by breach of this
Confidentiality Agreement.
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11. Modifications
11.1 The Distributor will not make any modifications to any
Products or in any way vary or change the specifications or content
of the Products purchased from the Company. The Distributor will
use its reasonable efforts to ensure that its sub-distributors,
independent business associates, dealers, agents, or customers do
not make any modifications to, or in any way vary, the
specifications or content of any Products.
12. Term and Termination
12.1 The term of this Agreement (the "Term") will commence on the
Effective Date of this Agreement and will continue until the
earlier of December 31, 2002 or until the date on which this
Agreement is terminated in accordance with the provisions of this
Agreement. The Term of this Agreement will automatically renew from
year to year after the initial Term until December 31, 2099
provided:
(A) Distributor has met the Minimum Purchase Requirements set
out and in each year thereafter on the basis that the
Minimum Purchase Requirements for the year Jan 1, 2003 to
December 31, 2003 will be ten (10%) per cent greater than
for the prior year and shall increase by the same
percentage in each subsequent year; and
(B) Distributor has not provided written notice at least
sixty (60) days prior to the end of the initial Term or
any renewal year thereafter of its intention to terminate
this Agreement.
12.2 Each of the Distributor and the Company, as the case may be,
shall have the right to terminate this Agreement upon the
occurrence of any of the following events, such termination to be
effective immediately upon the receipt or deemed receipt by the
other party of notice to that effect and the expiry of any
applicable period for remedy of the default:
(A) if a party is in default of any of the material terms or
conditions of this Agreement, including a breach by the
Distributor of the Minimum Purchase Requirements and
shall fail to remedy such default within 60 days of
written notice thereof from the other party, provided
that if the default is the non-payment of any monetary
amount, the defaulting party will have a period of 30
days from receipt of notice in which to remedy the
default;
(B) if the other party becomes bankrupt or insolvent, makes
an assignment for the benefit of its creditors or
attempts to avail itself of any applicable statute
relating to insolvent debtors;
<Page 41>
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(C) if the other party winds-up, dissolves, liquidates or
takes steps to do so or otherwise ceases to function as a
going concern or is prevented from reasonable performing
its duties hereunder; or
(D) if a receiver or other custodian (interim or permanent of
any of the assets of the other party is appointed by
private instrument or by court order or if any execution
or other similar process of any court becomes enforceable
against the other party or its assets or if distress is
made against the other party's assets or any part
thereof.
12.3 Subject to Section 12.4, upon termination of this Agreement
for any reason whatsoever, the following shall apply:
(A) those rights and obligations of each of the Company and
the Distributor which are expressly stated to survive
termination of this Agreement will survive termination
and will continue in full force and effect;
(B) all rights and privileges granted by the Company to the
Distributor pursuant to this Agreement, including the
rights to market, distribute and sell Products, will
immediately terminate and be relinquished by the
Distributor, and thereafter the Distributor shall take no
action that would make it appear to the public that the
Distributor is still supplying Products;
(C) the Distributor shall return to the Company all
advertising, informational or technical material given to
the Distributor by the Company;
(D) the Distributor shall cease using the Trade Names and
thereafter refrain from holding itself out as an
authorized distributor of the Products;
(E) the Distributor will retain in confidence all information
regarding the business and property of the Company and
the Products;
(F) all sub-distributorship agreements entered into by the
Distributor will terminate.
The provisions of this Section 12.3 will survive the termination of
this Agreement.
12.4 In the event of termination of this Agreement by the Company
for failure of the Distributor to meet the Minimum Purchase
Requirements, then the Distribution Rights will continue on a non-
exclusive basis for a period of six months on the terms and
conditions of this Agreement.
13. Assignment
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13.1 Except as provided by Section 5 of this Agreement, the rights
granted by this Agreement may not be sold, assigned, sub-licensed
or otherwise transferred by the Distributor without the prior
written consent of the Company, which consent may be unreasonably
withheld by the Company at its sole discretion.
13.2 The Company will have the right to assign this Agreement
without the consent of the Distributor.
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14. Miscellaneous Provisions
14.1 Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to all matters herein contained, and its execution has
not been induced by, nor do any of the parties hereto rely upon or
regard as material, any representations or writings whatsoever not
incorporated herein and made a part hereof. This Agreement shall
not be amended, altered or qualified except by an instrument in
writing, signed by all parties hereto and any amendments,
alterations or qualifications hereof shall not be binding upon or
affect the rights of any party who has not given its consent in
writing.
14.2 Interpretation
The division of this Agreement into articles and sections is for
convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
14.3 Severability
In the event that any of the covenants herein contained shall be
held unenforceable or declared invalid for any reason whatsoever,
such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining provisions of this
Agreement and such unenforceable or invalid portion shall be
severable from the remainder of this Agreement.
14.4 Force Majeure
In the event of an inability or failure by the Company to
manufacture, supply or ship any of the Products herein by reason of
any fire, explosion, war, riot, strike, walk-out, labour
controversy, flood, shortage of water, power, labour transportation
facilities or necessary materials or supplies, default or power
failure of carriers, breakdown in or the loss of production or
anticipated production from plant or equipment, act of God or
public enemy, any law, act or order of any court, board, government
or other authority of competent jurisdiction, or any other direct
cause (whether or not of the same character as the foregoing)
beyond the reasonable control of the Company, then the Company
shall not be liable to the Distributor and will not be deemed to be
in default during the period and to the extent of such inability or
failure. Deliveries omitted in whole or in part while such
inability remains in effect shall be canceled.
14.5 Notices
Any notice required or permitted to be given hereunder shall
be in writing and shall be effectively given if:
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(a) Delivered personally;
(b) Sent by prepaid courier service or mail; or
(c) Sent prepaid by telecopiers, fax, telex or other similar
means of electronic communication
(d) Addressed to the relevant Party at the address/fax number
shown for that Party at the beginning of this Agreement
or in the Definition section.
Any notice so given shall be deemed conclusively to have been
given and received when so personally delivered or, if sent by
telex, fax, telecopier or other electronic communication, on
the first business day thereafter, or if sent by mail on the
third business day thereafter. Any party may change any
particulars of its address/fax number for notice by notice to
the others in the manner above described.
14.6 Time of the Essence
Time shall be of the essence of this Agreement.
14.7 Further Assurances
The parties agree to sign such other instruments, cause such
meetings to be held, resolutions passed and by-laws enacted,
exercise their vote and influence, do and perform and cause to be
done and performed such further and other acts and things as may be
necessary or desirable in order to give full effect to this
Agreement.
14.8 Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns.
14.9 Non-Waiver
No waiver by any party of any breach by any other party of any of
its covenants, obligations and agreements hereunder shall be a
waiver of any subsequent breach of any other covenant, obligation
or agreement, nor shall any forbearance to seek a remedy for any
breach be a waiver of any rights and remedies with respect to such
or any subsequent breach.
14.10 Arbitration
All disputes in relation to this Agreement, other than a dispute
regarding the non-payment of any monetary amount required by this
Agreement, be referred to and finally resolved by Arbitration,
under the rules of the British Columbia International Commercial
Arbitration Center (the "Rules"), which Rules are deemed to be
incorporated by reference into this Article. The tribunal shall
consist of One (1) Arbitrator. The Parties will endeavor within
twenty-one (21) days of the matter being referred to Arbitration to
agree upon an Arbitrator, failing which the Arbitrator shall be
appointed in accordance with the Rules. The place of
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Arbitration shall be Surrey, British Columbia. The language of the
Arbitration shall be English. The parties agree that the Arbitrator
shall be requested to make his award within sixty (60) days following
the later of the conclusion of the Arbitration hearings or any
exchange of final written submissions by the Parties and further
agree that the word of the Arbitrator shall be final and binding and
without appeal.
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14.11 Relationship
The relationship between the Company and the Distributor is, and
during the term of this Agreement shall be that of independent
contractors. No party shall be deemed a legal representative or
agent of the other party for any purpose and shall have no right or
authority to assume or create in writing or otherwise, any
obligation of any kind, express or implied, with respect to any
commitments, in the name of the other party or on behalf of the
other party, unless given with the express written authority of
such party. Furthermore, the relationship among the Company and
the Distributor hereunder shall not constitute a joint venture,
general partnership or similar arrangement.
14.12 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the Province of British Columbia.
IN WITNESS WHEREOF the parties hereto have executed this Agreement
and as of the date and year first above written.
SKINVISIBLE PHARMACEUTICALS, ESSENTIALLY YOURS INDUSTRIES
INC. CORP.
by its authorized signatory: by its authorized signatory
"Terry H. Howlett" "Brian Lavorato"
- ---------------------------- -----------------------------
Signature of Authorized Signature of Authorized
Signatory Signatory
TERRY H. HOWLETT BRIAN LAVORATO
- ---------------------------- -----------------------------
Name of Authorized Signatory Name of Authorized Signatory
PRESIDENT PRESIDENT & CEO
- ---------------------------- -----------------------------
Position of Authorized Position of Authorized
Signatory Signatory
<Page 47>
DISTRIBUTION AGREEMENT
This Distribution Agreement (the "Agreement") dated for reference
the 28th day of July, 1999
BETWEEN:
SKINVISIBLE PHARMACEUTICALS, INC.,
a Nevada Corporation having its head office
at 3095 E. Patrick Lane, Suite 1
Las Vegas, Nevada, USA 89120
Fax # (702) 433-7192
(the "Company")
OF THE FIRST PART
AND:
EYI INTERNATIONAL LIMITED
a Cayman Island Company having its head office at
PO Box 1320 GT George Town
Grand Cayman, Cayman Islands
Fax # (345) 94902135
(the "Distributor")
OF THE SECOND PART
WHEREAS:
A. The Company has developed a line of hand lotion products which
are marketed under the name "Skinvisible".
B. The Distributor wishes to acquire certain rights to market and
distribute the Company's Skinvisible hand lotion products outside
of North America on the terms and conditions contained herein.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and agreements contained herein, the parties
hereto agree as follows:
1. DEFINITIONS
In this Agreement, the following words and phrases shall have the
following meanings:
(A) "Confidential Information of the Company" means all
business plans, trade secrets, design concepts,
knowledge, information, production technology, processes,
know how, business projections, customer lists and
intellectual property concerning or relating to the
business of the Company and the Products, including the
Manufacturing Information, which may be communicated to,
acquired by, or learned
<Page 48>
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of by the Distributor from the Company, whether or not such
information is subject to proprietary protection at law;
(B) "Confidential Information of the Distributor" means all
customer lists, independent sales agent lists, direct
sales marketing contacts and information, business plans,
trade secrets, knowledge, information, know how,
business projections, computer software programs and
intellectual property concerning or relating to the
business of the Distributor which may be communicated to,
acquired by, or learned of by the Company from the
Distributor, whether or not such information is subject
to proprietary protection at law;
(3 "Direct Selling Market" means that portion of the Retail
Market characterized by person-to-person, multi-level or
network marketing;
(4 "Future Products" means any future products developed by
the Company marketed under the name "Skinvisible" and
using the same polymer base as the Products;
(5 "Industrial Market" means the commercial, institutional
and industrial market for the Products;
(6 "Manufacturing Information" means all information,
technology, data and trade secrets relating to the
manufacture of the Products;
(7 "North America Distribution Agreement" means the
distribution agreement dated July 27, 1999 between the
Company and Essentially Yours Industries Limited for the
distribution of the Products in North America;
(8 "Patents" means any patents underlying the Products which
are owned or may be owned by the Company or licensed or
which may be licensed to the Company;
(9 "Products" means the following hand lotion products
marketed by the Company under the trade name
"Skinvisible":
(11 Skinvisible Medical Formula;
(12 Skinvisible Food Service Formula;
(13 Skinvisible Personal Formula;
(14 Skinvisible Industrial Formula;
(15 Skinvisible Salon Formula.
(10 "Retail Market" means the retail market for the Products
whereby the Products are sold to the public or to re-
sellers for sale to the public and is deemed to exclude
the Industrial Market;
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(11 "Schedule A Countries" means those countries listed in
Schedule A to this Agreement and those countries which
are deemed to be Schedule A Countries in accordance with
Section 3.1 of this Agreement;
(12 "Schedule B Countries" means those countries listed in
Schedule B to this Agreement and those countries which
are deemed to be Schedule B Countries in accordance with
Section 3.1 of this Agreement;
(13 "Term" has the meaning described in Section 14.1 of this
Agreement.
(14 "Territory" means the territory comprised of the Schedule
A Countries and the Schedule B Countries;
(15 "Trade Name" means the tradename "Skinvisible" and the
trademark "Skinvisible" in the event that the Company is
granted trademark protection by the United States Patent
and Trademark Office.
2. Grant of Distribution Rights
2.1 In consideration of the sum of One ($1.00) USD and other good
and valuable consideration, the receipt and sufficiency of which is
acknowledged by the Company and subject to the terms and conditions
of this Agreement, the Company hereby grants to the Distributor the
exclusive rights to market, distribute and sell the Products to the
Retail Market within the Territory for the Term of this Agreement
(the "Distribution Rights"). The Distribution Rights will include
the following rights:
(1 the right to market, distribute and sell the Products;
(2 the right and license to use the Trade Name in connection
with the marketing, distribution and sale of the
Products.
2.2 The Distributor will have the right to market, distribute and
sell the Products to the Retail Market using whatever methods/sales
programs it deems appropriate in the various countries in the
Territory, subject to the terms and conditions of this Agreement.
2.3 The Distribution Rights will extend to the right and license
to use the trademark "Skinvisible" in the event that the Company's
application to the United States Patent and Trademark Office for
the registration of "Skinvisible" as a trademark is approved. The
Distributor acknowledges that there is no assurance that trademark
protection will be granted by the United States Patent and
Trademark Office.
3. Option to Expand Territory
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3.1 The Company grants to the Distributor the option to expand the
Territory to include additional countries on the following
basis (the "Option"):
(20 the Option will be exercisable during the initial term of
this Agreement;
(21 the Option may be exercisable from time to time in
respect of any country not included within the Territory,
excluding Canada, the United States and Mexico;
(22 the Option will be exercisable with respect to a country
by the Distributor placing an order with the Company for
a minimum of 25,000 oz of Product for the country (to be
paid once approval is obtained) and by the Distributor
paying for the cost of obtaining applicable approvals and
registrations for sales in the country in accordance with
Section 5.1 of this Agreement;
(23 any order to be placed by the Distributor pursuant to
Section 3.1(c) would be subject to the Company obtaining
all applicable approvals and registrations for sales of
the Products in the country;
(24 the country will become a part of the Territory upon the
Company achieving all applicable permits for sales of the
Products in the country and the Distributor having
completed payment for the cost of obtaining the
applicable approvals and registrations;
(25 the country in respect of which the Option is exercised
will be deemed to be a Schedule A Country unless the laws
of the country prohibit direct sales marketing, in which
event the country will be deemed to be a Schedule B
Country.
3.2 The Distributor will have a right of first refusal to acquire
the Distribution Rights for those countries not within the
Territory, other than the countries of Canada, United States and
Mexico, on the following basis:
(1 Upon the receipt by the Company from a third party of a
written offer to enter into an agreement for the
marketing, distribution and sale of the Products for a
country or countries not within the Territory, other than
the countries of Canada, United States and Mexico, (the
"Third Party Proposal") and the determination of the
Company to accept the Third Party Proposal, subject to
compliance with the terms and conditions of this
Agreement, then the Company will deliver to the
Distributor notice of the Distributor's right to enter
into an agreement with the Company for the marketing,
distribution and sale of the Products within such country
on the terms and subject to the conditions of the Third
Party Proposal (a "Right of First Refusal Notice");
(2 Upon delivery of a Right of First Refusal Notice, the
Distributor will have a period of thirty days in which to
accept or reject the offer to enter into an agreement
with the
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Company for the marketing, distribution and sale
of the Products on the terms and subject to the
conditions of the Third Party Proposal;
(3 In the event of acceptance by the Distributor of the
Right of First Refusal Notice, then the Distributor and
the Company will enter into an agreement with the Company
for the marketing, distribution and sale of the Products
on the terms and subject to the conditions of the Third
Party Proposal;
(4 In the event that the Distributor does not accept the
Company's offer, then the Company will have the right to
enter into an agreement with the third party for the
marketing, distribution and sale of Products within the
applicable country or countries on the terms and subject
to the conditions of the Third Party Proposal.
(5 In the event the Company does not enter into the
agreement with the third party on the terms of the Third
Party Proposal, then the terms and conditions of this
Section 3.2 will apply to any new proposal or counter-
proposal from the third party or a new third party.
4. Product Prices
4.1 The prices to be paid by the Distributor to the Company for
the Products are as follows, subject to adjustment as provided in
Section 4.2 (the "Product Prices"):
Product Size Price
- ------------ -----
2-oz bottle $1.94 US
4-oz bottle $2.78 US
8-oz bottle $4.46 US
16-oz bottle $7.85 US
4.2 The Product Prices will be fixed for the 1999 calendar year.
Such prices shall be exclusive of all city, state and federal
taxes, including, without limitation, manufacture, value added,
sales, use, receipts, gross income, excise, occupation or similar
taxes, which obligations attributable to the manufacture and sale
to the Distributor are the obligations of the Distributor.
Following the initial 1999 period, unless agreed otherwise by the
parties in writing, the Company shall have the right to adjust
prices not more than once per year and then only to the extent
necessary to cover increased costs and expenses. In the event of
such a price increase, the Company will supply the Distributor
written notice of the price increases. Price increases shall take
effect on the date designated by the Company, but in no event
earlier than one hundred twenty (120) days following receipt of
notice of such increase by the Distributor. Any purchase order
placed by the Distributor prior to the expiration of said one
hundred twenty (120) day period shall by filled by the Company at
the pre-increase price.
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4.3 The Distributor will pay to the Company 25% of the aggregate
price for all Products at the Product Price ordered (the "Order
Price") upon submission of an order for Products to the Company.
4.4 The Company will invoice the Distributor for all Products sold
to the Distributor at the Product Prices. The Distributor will pay
the balance of the Order Price to the Company for all orders of
Products within thirty (30) days of the date of delivery FOB Las
Vegas, Nevada.
4.5 The Distributor shall have the right to establish its own
selling prices for Products to the Retail Market within the
Territory.
4.6 The determination of sales, marketing strategies, and selling
prices for the Products to the Retail Market within the Territory
will be the sole responsibility of the Distributor.
4.7 All references to money or currency herein contained shall
mean lawful money of the United States of America.
4.8 Each order placed by the Distributor for the purchase of any
Products shall be subject to the terms and conditions of this
Agreement.
4.9 All purchases of Products will be in units of 2 ounce, 4
ounce, 8 ounce or 16 ounce bottles, unless the Parties agree
otherwise.
4.10 The Company will deliver all Products to the Distributor FOB
Las Vegas, Nevada within 42 days of the date of receipt of an order
for Products by the Distributor.
5. Approvals
5.1 In regard to obtaining registration of the Products and
approval for sale of the Products in each country within the
Territory the following terms shall govern:
a) the Distributor shall provide written notice to the Company
of its intention to commence sales/marketing activities in
a country;
b) the Company shall forthwith undertake to use its reasonable
best efforts to obtain the necessary approvals and
registrations for its Products in the countries indicated;
c) the out of pocket costs of the application for registration
and approval, excluding the Company's own internal costs
and expenses, shall be paid by the Distributor;
d) in the event that the Company chooses at a later date to
enter into the Industrial Market in that certain country
for which approvals and registrations have been received
and relies upon the approvals paid for by the Distributor
then:
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i) if the Distributor is still actively marketing in such
country the Company shall reimburse the Distributor 50%
of the costs and expenses paid by the Distributor in
regard to such approvals and registrations;
ii) if the Distributor has ceased actively marketing in
such country then the Company shall reimburse the
Distributor 100% of the costs and expenses paid by the
Distributor in regard to such approvals and registrations
if the Company continues to sell Products in the country.
6. Limitations on the Distribution Rights
6.1 The Distributor will use its reasonable best efforts to ensure
that the Distributor does not distribute or sell any Products for
re-sale to any person or Company in the Industrial Market within
the Territory or in any market outside the Territory.
6.2 The Distributor will not, directly or indirectly, sell, assign
or grant to any other person, firm or corporation, the right to
sell, or distribute the Products to the Industrial Market within
the Territory.
6.3 The Distribution Rights do not extend to any products
manufactured by the Company and marketed under the "Skinvisible"
name other than the Products.
6.4 The Distributor will not market, distribute or sell any
products similar to or competitive with the Products during the
Term of this Agreement, save and except those products already part
of Distributor's existing product line.
6.5 Nothing in this Agreement shall be deemed in any way to
constitute any transfer or assignment by the Company of any Patents
or Confidential Information to the Distributor or to give the
Distributor any right, title or interest in or to any Patents or
Confidential Information. The Distributor acknowledges that all
patents pertaining to the Products or Confidential Information are
and shall remain the exclusive property of the Company.
6.6 The Distributor will not purchase Products from any person
other than the Company.
6.7 Nothing in this Agreement shall limit the right of the Company
to market, distribute and sell products with the same or similar
formulations under different product names and labels, not to be
confusing with the name "Skinvisible", with the express exclusion
of the Direct Selling Market for Schedule A Countries and the
Retail Market for Schedule B Countries.
7. Sub-Distributors
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7.1 The Distributor will have the right to appoint sub-
distributors within the Territory, provided that each sub-
distributor is appointed on the following terms and conditions:
a) each sub-distributor will enter into a sub-
distributorship agreement with the Distributor on terms
and conditions acceptable to the Company and which will
bind the sub-distributor to the terms and conditions set
forth in this Agreement;
b) the Distributor shall provide the Company a copy of each
executed sub-distributorship agreement within 30 days of
execution in order that the Company can verify compliance
of the sub-distributorship agreement with the terms and
conditions of this Agreement.
c) each sub-distributor must be an affiliate of the
Distributor. The term "affiliate" is defined as a person
with whom the Distributor has entered into a
distributorship relationship for products other than the
Products in a country or state within the Territory or a
person to whom the Company has consented to in writing as a
sub-distributor acceptable to the Company. In determining
whether a person is an acceptable sub-distributor, the
Company will not unreasonably withhold its consent and will
evaluate the potential sub-distributor based on the
business experience and financial resources of the
potential sub-distributor. Any request by the Distributor
for approval for a potential sub-distributor will be in
writing and will include such written information as is
reasonably necessary for the Company to determine whether
or not to withhold its consent. The Company will advise
the Distributor of its determination in writing within 14
days of the receipt of the written request of the
Distributor and the required information.
7.2 The Distributor will not have any right to assign, sub-license
or otherwise transfer any of the rights granted to the Distributor
in this Agreement except as set forth in this Article 7.
8. Additional Covenants of the Distributor
8.1 The Distributor will throughout the term of this Agreement:
(A) refer to the Company all queries, orders and requests
relating to the purchase of Products intended for the
Industrial Market within the Territory;
(B) purchase and maintain a sufficient liability insurance
policy with reputable insurance companies in those
jurisdictions in which the Distributor markets, distributes
and sells the Products;
(C) ensure that any advertising or promotional efforts
undertaken by the Distributor will be conducted in
compliance with advertising and marketing guidelines
established by the Company in order to ensure a consistent
marketing and brand recognition of the Products;
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(D) not make any claims with regards to the Products other than
those made by the Company;
(E) comply with all applicable laws and regulations regarding
the distribution, marketing and sale of the Products within
the Territory.
9. Additional Covenants of the Company
9.1 The Company will during the term of this Agreement:
(A) refer to the Distributor all queries, orders and requests
relating to the purchase of Products intended for the
Retail Market within the Territory;
(B) provide the Distributor with such information as the
Company considers appropriate in order to assist the
Distributor in the preparation of sales promotion material
and shall provide the Distributor with its sales
promotional material relating to the Products in order to
facilitate advertising of the Products within the
Territory;
(C) ensure all the Products meet the Company's specifications
for the applicable Products;
(D) In addition to any warranty requirements pursuant to the
terms of this Agreement, all Products supplied by the
Company and its manufacturers shall be of merchantable
quality and shall meet any and all U.S. governmental
standards applicable to such Products. The Distributor
shall have the right, through its duly appointed
representative, to examine, inspect and/or test any and all
of the Products supplied by the Company, and the production
lines, production facilities and storage facilities.
Without limiting the forgoing, the Company shall not alter
or substitute any ingredients used in production of the
Products without the prior written consent of Distributor
and without compliance with U.S. governmental standards
applicable to such products. The Company warrants that the
goods delivered in accordance with this Agreement shall
measure up to the same standard and analysis as the sample
Products previously submitted to Distributor. The
Distributor may, but is not required to do so, from time to
time, conduct laboratory tests on the Products to verify
that the content (if applicable) of the Products conform to
a Certificate of Analysis (the "Certificate") which must be
provided to Distributor within 14 days following each
shipment of Products(s). Such testing shall be conducted
to assure quality control, and any material deviation from
the Certificate shall be deemed a breach of this Agreement,
or, at the election of the Distributor, the Company shall
be required to immediately comply with supplying the
Products in accordance with the criteria in the
Certificate;
(F) permit the Distributor and its affiliates to hold
themselves out as authorized distributors of the Products
for the Retail Market within the Territory;
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(G) Company agrees to furnish to the Distributor in a timely
manner Product Information (other than the composition of
the Company's proprietary polymers) regarding the Products,
which Product Information shall accurately describe the
nature, character and prescribed use of the Products. Such
information shall be appropriate for distribution to
Consumers and Associates of Distributor in the discretion
of the Distributor. The Product Information shall not
misrepresent or in any way intentionally mislead
Distributor, its Associates or consumers with respect to
the products. Distributor may incorporate such Product
Information in its sales and advertising and promotional
literature and materials (the "Sales Materials") Said
Product Information utilised shall not be deemed as
Confidential Information as set forth in this Agreement;
(H) Company has the right to supply and distribute the
Products and all components thereof, and the Products shall
not and do not, constitute any known infringement of any
license, trademark, copyright, patent or similar
proprietary interest of any third party;
(I) Company represents it has the capability to supply the
Products necessary to meet the anticipated sales of the
Distributor for the duration of this Agreement;
(J) Execution and delivery of this Agreement by the Company
has been duly authorized. The person executing this
Agreement on behalf of the Company has full and proper
authorization to execute same, and this Agreement is the
valid and binding agreement of the Company and is
enforceable against the Company in accordance with its
terms;
(K) The Company warrants that it will provide delivery within
forty two (42) days, or less, of receipt of Distributor
orders except in the case of disruption of transportation
systems by "force majeure" or other factors in or other
factors beyond the control of the Company.
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10. Indemnification
10.1 Each of the parties agrees to indemnify and hold harmless the
other party from any liability arising out of the act or omission
of the indemnifying party, its servants, agents and
representatives.
11. Right of First Refusal for Future Products
11.1 The Distributor will have a right of first refusal to acquire
the marketing, distribution and sales rights for Future Products
for the Retail Market within the Territory on the following basis:
(A) Upon the Company intending to market any Future Product
or upon the receipt by the Company from a third party of
a written offer to enter into an agreement for the
marketing, distribution and sale of any Future Product
(the "New Product Third Party Proposal") and the
determination of the Company to accept the New Product
Third Party Proposal, subject to compliance with the
terms and conditions of this Agreement, then the Company
will deliver to the Distributor notice of the
Distributor's right to enter into an agreement with the
Company for the marketing, distribution and sale of the
Future Product on the terms and subject to the conditions
of the Company's proposal or the New Product Third Party
Proposal as the case may be (a "New Product Right of
First Refusal Notice");
(B) Upon delivery of a New Product Right of First Refusal
Notice, the Distributor will have a period of thirty (30)
days in which to accept or reject the offer to enter into
an agreement with the Company for the marketing,
distribution and sale of the Future Product on the terms
and subject to the conditions of the Company proposal or
New Product Third Party Proposal; as the case may be;
(3 In the event of acceptance by the Distributor of the New
Product Right of First Refusal Notice, then the Distributor
and the Company will enter into an agreement with the
Company for the marketing, distribution and sale of the
Future Product on the terms and subject to the conditions
of the Company Proposal or New Product Third Party Proposal
as the case maybe;
(4 In the event that the Distributor does not accept the
Company's offer, then the Company will have the right to
commence marketing or to enter into an agreement with the
third party for the marketing, distribution and sale of the
Future Product on the terms and subject to the conditions
of the New Product Third Party Proposal, as the case may
be. In the event the Company does not commence marketing
within six (6) months on the terms of its proposal or the
Company not enter into the agreement with the Third Party
on the terms of the New Product Third Party Proposal, then
the terms and conditions of this
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Section 11.1 will apply to any new proposal by the Company
or any new proposal or counter-proposal from the third party
or a new Third Party.
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12. Confidential Information
12.1 The Company acknowledges that the Confidential Information of
the Distributor is the property of the Distributor and the success,
profitability and competitive position of the Distributor requires
that the Confidential Information of the Distributor be maintained
in confidence by the Company. Accordingly, the Company covenants
and agrees with the Distributor, subject to Sections 12.2 and 12.3
of this Agreement, that:
(A) the Company will at all times keep all Confidential
Information in the strictest confidence;
(B) the Company will not use the Confidential Information for
any purpose other than for performing its obligations
pursuant to this Agreement;
(C) the Company will not at any time publish or in any way
participate or assist in the publishing of any Confidential
Information;
(D) the Company will not disclose or assist in the disclosure
of any Confidential Information to any person, firm,
corporation or other entity;
(E) the Company will not contact the Distributor's independent
sales associates directly without the consent of the
Distributor.
12.2 The Company may disclose the Confidential Information of the
Distributor in confidence to its lawyers, accountants and other
professional advisors in connection with the performance of the
business arrangements between the Company and the Distributor, each
of whom shall be advised of the confidential nature of such
confidential information.
12.3 The Company may disclose the Confidential Information of the
Distributor only to the extent necessary in order that the Company
may comply with all applicable laws and regulations, including
compliance with the Company's obligations as a reporting issuer
under the United States Securities Exchange Act of 1934.
12.4 The Distributor acknowledges that the Confidential Information
of the Company is the property of the Company and the success,
profitability and competitive position of the Company requires that
the Confidential Information of the Company be maintained in
confidence by the Distributor. Accordingly, the Distributor
covenants and agrees with the Company, subject to Sections 12.5 and
12.6 of this Agreement, that:
(A) the Distributor will at all times keep all Confidential
Information in the strictest confidence;
(B) the Distributor will not use the Confidential Information
for any purpose other than for performing its obligations
pursuant to this Agreement;
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(C) the Distributor will not at any time publish or in any way
participate or assist in the publishing of any Confidential
Information;
(D) the Distributor will not disclose or assist in the
disclosure of any Confidential Information to any person,
firm, corporation or other entity.
12.5 The Distributor may disclose the Confidential Information of
the Company in confidence to its lawyers, accountants and other
professional advisors in connection with the performance of the
business arrangements between the Company and the Distributor.
12.6 The Distributor may disclose the Confidential Information of
the Company only to the extent necessary in order that the
Distributor may comply with all applicable laws and regulations,
provided that this disclosure will not relate to the composition of
the Company's proprietary polymers.
12.7 No waiver by either party of its rights pursuant to the
confidentiality agreements or any consent to any release of
confidential information shall be effective unless expressed in
writing, and no such waiver or consent shall apply beyond the
specific facts in respect of which the waiver of consent was given.
12.8 This confidentiality agreements of each party do not apply to
information which is or becomes publicly available or is lawfully
received by the other party other than by breach of this
Confidentiality Agreement.
13. Modifications
13.1 The Distributor will not make any modifications to any
Products or in any way vary or change the specifications or content
of the Products purchased from the Company. The Distributor will
use its reasonable efforts to ensure that its sub-distributors,
independent business associates, dealers, agents, or customers do
not make any modifications to, or in any way vary, the
specifications or content of any Products.
14. Term and Termination
14.1 The term of this Agreement (the "Term") will commence on the
Effective Date of this Agreement and will continue until the
earlier of December 31, 2002 or until the date on which this
Agreement is terminated in accordance with the provisions of this
Agreement. The Term of this Agreement will automatically renew from
year to year after the initial Term until December 31, 2099
provided the Distributor has commenced activities and continues
activities in at least three (3) countries within the Territory on
the basis that registrations and approvals for sale of the Products
has been obtained by the Company.
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14.2 Each of the Distributor or the Company, as the case may be,
shall have the right to terminate this Agreement upon the
occurrence of any of the following events, such termination to be
effective immediately upon the receipt or deemed receipt by the
other party of notice to that effect and the expiry of any
applicable period for remedy of the default:
(A) if a party is in default of any of the material terms or
conditions of this Agreement, and shall fail to remedy such
default within 60 days of written notice thereof from the
other party, provided that if the default is the non-
payment of any monetary amount, the defaulting party will
have a period of 30 days from receipt of notice in which
to remedy the default;
(B) if (i) the North America Distribution Agreement is
terminated due to a default by the Distributor under the
North American Distribution Agreement or the failure of the
Distributor under the North American Distribution Agreement
to meet the minimum purchase requirements under the North
America Distribution Agreement; and (ii) the Distributor
has failed to purchase in aggregate the volumes of Products
under this Agreement and the North America Distribution
Agreement which would meet or exceed the minimum volume
requirements set forth in the North America Distribution
Agreement;
(C) if the other party becomes bankrupt or insolvent, makes an
assignment for the benefit of its creditors or attempts to
avail itself of any applicable statute relating to
insolvent debtors;
(D) if the other party winds-up, dissolves, liquidates or takes
steps to do so or otherwise ceases to function as a going
concern or is prevented from reasonably performing its
duties hereunder; or
(E) if a receiver or other custodian (interim or permanent of
any of the assets of the other party is appointed by
private instrument or by court order or if any execution or
other similar process of any court becomes enforceable
against the other party or its assets or if distress is
made against the other party's assets or any part thereof.
14.3 Subject to Section 14.4, upon termination of this Agreement
for any reason whatsoever, the following shall apply:
(A) those rights and obligations of each of the Company and the
Distributor which are expressly stated to survive
termination of this Agreement will survive termination and
will continue in full force and effect;
(B) all rights and privileges granted by the Company to the
Distributor pursuant to this Agreement, including the
rights to market, distribute and sell Products, will
immediately terminate and be relinquished by the
Distributor, and thereafter the Distributor shall take no
action that would make it appear to the public that the
Distributor is still supplying Products;
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(C) the Distributor shall return to the Company all
advertising, informational or technical material given to
the Distributor by the Company;
(D) the Distributor shall cease using the Trade Names and
thereafter refrain from holding itself out as an authorized
distributor of the Products;
(E) the Distributor will retain in confidence all information
regarding the business and property of the Company and the
Products;
(F) all sub-distributorship agreements entered into by the
Distributor will terminate.
The provisions of this Section 14.3 will survive the termination of
this Agreement.
14.4 In the event of termination of this Agreement by the Company,
then the Distribution Rights will continue on a non-exclusive basis
for a period of six months with respect to this Agreement or with
respect to the deleted country, as the case may be, on the terms
and conditions of this Agreement.
15. Assignment
15.1 Except as provided by Section 7 of this Agreement, the rights
granted by this Agreement may not be sold, assigned, sub-licensed
or otherwise transferred by the Distributor without the prior
written consent of the Company, which consent may be unreasonably
withheld by the Company at its sole discretion.
15.2 The Company will have the right to assign this Agreement
without the consent of the Distributor.
16. Miscellaneous Provisions
16.1 Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to all matters herein contained, and its execution has
not been induced by, nor do any of the parties hereto rely upon or
regard as material, any representations or writings whatsoever not
incorporated herein and made a part hereof. This Agreement shall
not be amended, altered or qualified except by an instrument in
writing, signed by all parties hereto and any amendments,
alterations or qualifications hereof shall not be binding upon or
affect the rights of any party who has not given its consent in
writing.
16.2 Interpretation
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The division of this Agreement into articles and sections is for
convenience of reference only and shall not affect the
interpretation or construction of this Agreement.
16.3 Severability
In the event that any of the covenants herein contained shall be
held unenforceable or declared invalid for any reason whatsoever,
such unenforceability or invalidity shall not affect the
enforceability or validity of the remaining provisions of this
Agreement and such unenforceable or invalid portion shall be
severable from the remainder of this Agreement.
16.4 Force Majeure
In the event of an inability or failure by the Company to
manufacture, supply or ship any of the Products herein by reason of
any fire, explosion, war, riot, strike, walk-out, labour
controversy, flood, shortage of water, power, labour transportation
facilities or necessary materials or supplies, default or power
failure of carriers, breakdown in or the loss of production or
anticipated production from plant or equipment, act of God or
public enemy, any law, act or order of any court, board, government
or other authority of competent jurisdiction, or any other direct
cause (whether or not of the same character as the foregoing)
beyond the reasonable control of the Company, then the Company
shall not be liable to the Distributor and will not be deemed to be
in default during the period and to the extent of such inability or
failure. Deliveries omitted in whole or in part while such
inability remains in effect shall be cancelled.
16.5 Notices
Any notice required or permitted to be given hereunder shall be in
writing and shall be effectively given if:
(a) Delivered personally;
(b) Sent by prepaid courier service or mail;or
(c) Sent prepaid by telecopiers, fax, telex or other similar
means of electronic communication
Addressed to the relevant Party at the address/fax number shown for
that Party at the beginning of this Agreement or in the Definition
section,
Any notice so given shall be deemed conclusively to have been given
and received when so personally delivered or, if sent by telex,
fax, telecopier or other electronic communication, on the first
business day thereafter, or if sent by mail on the third business
day thereafter. Any party may change any particulars of its
address/fax number for notice by notice to the others in the manner
above described.
16.6 Time of the Essence
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Time shall be of the essence.
16.7 Further Assurances
The parties agree to sign such other instruments, cause such
meetings to be held, resolutions passed and by-laws enacted,
exercise their vote and influence, do and perform and cause to be
done and performed such further and other acts and things as may be
necessary or desirable in order to give full effect to this
Agreement.
16.8 Successors and Assigns
This Agreement shall endure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns.
16.9 Non-Waiver
No waiver by any party of any breach by any other party of any of
its covenants, obligations and agreements hereunder shall be a
waiver of any subsequent breach of any other covenant, obligation
or agreement, nor shall any forbearance to seek a remedy for any
breach be a waiver of any rights and remedies with respect to such
or any subsequent breach.
16.10 Arbitration
All disputes in relation to this Agreement, other than a dispute
regarding the non-payment of any monetary amount required by this
Agreement, be referred to and finally resolved by Arbitration,
under the rules of American Arbitration Association (the "Rules"),
which Rules are deemed to be incorporated by reference into this
Article. The tribunal shall consist of One (1) Arbitrator. The
Parties will endeavour within twenty-one (21) days of the matter
being referred to Arbitration to agree upon an Arbitrator, failing
which the Arbitrator shall be appointed in accordance with the
Rules. The place of Arbitration shall be in Las Vegas, Nevada.
The language of the Arbitration shall be English. The parties
agree that the Arbitrator shall be requested to make his award
within sixty (60) days following the later of the conclusion of the
Arbitration hearings or any exchange of final written submissions
by the Parties and further agree that the word of the Arbitrator
shall be final and binding and without appeal.
16.11 Relationship
The relationship between the Company and the Distributor is, and
during the term of this Agreement shall be that of independent
contractors. No party shall be deemed a legal representative or
agent of the other party for any purpose and shall have no right or
authority to assume or create in writing or otherwise, any
obligation of any kind, express or implied, with respect to any
commitments, in the name of the other party or on behalf of the
other party, unless given with the express written
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authority of such party. Furthermore, the relationship among
the Company and the Distributor hereunder shall not constitute a
joint venture, general partnership or similar arrangement.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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16.12 Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of England
IN WITNESS WHEREOF the parties hereto have executed this Agreement
as of the date and year first above written.
SKINVISIBLE PHARMACEUTICALS,
INC.
by its authorized signatory
\s\ Terry H. Howlett
Signature of Authorized Signatory
Terry H. Howlett
Name of Authorized Signatory
President
Position of Authorized Signatory
EYI INTERNATIONAL LIMITED
by its authorized signatory
\s\ Thomas Viccars
Signature of Authorized Signatory
Thomas Viccars
Name of Authorized Signatory
Attorney & Agent
Position of Authorized Signatory
