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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ____________
Commission File No. 0-25911
Skinvisible, Inc.
(Exact name of Registrant as specified in its charter)
NEVADA 88-0344219
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
6320 South Sandhill Road, Suite 10
Las Vegas, Nevada 89120
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702)
433-7154
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
100,000,000 shares of common stock
Check whether the issuer (l) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [ X ] Yes
[ ] No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Revenues for 1999 were $169,000.
The aggregate market value of the voting stock held by non-
affiliates computed by reference to the last reported sale price
of such stock as of February 29, 2000 is $26,750,256.
The number of shares of the issuer's Common Stock outstanding as
of February 29, 2000 is 11,670,333.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
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PART I
This report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results could
differ materially from those projected in the forward-looking
statements as a result of the risk-related factors set forth
herein.
ITEM 1. Description of Business
Our Products and Their Markets
We market several polymer based hand protection products under
the trade name "Skinvisible" in five separate and distinct
markets under five different brand names. All of our products
incorporate Triclosan as the active ingredient and offer the same
degree of protection from occupational hand disease. All of our
products are identical in composition.
The five markets are as follows:
1. Medical Market. We have been marketing our products to the
medical and hospital industry using the brand name "Skinvisible -
Medical Formula". In this market, our target purchasers have
been hospitals, nursing homes, doctors, nurses, dentists,
hygienists, fire departments, police ambulance and ancillary
services. We have promoted our product in this market as an
additional measure to prevent the transmission of disease,
protect against harmful chemicals, protect from the rigors of
extensive hand washing protocols and as a safe and effective
alternative to protect people from latex contact which can cause
allergic reactions in some users.
2. Industrial Market. We have been marketing our products to
the industrial marketplace using the brand name "Skinvisible -
Industrial Formula". In this market, our target purchasers have
been mechanics, painters, auto-body workers, chemical handlers,
construction trades, gardeners, mill workers and garbage/
sanitation workers. We have promoted our product in this market
as a measure to protect the user's skin from exposure to harsh
chemicals and skin irritants.
3. Food Service Market. We have been marketing our products to
the food service marketplace using the brand name "Skinvisible -
Food Service Formula". In this market, our target purchasers
have been restaurants, hospitality services, food service and
food processing companies. We have promoted our product in this
market as a measure to prevent against the transmission of
infectious pathogens and disease-causing bacteria associated with
food products, handling and processing.
4. Salon Market. We have been marketing our products to the
salon marketplace using the brand name "Skinvisible - Salon
Formula". In this market, our target purchasers have been
hairdressers, nail technicians, beauticians, massage therapists
and tanning salons as a measure to protect the user from exposure
to disease transmission and exposure of the user's skin to harsh
chemicals and skin irritants.
5. Personal Market. We have been marketing our products to the
personal marketplace using the brand name "Skinvisible - Personal
Formula". In this market, our target purchasers
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have been
individual consumers for their personal use as a measure to
protect the user from exposure to disease transmission resulting
from day to day activities.
Our price for these products are presently the same for all brand
name formulations. Our retail prices are as follows:
Product Size Price
2 oz bottle $ 8.50
4 oz bottle $11.10
8 oz bottle $16.70
16 oz bottle $27.60
Results of Research on our products
We have conducted research on our products internally and through
independent laboratories. Research at independent laboratories
generally follows our own internal research and development
activities as a means of obtaining independent verification of
the properties of our products.
Our research and development focus has been directed at analyzing
the original antimicrobial lotion, validating its properties,
researching new formulations, and conducting internal and
external laboratory and clinical tests. Tests have found that
our polymer technology:
(a) achieves skin adherence by creating a molecular
bond to the outer layer of the skin,
(b) allows the skin to breathe,
(c) maintains the skin's natural moisture, and
(d) gradually deteriorates with the natural turnover
of the outer layer of skin.
Because of its ability to adhere to the skin, the polymer acts as
a delivery system for antimicrobial agents such as Triclosan by
keeping it on the skin for longer periods of time.
We contracted with six major independent U.S. laboratories, all
FDA-recognized facilities for carrying out investigative studies
on the product. The studies undertaken were directed at
demonstrating: (1) the effective bonding of the polymer lotion to
skin; (2) the imperviousness of the lotion to a significant
number of noxious chemical agents; and (3) the effective
antimicrobial action of the lotion to bacterial pathogens at the
time of application and over a four hour period.
The results of these studies demonstrated our product's adherence
to the skin under practical user conditions, blockage of a broad
range of noxious chemicals, and kill patterns to the broad
spectrum of pathogens tested.
Corporate History and Subsidiaries
We were incorporated in Nevada on March 6, 1998 under the name
"Microbial Solutions, Inc.". On February 26, 1999, we filed an
amendment to our articles of incorporation changing our corporate
name to "Skinvisible, Inc."
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We carry on our basic business operations, including all
research, development and manufacturing of our products, through
a wholly owned subsidiary, Skinvisible Pharmaceuticals, Inc., a
Nevada Corporation formed on June 30, 1995 under the name Manloe
Labs Inc. We also have two other wholly owned subsidiaries that
are largely inactive. They are:
Name of Date of Jurisdiction of
Subsidiary Incorporation Incorporation
- --------------- ------------- ---------------
Skinvisible
International, Inc. February 22, 1999 Nevada
Skinvisible
Pharmaceuticals
(Canada) Inc. October 20, 1998 Canada (federal)
To date, we have only a few customers who have purchased only a
limited amount of our products, and thus we are not dependent on
any one or small group of existing customers.
Acquisition of Skinvisible Pharmaceuticals
We acquired all of the issued and outstanding shares of
Skinvisible Pharmaceuticals from Roger Hocking in exchange for
the payment to him of $200,000 in cash and 275,000 of our
restricted common shares. The closing of the acquisition of SVP
was completed on March 31, 1998. The SVP acquisition agreement
is attached as an exhibit to our form 10SB filing with the
Securities Exchange Commission. There was no affiliation between
Hocking and us or any of our directors or officers prior to this
purchase.
Manufacturing and Marketing License Agreement
On March 19, 1998, SVP entered into a Manufacturing and Marketing
License Agreement with Jazor Laboratory Group, Inc. and Bruce
Jezior. In this agreement, Jazor granted to SVP the exclusive
right and license to manufacture, distribute, market and sell the
products developed by Jazor. The products included a proprietary
polymer base known as Jatex, and two products developed by Jazor
using this polymer base, Viro Shield and Work Gluv. The licensed
products also included any products superceding or replacing Viro
Shield, Work Gluv or the polymer base, together with any
modification to or products superceding Viro Shield, Work Gluv or
the polymer base and any future products developed by Jazor using
the polymer base.
In exchange for these rights, SVP agreed to pay Jazor a license
fee of $50,000 and a royalty fee equal to the greater of $6,000
per month or 1.5% of the net revenues realized by SVP from the
sales of the licensed products. There was no affiliation between
Jazor or Jezior and us, SVP or any of our officers, directors,
principals or shareholders prior to entering into the
manufacturing agreement.
The manufacturing agreement provided that upon payment of
aggregate royalty fees of $2,000,000 to Jazor, SVP would have no
further obligations to make any additional royalty payments and
would deliver to SVP all confidential information, including
formulae, technical data, engineering specifications, and trade
secrets necessary to enable SVP to manufacture all products
independently of Jazor. On February 2, 1999, however, the
parties entered into an amendment to this agreement in which
Jazor released the process and technology information of the
proprietary polymer to us early in exchange for our issuance of
500,000 restricted common shares at a deemed price of $2.00. In
this amendment, Jazor also agreed to reduce the maximum amount of
royalty fees payable from $2,000,000 to $1,000,000.
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The manufacturing agreement and the February 2nd amendment are
attached as exhibits to our form 10SB filing with the Securities
and Exchange Commission.
Scientific Advisory Committee
We also formed a scientific advisory committee to advise our
board of directors on the research and development of new
products and on the scientific issues regarding our product
claims. Our scientific advisory committee currently consists of
Professor Christaan Barnard, M.D., Dr. Jim Roszell, Ph.D., Dr.
Claude Paul, L.D.S., D.M.D. and Bruce Jezior. Dr. Barnard is a
world renowned heart transplant specialist from South Africa who
performed the world's first human heart transplant. Dr. Roszell
is a chemist who works full time for us, and has experience in
dealing with regulatory bodies such as the FDA. Bruce Jezior is
the inventor of the proprietary Jatex polymers. Dr. Paul is a
retired dental surgeon and periodontist who received his graduate
and doctorate degrees from Geneva University in Switzerland.
Each member of the scientific advisory committee spends a small
portion of their business time on committee business. We consult
with members of the scientific advisory committee on an as needed
basis generally to provide us with direction on the research and
development of our products.
Members of the committee do not conduct any research or
development activity for us. Research and development on our
products is carried on through independent laboratories.
Research and Development Expenditures
During the 1998 and 1999 fiscal years, we spent the following
amounts on research and development activities:
Year Ended Year Ended
December 31, 1998 December 31, 1999
$384,550 $ 68,228
As we were formed in 1998, we had no research and development
expenditures from years prior to 1998.
Manufacturing of our products
Our products are manufactured by SVP at our facility at 6320 S.
Sandhill Road, Unit #10, Las Vegas, Nevada 89120. The
manufacturing process consists of the manufacture of the polymer
base and the addition of the active Triclosan ingredient. The
manufacturing process starts with the combination of the base
ingredients in accordance with the process prescribed by our
proprietary formula. The combined ingredients are then heated to
critical temperatures, cooled and bottled. Once manufactured,
the finished product is stored on site pending shipment.
We currently have the capacity to produce approximately 500
gallons of product per day.
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The ingredients for our products are supplied by a number of
different chemical manufacturers and can be purchased easily from
alternate suppliers if the need arose. We do not have any long
term contractual arrangements with any of our suppliers.
Marketing Efforts to Date and Distribution Methods of the
Products
We originally commenced marketing of our products exclusively
through a network marketing program known as the "Net/Direct,
Dual Compensation Plan" through wholly owned subsidiaries. The
Net/Direct Plan had been structured to provide various incentives
to encourage independent businesses and individuals to sell and
buy our products or to make customer referrals. The Net/Direct
Plan contemplated that independent businesses and individuals
would earn commissions off their own sales and the sales of
others they brought into the marketing program.
We decided to abandon this network marketing program in June,
1999 and to market our products through a combination of
distribution agreements and direct marketing efforts. As a
result, we entered into an agreement with Aquastel Pacific
Environmental Technology Limited of Hong Kong for the commercial
sale and distribution of our products in Hong Kong, Taiwan,
Singapore, Malaysia and Thailand. Under this agreement, we
granted Aquastel exclusive rights to these countries for a term
of three years, subject to an eight month cancellation clause and
subject to Aquastel meeting certain minimum purchase
requirements. We cancelled this agreement consistent with this
cancellation provision on October 5, 1999.
On July 28, 1999, we entered into an agreement with Essentially
Yours Industries Corp. of Surrey, British Columbia, Canada in
which we granted EYI exclusive distribution rights for our
products in the retail marketplace within Canada and the United
States. Additionally, we signed an agreement on the same date
with EYI International Limited under similar terms and conditions
for the exclusive distribution of our product line in the retail
market within the fourteen countries EYI International presently
operates. We cancelled both of these agreements and entered into
new agreements with EYI for the sale of our polymer and a license
agreement to use our anti-microbial formula.
To date, we have not received a significant volume of sales from
any of these agreements.
Onyx Consulting Partnership Strategic Business Analysis
In December of 1999, we hired Onyx Consulting Partnership to
evaluate our products and business operations and provide
guidance in our sales and business efforts. Onyx began by doing
an independent assessment of our products and research efforts,
along with a review of the marketplace to identify current
competitors.
As a result, Onyx recommended that we:
1. Obtain and test samples of competitor's products to
determine the similarities and differences with our product.
2. Change the labeling of our products to comply with FDA
requirements.
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3. Re-position our product as a "hand sanitizer plus" under the
FDA's monograph for heath care personnel antiseptic hand
wash.
4. Accelerate our short-term product development and testing.
5. Hire a national sales director to begin evaluating and
prioritizing sales activities.
We are currently evaluating these items and taking steps where
appropriate.
Competition
The market for hand care products is highly competitive, and
there are currently a number of products in the marketplace that
make claims similar to ours. In some cases, these products are
offered by companies with established distribution channels and
greater financial resources than ours, posing a strong
competitive threat and creating a formidable barrier to our entry
into the marketplace.
Given the potential for hand care protectants in the marketplace,
it is anticipated that other products may be developed in the
future by competitors with greater resources and established
distribution channels that may be able to meet or exceed the
benefit offered by our products and negatively effect our sales
and market share.
Our key competitors who produce barrier products for occupational
hand disease include the following:
Product Manufacturer
------- ------------
Gloves in a Bottle 1998 Glovesina Bottle, Inc.
GloveCote Fibre Glass-Evercote, Co., Inc.
Invisible Glove Blue Magic, Inc.
The following companies currently manufacture products which are
competitive with our products in the antimicrobial product
market:
Product Manufacturer
- ------- -------------------
ViraShield Genomic Actives, LLC
Dermal Defense LMG Dermal Defense
Unique Skin Unique Laboratories, Inc.
Bio-Safe Bio-Safe Skin Products
The following company produces a polymer delivery technology that
may be competitive with our polymer technology:
Product Manufacturer
- ------- ------------
Penederm Mylan Laboratories
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Key Employees
We have 2 employees, including our President and SVP employs 9
individuals, including its President. All of our employees and
the employees of SVP are full-time, except our
Secretary/Treasurer Howard Thomson.
Mr. Terry Howlett, our President, is paid a salary of $10,000 per
month. We also reimburse Mr. Howlett for expenses incurred in
connection with his duties as President.
Any growth in the number of employees will be largely dependent
on the future success or failure of our continuing sales efforts.
None of our employees or the employees of SVP are subject to
collective bargaining agreements, nor have they been on strike,
or threatened to strike, within the past three years.
Government Approvals and Regulation
Our products are regulated by state and federal authorities, most
notably the Federal Food and Drug Administration and the Federal
Trade Commission.
We have been advised by our consultants that we are on an FDA
list of companies that may be in violation of government product
labeling requirements. As a result, we have made changes to our
existing labels.
The Skinvisible Product line has been formulated under the
tentative over-the-counter monograph for antimicrobial skin
lotions in the United States (the "Monograph"). No specific
application or formulary approval procedure is necessary for
marketing a product in the United States, provided the product
fits under the formulary guidelines of the Monograph. The
official procedure is to file with the FDA which then affixes a
National Drug Code (NDC) number to the product. The NDC numbers
applied to the Skinvisibile Products are as follows:
Skinvisible Product Brand Name NDC Number
- ------------------------------ ----------
Medical Formula NDC#63034-025
Food Service Formula NDC#63034-035
Industrial Formula NDC#63034-055
Salon Formula NDC#63034-045
Personal Formula NDC#63034-065.
In Canada, the Skinvisible Products are regulated by the Health
Protection Branch (HPB) of the Canada Ministry of Health and
Welfare. Under the Canadian regulatory scheme a company submits
an application to the HPB who reviews the application and the
product through a review panel and issues a Drug Identification
Number (DIN) upon approval. The HPB has assigned the following
DIN to the Company: 02240020.
We are not subject to any significant or material environmental
regulation in the normal operation of our business.
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ITEM 2. Description of Property
Our head office and administration activities are currently
carried out on leased premises located at 6320 South Sandhill
Road, Suite 10, Las Vegas, Nevada 89120. These premises are
comprised of 6000 square feet of a mixed office and industrial
facility, and are leased for a term of 4 years expiring on April
14, 2002. Our obligations under the lease for this property are
$73,476 for the year 2000, $73,476 for the year 2001 and $24,492
for the period from January 1, 2002 to April 14, 2002.
Up until recently, we had leased 4000 square feet of office space
at 3095 E. Patrick Lane, Suite 1, Las Vegas, Nevada 89120. We
recently, however, arranged with the owner of the building to get
a complete release from our obligations on this lease.
We do not lease or own any personal property, however, SVP owns a
number of items, including certain manufacturing equipment,
computers, fax machines, office furniture and furnishings. SVP
also leases a couple of telephone system.
ITEM 3. Legal Proceedings
We are not a party to any material legal proceedings and to our
knowledge, no such proceedings are threatened or contemplated.
ITEM 4. Submission of Matters to a Vote of Security Holders.
We had our annual meeting of shareholders on December 22, 1999.
The meeting concerned the election of directors. All five of our
directors were up for re-election and all were re-elected by the
unanimous vote of the shareholders present or represented by
proxy.
Votes Votes Votes Broker
Nominee For Against Withheld Abstentions Non-Votes
- ------- ------
Terry Howlett 859,920 0 0 0 0
Jerry Hodge 859,920 0 0 0 0
Howard Thomson 859,920 0 0 0 0
Anthony 859,920 0 0 0 0
St.John
Jost
Steinbruchel 859,920 0 0 0 0
No other matters were submitted to our security holders for a
vote during the fiscal year ending December 31, 1999.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholders Matters
Market Information
Our shares are currently trading on the OTC Bulletin Board under
the stock symbol SKVI. The first day in which the Company's
shares traded was January 8, 1999. The high and the low bids for
the Company's shares for each quarter of actual trading were:
Quarter High Low
- -------- ----- -----
1st Quarter 1999 $5.25 $1.50
2nd Quarter 1999 $5.59 $4.00
3rd Quarter 1999 $5.25 $2.50
4th Quarter 1999 $3.69 $2.25
1st Quarter 2000 $4.13 $2.13
The quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission and may not represent actual
transactions.
As of February 29, 2000, we had approximately 84 registered
shareholders. We have never issued any dividends and are not
likely to do so in the near future. There are no legal
restrictions on our ability to pay dividends on our common stock.
Recent Sales of Unregistered Securities
We completed the issuance of 5,225,000 shares of the Company's
common stock to eighteen (18) persons at a deemed price of $0.001
per share on March 20, 1998 pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 Act") for services in
connection with the formation of the our business. All shares
were issued to persons who were close friends and business
associates of Mr. Terry Howlett, the sole director and officer of
the Company as of March 20, 1998. Each shareholder provided
services in connection with identifying, reviewing and evaluating
a business opportunity of the company and negotiating the
acquisition of our business. Each shareholder was either a
sophisticated investor or an accredited investor. Each
shareholder was given the opportunity to review the information
available to the company on SVP and its antimicrobial hand lotion
business prior to our agreement to acquire SVP. All shares
issued to the shareholders were "restricted securities", as
defined in the Securities Act of 1933.
We completed the issuance of 275,000 shares of common stock to
Mr. Roger Hocking on March 27, 1998 pursuant to Section 4(2) of
the1933 Act. The shares were issued to Mr. Hocking in
consideration of the acquisition of SVP. All shares issued to
Mr. Hocking were "restricted securities", as defined in the 1933
Act.
We completed an offering of 2,000,000 common shares at a price of
$0.15 per share on April 30, 1998 to a total of 11 investors.
The offering was completed pursuant to Rule 504 of Regulation D
of the 1933 Act.
We completed an offering of 700,000 common shares at a price of
$1.00 per share on May 29, 1998 to a total of 56 investors
pursuant to Rule 504 of Regulation D of the 1933 Act. The
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Company paid commissions totaling $50,000 to three parties in
connection with the completion of this offering.
We completed the issuance of 500,000 shares of common stock to
Mr. Bruce Jezior on February 2, 1999 pursuant to Section 4(2) of
the1933 Act. The shares were issued to Mr. Jezior upon execution
of the amendment to the manufacturing agreement . See Item 6.
"Description of Business - Manufacturing and Marketing License
Agreement". All shares issued to Mr. Jezior were "restricted
securities", as defined in the 1933 Act.
We completed an offering of 1,500,000 common shares at a price of
$1.00 per share on March 8, 1999 to a total of four accredited
investors pursuant to Rule 506 of Regulation D of the 1933 Act.
All shares issued pursuant to this offering were "restricted
securities", as defined in the 1933 Act.
We completed an offering of 1,450,000 common shares at a price of
$2.25 per share on February 8, 2000 to a total of 57 accredited
investors pursuant to Rule 506 of Regulation D of the 1933 Act.
All shares issued pursuant to this offering were "restricted
securities", as defined in the 1933 Act. We also issued out
warrants for the purchase of 1,087,500 shares of common stock in
this offering. The Company paid commissions totaling $326,250 to
4 parties in connection with the completion of this offering:
As of February 29, 2000, we had issued a total of 20,333 shares
of common stock to 6 employees and consultants upon the exercise
of their stock options granted pursuant to the company's
incentive employee stock option plan. These shares were issued
at a price of $1.50 to $2.50 per share, for a total purchase
price of $41,749.50. In addition, subsequent to February 29th,
we issued an additional 21,000 shares to one employee upon the
exercise of his stock options at a total purchase price of
$27,250. The shares were issued pursuant to the exemption from
registration provided by Rule 701 under the Securities Act of
the1933 and were marked as restricted when issued. Since
becoming a reporting company, we have filed a registration
statement using form S-8 to register these shares for resale.
ITEM 6. Management's Discussion and Analysis or Plan of
Operation
We currently intend to pursue the following plan of operations
during the next twelve months:
1. We will be more closely examining the benefits and qualities
of our proprietary polymer and its differences and similarities
to products developed by our competitors.
2. We will be pursuing private label arrangements with various
companies in the commercial, industrial, food service, medical
and network marketing industries for the sale of our product.
3. We will be marketing our polymer to major corporations for
use in their products.
4. We will be devising and revising our business plan to adopt
to our finding in items 1 above.
5. We will continue research and development into new products
using our proprietary polymer technology.
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We anticipate that we will spend approximately $1,500,000 over
the next twelve month period in pursuing this plan of operations.
Of this amount, we anticipate that $750,000 will be realized from
operating revenues, after deduction of costs of goods sold, and
existing cash reserves, and $750,000 will be raised by additional
debt or equity financing.
We are presently undertaking a search for additional equity
financing to cover these anticipated expenses and expected
operational losses. However, we have not, as yet, formalized or
entered into any such arrangements, and we can offer no assurance
that such financing will be available when needed. Our failure
to obtain such financing in a timely manner would have a
significant negative effect on our future operations and may
result in our being forced to cease operations.
Our actual expenditures and business plan may differ from that
stated above. Our board of directors may decide not to pursue
this plan, or may modify it based on available financing. We
currently do not have any financing arrangements in place that
would enable us to meet this plan of operations.
In the event we are not successful in obtaining any further debt
or equity financing, we anticipate that we can sustain our
business operations based on our current cash position and
revenues for only a period of approximately two months.
The above statements are forward-looking statements. Actual
results of our plan of operations may differ materially. Factors
that may cause the actual results or our actual plan of
operations to vary include, among other things, decisions of our
board of directors not to pursue a specific course of action
based on its re-assessment of the facts or new facts and changes
in the hand care business or general economic conditions.
The financial statements for 1999 which are a part of this
document present our combined activities with those of our wholly
owed subsidiaries.
Liquidity And Capital Resources
We had net losses of $2,884,651 for the year ended December 31,
1999 which was up more than double from $1,265,440 for the year
ended December 31, 1998. The losses were funded by various
financings and short term loans we obtained during the year.
These loses can be attributed to the more than double increase in
our operating expenditures and our failure to generate a
significant number of sales. Our problems with making sales and
generating sufficient revenues persists, but we have at least
succeeded in reducing our operating costs over the past two
months. Our loss per share was $.28, up from $.16 at the end of
1998.
We anticipate that losses will continue into the foreseeable
future, most likely to a slower extent as operating costs have
declined.
As of December 31, 1999, we had $898,458 in cash, which was up
from $110,776 at the end of 1998. This result is largely do to
the selling of 1,244,000 shares of common stock in the 4th
quarter 1999 at a price of $2.25 per share. These shares were
sold using the exemption from registration provided by Rule 506
of Regulation D of the Securities Act of 1933. We have applied
these proceeds to the payment of several current and long term
obligations on our books, including the payment of an unsecured
demand loan from Mr. Harold C. Moll, a shareholder of the
Company, in the amount of $725,762, after the end of 1999. As we
continue to have
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problems with generating a sufficient amount of
revenue to support operating costs, our cash accounts continue to
decline.
Results Of Operations
Fiscal Year End 1999 Compared With Fiscal Year End 1998
During 1999, our management received fees and salaries of
$139,607. Of this our president received $120,000, and our
secretary/treasurer received $19,607. Outside management
consultants received a total of $547,804. These costs were
largely associated with marketing, technical and investor
relations consultants. Our management has recently taken steps
to substantially reduce these costs along with others and thus
expects such expenses to significantly decline during this fiscal
year.
General and administrative expenses for 1999 were $2,164,814
compared to $649,300 for 1998. In 1999, we expended substantial
amounts on expanding our operations including the hiring of key
executives for growth and the growth of our physical plant. When
our sales did not meet expectations, we took aggressive steps to
reduce these expenses. We plan to maintain these costs at this
reduced level for the foreseeable future.
Research and development expenses were $68,228 for 1999 compared
to $384,550 for the same period in 1998. R&D cost were higher in
1998 due to the development and testing of our product during
that time period. We anticipate that R&D expenses may increase
slightly over the next year due to the development and testing of
our new products and those of our competitors.
Depreciation and amortization expenses for 1999 were $53,189
compared to $8,858 for the same period in 1998. This increase
was the result of our acquisition of a substantial amount of
property and equipment during 1999. We do not anticipate the
need to purchase any more equipment during this fiscal year.
Impact of the Year 2000 Issue
The "Year 2000 problem" arose because many existing computer
programs use only the last two digits to refer to a year.
Therefore, these computer programs were not expected to properly
recognize a year that begins with "20" instead of the familiar
"19". Many experts believed that if not corrected this problem
would lead to widespread computer failures. Since the turn of
the century, however, we have not experienced any adverse effects
of this Year 2000 problem.
ITEM 7. Financial Statements
The information required by this item is set forth in Item 13 of
this Report.
ITEM 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
We have had no changes in or disagreements with our accountants
on accounting or financial disclosures.
13
<PAGE>
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act.
The following are the names of our officers and directors, their
present positions, and some brief information about their
background.
Skinvisible, Inc.
Name Age Offices Held
- ----- --- ------------
Terry Howlett 52 Director, President
Howard Thompson 52 Secretary, Treasurer, Director
Jerry Hodge 55 Director
Anthony St. John 42 Director
Jost Steinbruchel 59 Director
Skinvisible Pharmaceuticals, Inc.
Name Age Offices Held
- ----- --- ------------
Terry Howlett 52 Director, President, &
Secretary
Jerry Hodge 55 Director
Mr. Terry H. Howlett (Age 52), President & Director. Mr. Howlett
has a diversified background in market initialization and
development, sales and venture capital financing for emerging
growth companies. He has held senior management, marketing and
sales positions with various companies, including the Canadian
Federation of Independent Business, Family Life Insurance, and
Avacare of Canada and founded Presley Laboratories, Inc. which
marketed cosmetic and hand care products on a direct sales basis.
For the ten years prior to becoming President of the Company, Mr.
Howlett was the President and CEO of Voice-it Solutions, Inc., a
publicly traded company on the Vancouver Stock Exchange that made
voice response software for order entry systems.
Mr. Howard Thomson (Age 52), Director, Treasurer and Secretary.
Mr. Thomson has recently retired after 17 years in senior
management positions with the Bank of Montreal, including 5 years
as Branch Manager, 4 years as Regional Marketing Manager and 5
years as Senior Private Banker. He previously resided in London,
England and was employed by the National Westminster Bank for 13
years.
M. Jerry Hodge (Age 55), Director. For over the past five years,
Mr. Hodge has been the President & CEO of Hospitality Network,
the largest provider of in-room video entertainment to the
hotel/casino industry, and has professional management expertise
in the areas of business development, finance, operations, and
corporate strategic planning.
Anthony St. John (Age 42), Director. Lord Anthony St. John has
been a member of the House of Lords in England since 1978. In
1998, he was appointed Extra Lord-in-Waiting to her Majesty the
Queen. He has been a consultant to Merrill Lynch International
since 1991 and
14
<PAGE>
serves as a Director on other publicly traded
companies. Since graduating with a law degree in 1979 from
Capetown, South Africa, Lord St. John has spent a number of years
in the commercial field as auditor and legal counsel for
international companies.
Jost Steinbruchel (Age 59), Director. Since 1984, Mr.
Steinbruchel has operated his own company in Geneva Switzerland
specializing in financial engineering in international trade
throughout a wide network of banking relations, principally in
Europe, China, Australia and Africa. Previously, he spent 20
years of his professional career as an executive in international
banking with Lloyds of London, Citicorp and Credit Suisse. Mr.
Steinbruchel has a law degree from Sorboure, Paris.
Terms of Office
Our directors are appointed for one year terms to hold office
until the next annual general meeting of the stockholders or
until removed from office in accordance with our by-laws.
Officers are appointed by our board of directors and hold office
until removed by the board.
Significant Employees
We do not have any other employees who are not already an
executive officer that are expected to make a significant
contribution to the business.
Section 16(a) Beneficial Ownership Reporting Compliance
The following persons have failed to file, on a timely basis, the
identified reports required by section 16(a) of the Exchange Act
during the most recent fiscal year.
- -----------------------------------------------------------------
Number Transactions Known Failures
of Late Not Timely To File a
Name and principal position Reports Reported Required Form
- -----------------------------------------------------------------
Terry Howlett, Director,
President, CEO 2 0 None
Howard Thomson, Director,
Sec/Treas. 2 0 None
Anthony St. John, Director 2 0 None
Jost Steinbruchel, Director 2 0 None
Jerry Hodge, Director 2 0 None
- -----------------------------------------------------------------
15
<PAGE>
ITEM 10. Executive Compensation
Executive Compensation
The following table sets forth certain information as to our five
highest paid executive officers and directors for the fiscal year
ended December 31, 1999.
- -----------------------------------------------------------------
Name and principal position Salary
- -----------------------------------------------------------------
Terry Howlett, Director, President, CEO $ 120,000
Howard Thomson, Director, Sec/Treas. $ 19,607
Anthony St. John, Director $ 11,000
Jost Steinbruchel, Director $ 11,000
Jerry Hodge, Director $ 12,000
Aggregate of the five Highest Paid
Officers and Directors $ 173,607
- -----------------------------------------------------------------
In addition, certain of the officers are provided an automobile
allowance for use of their vehicles for company business and have
and/or will receive stock options to purchase our shares.
Our executive officers and directors received cash compensation
of $173,607, in the aggregate, for services rendered in fiscal
year 1999.
In 1999, we paid a fee of $1,000 per month to our directors,
other than Terry Howlett, in consideration for each director
acting as a director of the company. This compensation was
cancelled by resolution of the board on January 1, 2000.
Summary Compensation Table
Annual Compensation Long Term Compensation
------------------- ----------------------
Other All
Annual Other
Com- Com-
pen- Restricted pen-
sa- Stock Options/* LTIP sa-
Name Title Year Salary Bonus tion Awarded SARs (#)payouts($)tion
- ---- ----- ---- ------ ----- ------ ------- ------- --------- ----
Terry
Howlett President 1999 $120,000 $ 0 $10,785 0 300,000 0 0
Director
Howard Secretary 1999 $ 19,607 $ 0 0 0 50,000 0 0
Thomson Treasurer
Director
Jerry
Hodge Director 1999 $ 12,000 $ 0 0 0 50,000 0 0
Anthony Director 1999 $ 11,000 $ 0 0 0 50,000 0 0
St.John
Jost Director 1999 $ 11,000 $ 0 0 0 50,000 0 0
Steinbruchel
16
<PAGE>
ITEM 11. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth, as of February 29, 1999, the
beneficial ownership of our common stock by each person known by
us to beneficially own more than 5% of the outstanding common
stock and by our officers and directors individually and as a
group. Except as otherwise indicated, all shares are owned
directly.
Name and address Amount of Percent
Title of class of beneficial owner beneficial ownership of class(1)
- -------------- ------------------- -------------------- -----------
Common Terry Howlett 1,000,000 8.57%
Director, President
Common Howard Thomson 156,000 1.34%
Director, Sec./Treas.
Common Anthony St. John 150,000 1.29%
Director
Common Jost Steinbruchel 300,000 2.57%
Director
Common Logan Anderson 800,000 6.85%
Common Harry Moll 850,000 7.28%
Common Abaderra Ltd. 780,000 6.68%
Common Jerry Hodge 150,000 1.29%
Director
Common All Officers and
Directors 1,756,000 15.05%
as a Group (5 persons)
- -------
(1) Based on 11,670,333 shares issued and outstanding on February
29, 2000.
The following table shows the issued and outstanding stock
options held by our officers and directors, and by each person
known by us to beneficially own more than 5% of our common stock
as of February 29, 2000. Each of the following options was
granted by the Company on January 8, 1999.
Name Exercise Price No. of Options Term of Option
Terry Howlett $1.65 300,000 5 years
Jerry Hodge $1.50 50,000 5 years
Howard Thomson $1.50 50,000 5 years
Anthony St. John $1.50 50,000 5 years
Jost Steinbruchel $1.50 50,000 5 years
ITEM 12. Certain Relationships and Related Transactions.
None of the following persons has any direct or indirect material
interest in any transaction to which we are a party since the
incorporation of the Company in March, 1998, or in any proposed
transaction to which the Company is proposed to be a party:
17
<PAGE>
(A) any director or officer;
(B) any proposed nominee for election as a director;
(C) any person who beneficially owns, directly or indirectly,
shares carrying more than 10% of the voting rights
attached to our common stock; or
(D) any relative or spouse of any of the foregoing persons,
or any relative of such spouse, who has the same house as
such person or who is a director or officer of any parent
or subsidiary.
Our policy regarding related transactions requires that any
director or officer who has an interest in any transaction
disclose the presence and the nature of the interest to the
board of directors prior to any approval of the transaction by
the board of directors. The transaction may then be approved by
a majority of the disinterested directors, provided that an
interested director may be counted in determining the presence of
a quorum at the meeting of the board of directors to approve the
transaction. Our policy regarding compensation for directors and
officers is that the board of directors may, without regard to
personal interest, establish the compensation of directors for
services in any capacity.
18
<PAGE>
ITEM 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Exhibits
Exhibit 1: Manufacturing and Marketing License Agreement*
Exhibit 2: Letter Agreement Modifying the Manufacturing and
Marketing License Agreement*
Exhibit 3: Acquisition Agreement of Manloe Labs*
Exhibit 4: Letter Agreement Amending the Agreement for
Acquisition of Manloe Labs*
Exhibit 5: Agreement between the Company and Aquastel Pacific
Environmental Technology of Hong Kong*
Exhibit 6: Distribution Agreement between SVP and Essentially
Yours Industries Corp.*
Exhibit 7: Distribution Agreement between SVP and EYI
International Limited*
- ----------------
* Incorporated by reference from our registration statement on
Form 10-SB12G originally filed with the commission on 4-30-99 and
as amended on 11-8-99 (File No. 0-25911)
Financial Statements
The Company's audited Financial Statements, as described below,
are attached hereto.
1. Audited Consolidated Financial Statements for the periods
ending December 31, 1999 and 1998, including:
(a) Independent Auditors' Report;
(b) Consolidated Balance Sheet;
(c) Consolidated Statement of Operations and Accumulated Equity;
(d) Consolidated Statement of Changes in Stockholders' Equity;
(e) Consolidated Statement of Cash Flows;
(f) Notes to Consolidated Financial Statements;
(g) Supplemental Statements.
2. Consent by Auditor to use of Audited Financial Statements
19
<PAGE>
SKINVISIBLE, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
WITH
INDEPENDENT AUDITOR'S REPORT THEREON
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Page
----
Independent Auditor's 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
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Skinvisible, Inc.
We have audited the accompanying consolidated balance sheet of Skinvisible,
Inc., and subsidiary, a development stage company, as of December 31, 1999
and the related consolidated statements of operations and accumulated
deficit, changes in stockholders' deficit, and statement of cash flows for
the year then ended. These consolidated financial statements are the
responsibility of management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Skinvisible, Inc. and subsidiary as of December 31, 1999, and the results
of their operations, changes in stockholders' deficit and cash flows for
the year ended December 31, 1999, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental consolidated
statement of operating expenses and proforma consolidated balance sheet,
statement of operations and accumulated deficit, and statement of operating
expenses are presented for the purposes of additional analysis and are not
a required part of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Sarna & Company
Westlake Village, California
February 15, 2000
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
ASSETS December 31
-----------
1999 1998
-----------------
Current Assets
Cash $ 898,458 $ 110,776
Accounts Receivable 7,456 4,415
Inventory 149,150 47,530
Prepaid License Fee 50,000 50,000
Advances 0 - 0 -
--------- ---------
Total Current Assets 1,105,064 212,721
Property and Equipment
Furniture and Equipment 135,627 85,894
Laboratory Build-Out 286,922 38,126
---------- ---------
Total Property and Equipment 422,549 124,020
Less Accumulated Depreciation <59,558> <8,858>
---------- ---------
Net Property and Equipment 362,991 115,162
Other Assets - Exclusive Distribution Rights 200,000 200,000
- Prepaid Royalty 1,000,000 - 0 -
- Deposits 5,511 - 0 -
--------- ---------
TOTAL ASSETS $2,673,566 $ 527,883
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
and Accrued Expenses $ 102,695 $ 123,723
Loan Payable 725,762 725,000
----------- ---------
Total Current Liabilities 828,457 848,723
Stockholders' Equity
Common Stock, $0.001 par value
100,000,000 shares authorized,
11,453,000 and 8,200,000 shares issued 11,453 8,200
Additional paid in capital 5,983,747 936,400
Accumulated Deficit <4,150,091><1,265,440>
---------- ---------
Total Stockholders' Equity 1,845,109 <320,840>
---------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,673,566 $ 527,883
========== =========
See Notes to Consolidated Financial Statements
2
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
YEAR ENDED
DECEMBER 31
1999 1998
-------------------
Revenues $ 169,013 $ 12,269
Cost of Sales
Beginning Inventory 47,530 - 0 -
Purchases 181,642 51,531
--------- ---------
Total Available 229,172 51,531
Less: Ending Inventory <149,150> <47,530>
Sample Distribution - 0 - - 0 -
--------- ---------
Total Cost of Sales <80,022> <4,001>
--------- ---------
Gross Profit 88,991 8,268
Operating Expenses <2,973,642> <1,265,440>
--------- ---------
Loss Before Provision for
Income Taxes <2,884,651> <1,273,708>
Provision for Income Taxes <0> <0>
--------- ---------
Net Loss <2,884,651> <1,265,440>
Accumulated Deficit, Beginning
of Year <1,265,440> <0>
----------- ---------
Accumulated Deficit, End of Year $<4,150,091>$<1,265,440>
=========== =========
Net Loss per Share $ <.28>$ <.16>
=========== ===========
Weighted Average Shares Outstanding 10,295,917 7,891,300
=========== =========
See Notes to Consolidated Financial Statements
3
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED
DECEMBER 31
1999 1998
-------------------
Shares of Common Stock Issued:
Beginning Balance 8,200,000 - 0 -
Issuance Pursuant to:
Stock Offering 2,744,000 8,200,000
Royalty Payment Agreement 500,000 - 0 -
Stock Option Plan 9,000 - 0 -
---------- ---------
Ending Balance 11,453,000 8,200,000
========== =========
Common Stock Par Value
Beginning Balance $ 8,200 $ - 0 -
Issuance Pursuant to:
Stock Offering 2,744 8,200
Royalty Payment Agreement 500 - 0 -
Stock Option Plan 9 - 0 -
---------- ---------
Ending Balance 11,453 8,200
---------- ---------
Additional Paid in Capital
Beginning Balance 936,400 - 0 -
Issuance Pursuant to:
Stock Offering 4,034,356 936,400
Royalty Payment Agreement 999,500 - 0 -
Stock Option Plan 13,491 - 0 -
---------- ---------
Ending Balance 5,983,747 936,400
---------- ---------
Accumulate Deficit
Beginning Balance <1,265,440> - 0 -
Net Loss <2,884,651><1,265,440>
--------- ---------
Ending Balance <4,150,091><1,265,440>
--------- ---------
Total Stockholders' Equity $1,845,109 $ 320,840
========== =========
See Notes to Consolidated Financial Statements
4
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED
DECEMBER 31
1999 1998
-------------------
Cash Flows from Operating Activities:
Net Loss $ <2,884,651>$<1,265,440>
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Depreciation 53,189 8,858
<Increase> Decrease in:
Accounts Receivable <3,041> <4,415>
Inventory <101,620> <47,530>
Advances <620> - 0 -
Other Assets - Prepaid Royalty <1,000,000> - 0 -
- Distribution Rights - 0 - <200,000>
- Deposits <5,511> - 0 -
- Prepaid Licensing Fee - 0 - <50,000>
Increase <Decrease> in:
Accounts Payable and
Accrued Expenses 21,028 123,723
--------- ---------
Net Cash Used by Operating Activities <3,963,282> <1,434,804>
Cash Flows from Investing Activities:
Purchases of Property and Equipment <298,529> <124,020>
--------- ---------
Net Cash Used by Investing Activities <298,529> <124,020>
Cash Flows from Financing Activities:
Payment of Loan Principal <598> 725,000
Net Proceeds from the Issuance of
Common Stock 5,050,091 944,600
--------- ---------
Net Cash Provided by Financing Activities 5,049,493 1,669,600
--------- ---------
Net Increase <Decrease> in Cash 787,682 110,776
Cash at Beginning of Period 110,776 - 0 -
--------- ---------
Cash at End of Period $ 898,458 $ 110,776
========= =========
Supplemental Disclosure:
Interest Paid $ 114,661 - 0 -
========= =========
See Notes to Consolidated Financial Statements
5
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(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 subsidiaries, (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
subsidiaries name of Manloe Labs, Inc. was also changed on February 26,
1999 to Skinvisible Pharmaceutical, Inc.
During 1999, the Company formed subsidiaries titled Skinvisible
International, Inc. and Skinvisible Canada to encompass Canadian and other
international ventures.
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of Skinvisible,
Inc. and it's subsidiaries, Skinvisible Pharmaceutical, Inc., Skinvisible
International, Inc., and Skinvisible Canada. 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>
SKINVISIBLE, INC. AND SUBSIDIARIES
(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 9000 shares during the period ended September 30,
1999.
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>
SKINVISIBLE, INC. AND SUBSIDIARIES
(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>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
- ---------------------------------------------------------------
Year 2000 Compliance
- --------------------
The Year 2000 issue is the result of computer programs having been written
using two digits (rather than four) to define years. Computers or other
equipment with date-sensitive software may recognize "00" as 1900 rather
than 2000. This could result in system failure or miscalculations. If the
Company or significant customers, suppliers, or other third parties fail to
correct Year 2000 issues, the Company's ability to operate could be
affected.
The following disclosure is pursuant to the Year 2000 Readiness and
Disclosure Act.
The Company's Year 2000 program is designed to minimize the possibility of
Year 2000 interruptions. Any such interruption may have a material adverse
impact on the Company's future operating results. In 1999, the Company
established procedures to identify and assess systems and processes
vulnerable to Year 2000 problems. The Company also developed procedures to
monitor levels of compliance within its stated goals of compliance. In
each area of vulnerability, various testing and readiness methodologies are
being used to identify and correct suspect systems, processes or supplier
interfaces. The Company has met its Year 2000 compliance goals prior to
the end of 1999.
Recently Issued Accounting Pronouncements
- -----------------------------------------
Recently issued accounting pronouncements will have no significant impact
on the Company and its reporting methods.
NOTE 2 - PROVISION FOR INCOME TAXES
- -----------------------------------
The provision for income taxes for the periods ended December 31, 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 December 31, 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.
9
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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%.
Future annual minimum rental commitments are as follows:
Year
----
2000 $ 73,476
2001 $ 73,476
2002 $ 24,492
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 December 31, 1999, the company has future royalty payment commitments
totaling approximately $1,000,000.
NOTE 5 - STOCK OPTIONS
- ----------------------
During the period ended December 31, 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 1,323,500 shares of
common stock were outstanding at December 31, 1999. The exercise of any or
all of these options would cause reported losses per share to decrease.
NOTE 6 - SUBSEQUENT EVENT
- -------------------------
Subsequent to December 31, 1999 the company consolidated office space as a
result of reducing its network marketing efforts. Current lease
commitments are as reflected in footnote number four.
10
<PAGE>
SUPPLEMENTAL INFORMATION
<PAGE>
SKINVISIBLE, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATING EXPENSES
YEAR ENDED
DECEMBER 31
1999 1998
-------------------
Operating Expenses
Advertising $119,205 $ 94,918
Automobile Expense 41,957 - 0 -
Bad Debt Expense 2,946 - 0 -
Bank Charges 2,128 1,217
Consulting - Investor Relations 157,959 - 0 -
Consulting - Sales 169,683 5,000
Consulting - Technical 105,162 17,000
Data Processing 41,423 1,434
Depreciation 53,189 8,858
Director Fees 46,000 - 0 -
Discounts - Credit Cards 646 - 0 -
Donations 1,075 - 0 -
Dues and Subscriptions 11,285 2,347
Equipment Leases - 0 - 28,802
Expenses - Canadian Operations 41,942 16,778
Insurance 60,676 21,330
Interest 114,661 - 0 -
Janitorial 4,185 - 0 -
Office Expenses 31,316 34,161
Outside Labor 5,436 696
Lab Expenses 17,615 - 0 -
Management Fees 182,607 209,000
Meals & Entertainment 58,381 - 0 -
Payroll Taxes 54,945 43,744
Postage and Freight Out 24,563 6,816
Printing 43,822 12,354
Professional Fees 240,990 74,913
Rent 137,106 45,305
Repair & Maintenance 2,085 - 0 -
Research and Development 68,228 384,550
Royalties 72,000 48,000
Security 2,190 1,653
Tax & License 4,492 6,611
Telephone 56,491 11,354
Trade Show Expenses 6,472 23,666
Travel 282,873 - 0 -
Utilities 7,606 2,527
Wages 698,695 170,674
Warehouse Expense 1,607 - 0 -
----------- ---------
Total Operating Expenses $2,973,642 $1,273,708
=========== ==========
See Notes to Consolidated Financial Statements
12
<PAGE>
SARNA & COMPANY
Certified Public Accountants
310 N. Westlake Boulevard
Suite 270
Westlake Village, California 91362
805-371-8900
Fax 805-379-0140
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the inclusion of our audit report
dated February 15, 2000, on the financial statements of
Skinvisible, Inc. ("the Company") for the period ended
December 31, 1999 in the Company's Form 10-KSB annual
report to be filed with the United States Securities
Exchange Commission. We also consent to the application of
such report to the financial information in the Form 10-KSB,
when such financial information is read in conjunction with
the financial statements referred to in our report.
/s/ Sarna & Company
Sarna & Company
Certified Public Accountants
Westlake Village, California
March 23,2000
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Skinvisible, Inc.
By: /s/ Terry Howlett
___________________________________
Terry Howlett, Director, President and CEO
Date: March 27, 2000
In accordance with the Securities Exchange Act, this report has
been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Howard Thomson
___________________________________
Howard Thomson, Director, Secretary and Treasurer,
Chief Financial Officer and Controller
Date: March 27, 2000
By: /s/ Jerry Hodge
___________________________________
Jerry Hodge, Director
Date: March 27, 2000
By: /s/ Anthony St. John
___________________________________
Anthony St. John, Director
Date: March 27, 2000
By: /s/ Jost Steinbruchel
___________________________________
Jost Steinbruchel, Director
Date: March 27, 2000
20
