SKINVISIBLE, INC. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation: • the uncertainty of profitability based upon our history of losses; • legislative or regulatory changes concerning skincare research and therapies; • risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern; • risks related to our operations and uncertainties related to our business plan and business strategy; • changes in economic conditions; • uncertainty with respect to intellectual property rights, protecting those rights and claims of infringement of other’s intellectual property; • competition; and • cybersecurity concerns This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully, including those contained in this Annual Report under “Risk Factors,” and readers should not place undue reliance on our forward-looking statements. Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward- looking statements to conform these statements to actual results. Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. 17 Table of Contents Results of Operations for the Years Ended December 31, 2023 and 2022 Revenues Our revenue, which we combine from product sales, royalties on patent licenses and license fees (product development fees), was $20,000 for the year ended December 31, 2023, a decrease of $259,296 from $279,296 for the same period ended December 31, 2022. The 20,000 in revenue for the year ended December 31, 2023, was primarily the result of licensing fees. Gross Profit We had $0 in cost of revenues for the year ended December 31, 2023, as compared with $4,808 in cost of revenues for the year ended December 31, 2022, so our gross profit was 20,000, or 100% of sales for 2023 and $274,488, or 98% of sales for 2022. Our gross profit in 2023 was due to licensing revenue, and we hope to generate more revenues from our licenses with Quoin and Ovation for the rest of 2024. Operating Expenses Operating expenses decreased to $510,375 for the year ended December 31, 2023, from $512,919 for the same period ended December 31, 2022. Our operating expenses for all periods consisted mainly of selling, general and administrative expenses. Our selling, general and administrative expenses for the year December 31, 2023, consisted mainly of accrued salaries and wages of $356,272 and audit and accounting of $40,638. In comparison, Our selling, general and administrative expenses for the year December 31, 2022 consisted mainly of accrued salaries and wages of $328,769 and audit and accounting of $53,638. Other Expenses We had other expenses of $1,892,065 for the year ended December 31, 2023, as compared with other expenses of $986,455 for the year ended December 31, 2022. Our other expenses for the year ended December 31, 2023, consisted mainly of interest expense, netted against a gain on settlement of debt and gain on derivative liability changes. Our other expenses for the year ended December 31, 2022 consisted mainly of interest expense, netted against a gain on forgiveness of debt and gain on derivative liability changes. Net Loss We recorded a net loss of $2,382,440 for the year ended December 31, 2023, as compared with a net loss of $1,224,887 for the year ended December 31, 2022. 18 Table of Contents Liquidity and Capital Resources Going concern – The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $39,380,488 since its inception and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to generate the necessary funds through licensing of its core products or the ability to raise additional capital through the future issuances of common stock or debt is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These factors, among others, raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties. As of December 31, 2023, we had total current assets of $35,460 and total assets in the amount of $162,869. Our total current liabilities as of December 31, 2023, were $3,512,407. We had a working capital deficit of $3,476,947 as of December 31, 2023, compared with a working capital deficit of $3,535,040 as of December 31, 2022. Operating activities used $75,969 in cash for the year ended December 31, 2023, as compared with $45,170 provided for the year ended December 31, 2022. Our negative operating cash flows for 2023 was the result of our net loss for the year, mainly offset by changes in operating assets and liabilities and the amortization of debt discount. Our positive operating cash flows for 2022 was largely the result of changes in operating assets and liabilities, amortization of debt discount offset mainly by the net loss for the periods. We used cash of $10,521 and $2,530 in investing activities for the years ended December 31, 2023 and 2022, respectively, for the purchase of intangible assets. Cash flows provided by financing activities during the year ended December 31, 2023 amounted to $6,000, as compared with cash used of $27,299 for the year ended December 31, 2022. Our positive financing cash flow for the year ended December 31, 2023 resulted from proceeds from related part notes. Our negative financing cash flow for the year ended December 31, 2022 resulted from payments on related party loans. The features of the debt instruments and payables concerning our financing activities are detailed in the footnotes to our financial statements. Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional capital. Off Balance Sheet Arrangements As of December 31, 2023, there were no off-balance sheet arrangements. Critical Accounting Policies In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. 19 Table of Contents Product sales – Revenues from the sale of products (Invisicare® polymers) are recognized when title to the products are transferred to the customer and only when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive reasonably assured payments for products sold and delivered. Royalty sales – We also recognize royalty revenue from licensing our patented product formulations only when earned, with no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments. Distribution and license rights sales – We also recognize revenue from distribution and license rights only when earned (and are amortized over a five-year period), with no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments. Costs of Revenue – Cost of revenue includes raw materials, component parts, and shipping supplies. Shipping and handling costs is not a significant portion of the cost of revenue. Accounts Receivable – Accounts receivable is comprised of uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. The carrying amount of accounts receivable is reviewed periodically for collectability. If management determines that collection is unlikely, an allowance that reflects management’s best estimate of the amounts that will not be collected is recorded. Management reviews each accounts receivable balance that exceeds 30 days from the invoice date and, based on an assessment of creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of December 31, 2023, we had not recorded a reserve for doubtful accounts. Recently Issued Accounting Pronouncements In August 2020, FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity; Own Equity (“ASU 2020-06”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company is currently evaluating the impact the adoption of ASU 2020-06 will have on the Company’s financial statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk A smaller reporting company is not required to provide the information required by this Item. 20 Table of Contents