SKINVISIBLE, INC. 10-Q

Item 1. Financial Statements Our consolidated financial statements included in this Form 10-Q are as follows: F-1 Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited); F-2 Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited); F-3 Consolidated Statements of Stockholders’ Equity ( Deficit) for the three and six months ended June 30, 2024 and 2023 (unaudited); F-4 Consolidated Statements of Cash Flow for the three and six months ended June 30, 2024 and 2023 (unaudited); F-5 Notes to Consolidated Financial Statements. These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2024 are not necessarily indicative of the results that can be expected for the full year. 3 Table of Contents SKINVISIBLE, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, 2024 December 31, 2023 ASSETS Current assets Cash $ 6,990 $ 888 Accounts receivable 5,000 5,000 Accounts receivable - related party 17,592 21,592 Prepaid expense and other current assets 6,300 7,980 Total current assets 35,882 35,460 Patents and trademarks, net 127,176 127,409 Total assets $ 163,058 $ 162,869 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable and accrued liabilities $ 659,692 $ 438,668 Accrued interest payable 2,872,609 2,575,595 Loans from related party 4,200 6,000 Loans payable 433,600 433,600 Convertible notes payable, net of unamortized debt discount of $ 25,627 and $ 63,785 , respectively 40,000 40,000 Derivative liability 13,470 18,544 Total current liabilities 4,023,571 3,512,407 Convertible notes payable related party, net of unamortized discount of $ 0 and $ 0 respectively 5,372,403 5,372,403 Convertible notes payable 348,948 301,102 Total liabilities 9,744,922 9,185,912 Stockholders' deficit Common stock; $ 0.001 par value; 200,000,000 shares authorized; 4,889,843 and 4,539,843 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively 4,890 4,540 Additional paid-in capital 30,387,555 30,352,905 Accumulated deficit ( 39,974,309 ) ( 39,380,488 ) Total stockholders' deficit ( 9,581,864 ) ( 9,023,043 ) Total liabilities and stockholders' deficit $ 163,058 $ 162,869 See Accompanying Notes to Consolidated Financial Statements. F- 1 Table of Contents SKINVISIBLE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three months ended Six months ended June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023 Revenues $ 5,000 $ 5,000 $ 10,000 $ 10,000 Cost of revenues — — — — Gross profit 5,000 5,000 10,000 10,000 Operating expenses Depreciation and amortization 4,756 4,840 9,451 9,484 Selling general and administrative 142,937 112,983 266,426 241,243 Total operating expenses 147,693 117,823 275,877 250,727 Loss from operations ( 142,693 ) ( 112,823 ) ( 265,877 ) ( 240,727 ) Other income and (expense) Gain/(loss) on settlement of debt — — — — Interest expense ( 166,610 ) ( 167,522 ) ( 333,018 ) ( 1,551,636 ) Gain/(loss) on change in derivative liability 5,854 4,270 5,074 1,232 Total other income (expense) ( 160,756 ) ( 163,252 ) ( 327,944 ) ( 1,550,404 ) Net income (loss) $ ( 303,449 ) $ ( 276,075 ) $ ( 593,821 ) $ ( 1,791,131 ) Basic income (loss) per common share $ ( 0.07 ) $ ( 0.06 ) $ ( 0.13 ) $ ( 0.39 ) Fully diluted income (loss) per common share $ ( 0.07 ) $ ( 0.06 ) $ ( 0.13 ) $ ( 0.39 ) Basic weighted average common shares outstanding 4,539,843 4,539,843 4,539,843 4,539,843 Fully diluted weighted average common shares outstanding 4,639,843 4,539,843 4,589,843 4,539,843 See Accompanying Notes to Consolidated Financial Statements. F- 2 Table of Contents SKINVISIBLE, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (UNAUDITED) Common Stock Shares Amount Additional Paid-in Capital Shares payable Accumulated Deficit Total Stockholders' Deficit Balance, December 31, 2023 4,539,843 $ 4,540 $ 30,352,905 $ — $ ( 39,380,488 ) $ ( 9,023,043 ) Net loss — — — — ( 290,372 ) ( 290,372 ) Balance, March 31, 2024 4,539,843 $ 4,540 $ 30,352,905 $ — $ ( 39,670,860 ) $ ( 9,313,415 ) Units issued for cash 350,000 $ 350 $ 34,650 $ — $ — 35,000 Net loss — — — — ( 303,449 ) ( 303,449 ) Balance, June 30, 2024 4,889,843 $ 4,890 $ 30,387,555 $ — $ ( 39,974,309 ) $ ( 9,581,864 ) Balance, December 31, 2022 4,539,843 $ 4,540 $ 30,352,905 $ — $ ( 36,998,048 ) $ ( 6,640,603 ) Net loss — — — — ( 1,515,056 ) ( 1,515,056 ) Balance, March 31, 2023 4,539,843 $ 4,540 $ 30,352,905 $ — $ ( 38,513,104 ) $ ( 8,155,659 ) Net loss — — — — ( 276,075 ) ( 276,075 ) Balance, June 30, 2023 4,539,843 $ 4,540 $ 30,352,905 $ — $ ( 38,789,179 ) $ ( 8,431,734 ) See Accompanying Notes to Consolidated Financial Statements. F- 3 Table of Contents SKINVISIBLE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six months ended June 30, 2024 June 30, 2023 Cash flows from operating activities: Net loss $ ( 593,821 ) $ ( 1,791,131 ) Adjustments to reconcile net loss to net cash provided (used) by operating activities: — Depreciation and amortization 9,451 9,484 Amortization of debt discount 25,346 1,253,275 Gain/(loss) on change in derivative liability ( 5,074 ) ( 1,232 ) Changes in operating assets and liabilities: Decrease (Increase) in prepaid assets 1,680 1,605 Decrease (Increase) in accounts receivable - related party 4,000 — Increase (decrease) in accounts payable and accrued liabilities 221,024 178,725 Decrease in due from related party — ( 29,111 ) Increase in accrued interest 297,014 309,889 Net cash provided used in operating activities ( 40,380 ) ( 68,496 ) Cash flows from investing activities: Purchase of intangible assets ( 9,218 ) ( 9,334 ) Net cash used in investing activities ( 9,218 ) ( 9,334 ) Cash flows from financing activities: Common stock issued for cash 35,000 — Payments on related party loans ( 1,800 ) — Payments on convertible notes payable 22,500 — Net cash provided by (used in) financing activities 55,700 — Net change in cash 6,102 ( 77,830 ) Cash, beginning of period 888 81,378 Cash, end of period $ 6,990 $ 3,548 Supplemental disclosure of cash flow information: Cash paid for interest $ — $ — Cash paid for tax $ — $ — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Non-cash investing and financing activities: Accrued salary settled with Convertible notes payable related party — 1,152,194 See Accompanying Notes to Consolidated Financial Statements. F- 4 Table of Contents SKINVISIBLE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2024 1. DESCRIPTION OF BUSINESS AND HISTORY Description of business Skinvisible, Inc., (referred to as the “Company”) is focused on the development and manufacture and sales of innovative topical, transdermal and mucosal polymer-based delivery system technologies and formulations incorporating its patent-pending formula/process for combining hydrophilic and hydrophobic polymer emulsions. The technologies and formulations have broad industry applications within the pharmaceutical, over-the-counter, personal skincare and cosmetic arenas. Additionally, the Company’s non-dermatological formulations, offer solutions for a broad spectrum of markets women’s health, pain management, and others. The Company maintains executive and sales offices in Las Vegas, Nevada. History The Company was incorporated in Nevada on March 6, 1998 , under the name of Microbial Solutions, Inc. The Company underwent a name change on February 26, 1999, when it changed its name to Skinvisible, Inc. The Company’s subsidiary’s name of Manloe Labs, Inc. was also changed to Skinvisible Pharmaceuticals, Inc. Skinvisible, Inc., together with its subsidiaries, shall herein be collectively referred to as the “Company.” 2. BASIS OF PRESENTATION AND GOING CONCERN Basis of presentation The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X , and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s most recent Annual Financial Statements on Form 10-K filed with the SEC on June 30, 2024. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim period presented have been reflected herein. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles in the U.S. for complete financial statements. 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. For the six months ended June 30, 2024, the Company had a net loss of $ 593,821 . The Company has also incurred cumulative net losses of $ 39,974,309 since its inception and requires capital for its contemplated operational and marketing activities to take place. These factors, among others, raises substantial doubt about the Company’s ability to continue as a going concern within one year from the date of filing. Managements plans for the Company are to generate the necessary funding through licensing of its core products and to seek additional debt and equity funding. However, the Company’s ability to generate the necessary funds through licensing or 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. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties. F- 5 Table of Contents 3. SUMMARY OF SIGNIFICANT POLICIES This summary of significant accounting policies of Skinvisible Inc. is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements. Principles of consolidation The consolidated financial statements include the accounts of the Company and its subsidiary Skinvisible Pharmaceuticals Inc. All significant intercompany balances and transactions have been eliminated. Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates used to review the Company’s, impairments and estimations of long-lived assets, allowances for uncollectible accounts, inventory valuation, and the valuations of non-cash capital stock issuances. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Cash and cash equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments and short-term instruments with original maturities of three months or less to be cash equivalents. Fair Value of financial instruments The carrying value of cash, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments. The carrying amount of the Company’s convertible debt is also stated at a fair value of $ 5,764,477 since the stated rate of interest approximates market rates. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable. • Level 1 Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets. The Company uses Level 1 measurements to value the transactions when it issues shares, warrants, options and debt with beneficial conversion features. • Level 2 Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments. The Company did not rely on any Level 2 measurements for any of its transactions in the periods included in these financial statements. • Level 3 Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances. The Company did not rely on any Level 3 measurements for any of its transactions in the periods included in these financial statements. F- 6 Table of Contents Revenue recognition We recognize revenue in accordance with generally accepted accounting principles as outlined in the Financial Accounting Standard Board's (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue From Contracts with Customers, which requires that five steps be followed in evaluating revenue recognition: (i) identify the contract with the customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price; and (v) recognize revenue when or as the entity satisfied a performance obligation. 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 when no further contingencies or material performance obligations are warranted, and thereby have earned the right to receive and retain reasonably assured payments. The Company has made an accounting policy election to exclude from the measurement of the transaction price all taxes assessed by governmental authorities that are collected by the Company from its customers (sales and use taxes, value added taxes, some excise taxes). 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 March 31, 2024 and December 31, 2023, the Company had not recorded a reserve for doubtful accounts. Intangible assets The Company follows Financial Accounting Standard Board’s (FASB) Codification Topic 350-10 (“ASC 350-10”), “ Intangibles – Goodwill and Other ”. According to this statement, intangible assets with indefinite lives are no longer subject to amortization, but rather an annual assessment of impairment by applying a fair-value based test. Under ASC 350-10, the carrying value of assets are calculated at the lowest level for which there are identifiable cash flows. Stock-based compensation The Company follows the guidelines in FASB Codification Topic ASC 718-10 “ Compensation-Stock Compensation ”, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values. Earnings (loss) per share The Company reports earnings (loss) per share in accordance with FASB Codification Topic ASC 260-10 “ Earnings Per Share ”, Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented for the three months ending March 31, 2023, since the effect of the assumed exercise of options and warrants to purchase common shares (common stock equivalents) would have an anti-dilutive effect. There are 83,156,326 additional shares issuable in connection with outstanding convertible debts as of June 30, 2024. F- 7 Table of Contents Recently issued accounting pronouncements Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements. 4. INTANGIBLE AND OTHER ASSETS Patents and trademarks and other intangible assets are capitalized at their historical cost and are amortized over their estimated useful lives. As of June 30, 2024, intangible assets total $ 126,503 , net of $ 177,169 of accumulated amortization. Amortization expense for the three months ended June 30, 2024 and 2023 was $ 9,451 and $ 9,484 , respectively. License and distributor rights were acquired by the Company in January 1999 and provide exclusive use distribution of polymers and polymer based products. The Company has a non-expiring term on the license and distribution rights. Accordingly, the Company annually assesses this license and distribution rights for impairment and has determined that no impairment write-down is considered necessary as of June 30, 2024. 5. RELATED PARTY TRANSACTIONS During the three months ended June 30, 2024 and 2023, the Company repaid net $ 1,800 and $ 0 in advances due to related parties. As of June 30, 2024 and December 31, 2023, the Company had amounts due from related parties of $ 4,200 and $ 6,000 , respectively. Convertible Notes Related Party On January 31, 2023, the Company renegotiated accrued salaries, vacation, and outstanding convertible notes for its two officers. Under the terms of the agreements, all outstanding notes totaling $ 4,220,209 , accrued salaries of $ 1,062,000 , accrued vacation of $ 90,193 were converted to promissory notes convertible into common stock with a warrant feature. The convertible promissory notes are unsecured, due five years from issuance, and bear an interest rate of 10 % . At the investor’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.10 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.15 per share for three years after the conversion date . As of June 30, 2024 and December 31, 2023, the balance of the note was $ 5,372,402 and $ 5,372,402 , respectively. 6. NOTES PAYABLE Secured debt offering During the period from May 22, 2013 and December 31, 2018, the Company entered into a 9 % notes payable to nineteen investors and received proceeds of $ 552,000 . The notes were due two years from the anniversary date of execution. The Notes are secured by the US Patent rights granted for the Company's Sunscreen Products: US patent number #8,128,913: "Sunscreen Composition with Enhanced UV-A Absorber Stability and Methods.” As of June 30, 2024, $ 433,600 of the outstanding notes payable are past due and in default and have been classified as current notes payable. F- 8 Table of Contents 7. CONVERTIBLE NOTES PAYABLE Convertible Notes Payable consists of the following: June 30, December 31, 2024 2023 $ 40,000 face value 9 % secured notes payable to investors, due in 2015. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock a discount of 90 % of the current share price after the first anniversary of the note. The notes are secured by the accounts receivable of a license agreement the Company has with Womens Choice Pharmaceuticals, LLC on its proprietary prescription product, ProCort®. The notes have reached maturity and are now in default, under the notes default provisions the entire balance is now due upon demand. 40,000 40,000 Original issue discount — — Unamortized debt discount — — Total, net of unamortized discount 40,000 40,000 On June 30, 2019, the Company renegotiated accrued salaries and interest and outstanding convertible notes for a former employee. Under the terms of the agreements, all outstanding notes totaling $ 224,064 , accrued interest of $ 119,278 , accrued salaries of $ 7,260 and accrued vacation of $ 1,473 were converted to a promissory note convertible into common stock with a warrant feature. The convertible promissory note is unsecured, due five years from issuance, and bears an interest rate of 10 % . At the noteholder’s option until the repayment date, the note may be converted to shares of the Company’s common stock at a fixed price of $0.20 per share along with warrants to purchase one share for every two shares issued at the exercise price of $0.30 per share for three years after the conversion date . The Company has determined the value associated with the beneficial conversion feature in connection with the notes to be $ 152,642 as valued under the intrinsic value method. The aggregate beneficial conversion feature has been accreted and charged to interest expenses in the amount of $ 25,346 and $ 25,346 for the six months ended June 30, 2024 and 2023, respectively. 352,075 352,075 Unamortized debt discount ( 25,627 ) ( 50,973 ) Total, net of unamortized discount 326,448 301,102 $ 22,500 face value 10 % secured notes payable to investors, due in 2025. At the investor’s option until the repayment date, the note and related interest may be converted to shares of the Company’s common stock at the rate of $0.075. per share and 150,000 warrants exercisable at $0.10 each for 1 year from grant date . 22,500 — Total Convertible Notes $ 388,948 $ 341,102 Current portion: 388,948 40,000 Total long-term convertible notes $ — $ 301,102 F- 9 Table of Contents 8. COMMITMENTS AND CONTINGENCIES License Agreement On October 17, 2019, Skinvisible entered an Exclusive License Agreement with Quoin pursuant to which Skinvisible granted to Quoin a license to certain patents for the development of products for commercial sale. In exchange for the license, Quoin agreed to pay to Skinvisible a license fee of $ 1,000,000 and a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations. The agreement also requires that Quoin make certain milestone payments to Skinvisible upon achieving regulatory approval milestones for certain drug products. The agreement is subject to termination, if among other things, 50 % of the license fee is not paid by December 31, 2019 and if the full License Fee is not paid by March 31, 2020 . No payments were made by Quoin and the agreement was terminated on December 31, 2019. Both Parties subsequently determined that they continue to see the value in a partnership and therefore on May 8, 2020 and again on July 31, 2020 the companies agreed to extend the Exclusive License Agreement, as amended under the same terms to expire on September 30, 2020 and on January 27, 2021 the companies agreed to revise the milestone payments due under the agreement and to extend the agreement indefinitely. On June 14, 2021, the Company entered into an amendment to change the terms of the license Fee as shown below. As partial consideration for the rights conveyed by Skinvisible under this Agreement, Licensee agrees to pay to Skinvisible a one-time, non-refundable, non-creditable license issue fee of one million USD dollars ( $ 1,000,000 ). On February 3, 2020, we entered into a License Agreement with Ovation Science Inc. pursuant to which Skinvisible granted to Ovation Science Inc. a license for the manufacture and distribution rights to its hand sanitizer product, DermSafe. In exchange for the license, Ovation Science Inc. agreed to pay to Skinvisible a royalty percentage on all net sales on the licensed products subject to adjustment in certain situations plus a license fee payable in year 3 of the agreement if it chooses to continue the license. On June 10, 2020, the agreement was further amended to provide additional assignment rights for its hand sanitizer products in exchange for $ 100,000 . 9. STOCKHOLDERS’ DEFICIT The Company is authorized to issue 200,000,000 shares of $ 0.001 par value common stock. The Company had 4,889,843 and 4,539,843 issued and outstanding shares of common stock as of June 30, 2024 and December 31, 2023, respectively. During May 2024, the Company sold 350,000 units at $0.10 per unit, where one unit consists of one share of common stock and a warrant (the “Warrant”) with the right to purchase one-half of one share of Common Stock . The Warrant will be exercisable for a period of 1 year from the date of issuance at $ 0.20 per share. 10. SUBSEQUENT EVENTS In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to June 30, 2024 to the date these financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements. F- 10 Table of Contents