Certain statements, other than purely historical information, including
estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements generally are identified by the words "believes,"
"project," "expects," "anticipates," "estimates," "intends," "strategy," "plan,"
"may," "will," "would," "will be," "will continue," "will likely result," and
similar expressions. We intend such forward-looking statements to be covered by
the safe-harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and are including this
statement for purposes of complying with those safe-harbor
provisions. Forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may cause actual
results to differ materially from the forward-looking statements. Our ability to
predict results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse affect on our operations
and future prospects on a consolidated basis include, but are not limited to:
changes in economic conditions, legislative/regulatory changes, availability of
capital, interest rates, competition, and generally accepted accounting
principles. These risks and uncertainties should also be considered in
evaluating forward-looking statements and undue reliance should not be placed on
such statements. We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. Further information concerning our business, including
additional factors that could materially affect our financial results, is
included herein and in our other filings with the SEC.
We, through our wholly owned subsidiary Skinvisible Pharmaceuticals Inc., are a
pharmaceutical research and development ("R&D") company that has developed and
patented an innovative polymer delivery system, Invisicare and formulated over
forty topical skin products, which we out-license globally. We were incorporated
in 1998, and target an estimated $80 billion global skincare and dermatology
market and a $30 billion global over-the-counter market as well as other
healthcare / medical and consumer goods markets.
With the research and development complete on forty products and numerous
patents issued (technology and product patents), we are ready to monetize our
investment. Our business model will continue to be to out-license our patented
prescription and over-the-counter ("OTC") products featuring Invisicare to
established manufacturers and marketers of brands internationally and to
maximize profits from the products we have already out-licensed. We have also
formed a commercial subsidiary, Kintari Int. Inc. with subsidiaries Kintari USA
Inc. and Kintari Canada Inc., in order to take our cosmeceutical and select OTC
products with Invisicare to market.
The opportunity for us to license our products continues to be a viable model as
the need for pharmaceutical companies to access external R&D companies for new
products due to their own down-sizing or elimination of internal R&D
departments. The demand for our products is enhanced due to the granting of key
US and international patents and the completed development of a number of unique
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Strategic Growth Opportunities
Our growth strategy is to:
1. Generate revenue from direct sales of our cosmeceutical/OTC product line;
2. Generate revenue from online sales and private label / bulk orders of our
Kintari branded products;
3. Capitalize on the success of current licensees;
4. Increase the value of our current pipeline; and
5. Boost licensing revenues by securing additional licensees globally and develop
a robust royalty revenue stream that will finance our future growth.
Our Cosmeceutical/OTC Product Line
Kintari Int. Inc.
Kintari Int. Inc. was incorporated in the Province of Alberta, Canada. The
company was formed to develop, market and sell Skinvisible Pharmaceuticals,
Inc.'s patented skincare products initially in the United States. Kintari Int.
Inc. is our wholly-owned subsidiary.
Previously on April 1, 2016, Skinvisible licensed to Kintari Int. Inc. the
exclusive rights to our existing line of cosmeceutical products plus the
exclusive rights to any future cosmeceutical products developed by Skinvisible
plus the right-of-first-refusal on our existing OTC products plus the
right-of-first-refusal to any future OTC products developed by us in exchange
for a 100% equity position in Kintari Int. Inc. This inter-company agreement has
now been dissolved and all rights still remain with Skinvisible Pharmaceuticals,
Inc., as the original intent was for Kintari to operate as its own company;
however, this did not transpire. There is no change to the ownership as
Skinvisible continues to own 100% of Kintari Int. Inc. and all rights thereof.
Kintari USA Inc. and Kintari Canada Inc. both continue to sell Kintari branded
products through direct sales and online.
DermSafe, our hand sanitizer formulated with Invisicare and chlorhexidine
gluconate has been launched in Canada by our subsidiary Kintari Canada Inc.
where it has Health Canada approval. We launched DermSafe in August, 2016 in
Canada through our Kintari Canadian website for retail customers only. DermSafe
is an alcohol free hand sanitizer that products against 99% of all germs. We are
currently seeking licensees and/or distributors to begin the sale of DermSafe in
South America and in the EU.
Kintari Products in China:
In the thrid quarter of 2016, Kintari Int. Inc. signed an exclusive distribution
agreement with InterSpace Global Inc. InterSpace Global Inc. is an exporter of
"Made in USA" products and has offices in Salt Lake City, Utah and Shenzhen,
China. This new agreement provides for a more efficient export of Skinvisible's
products from the USA and Canada into Greater China (Includes China, Hong Kong,
Macau, Taiwan, Singapore, Malaysia and Thailand). It also includes Korea.
According to the agreement, InterSpace Global Inc. will sell Kintari products to
Chinese consumers through a network of online shopping malls and other channels.
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In addition to DermSafe, Skinvisible will supply its Kintari -branded portfolio
of globally patented skincare products made with its Invisicare delivery
The Kintari product portfolio consists of two anti-aging products to help fight
the signs of aging, a broad spectrum sunscreen along with our latest Hand & Body
Lotion products. All products are made with our patented Invisicare technology.
Our anti-aging products have been developed using proven anti-aging ingredients
with scientific evidence of their effectiveness at reducing the look of fine
lines and wrinkles resulting in youthful looking skin. These potent ingredients
will be powered by patented Invisicare technology, providing consumers with
unique, effective products, which we believe cannot be duplicated.
Our sunscreen is a broad spectrum SPF 30 known as Skinbrella. We completed
independent testing in early 2014 to validate our broad spectrum sunscreen
claims according to the labeling guidelines of the FDA, which are designed to
help reduce the incidents of skin cancer in the U.S. Our claims are as follows:
Claim # 1 - Broad-Spectrum: According to the FDA, in order for a sunscreen
to be labeled "broad spectrum" it must prove it protects against both UVA
and UVB rays by having an SPF (Sun Protection Factor) of at least 15 and a
critical wave length of at least 370 nm. Our sunscreen has surpassed both
of these criteria, allowing our broad spectrum sunscreen label to also
state "prevents sunburn, skin cancer and aging due to the sun."
Claim # 2 - Water-Resistant 80 Minutes: The FDA sunscreen water resistant
claim requires that a sunscreen must have the same SPF after being in water
or sweating for 40 or 80 minutes. Our testing was conducted at an
independent laboratory specializing in sunscreen testing. The test involved
human subjects that applied sunscreen to their arm, followed by the
immersion of the arm into a Jacuzzi for 80 minutes (10 minutes in / 10
minutes out). Our sunscreen successfully completed this testing and is
allowed to use "Water-resistant for 80 Minutes" on its sunscreen label, the
longest length of time allowed by the FDA.
Claim # 3 - Unique Patented Technology / Eight-Hour Photostability: As
previously announced, we were granted a patent from the United States
Patent and Trademark Office entitled "Sunscreen Composition with Enhanced
UVA Absorber Stability and Methods", which provides protection until
November 2029. Skinvisible successfully formulated a unique Invisicare
delivery system specifically for stabilizing avobenzone; the key sunscreen
used in the USA. Data submitted to the US patent office proved that our
sunscreen provides a minimum of eight hours of photostability.
Our Hand & Body Lotion is formulated with five moisturizers including aloe, shea
butter, glycerin, coconut oil and jojoba oil, and to help smooth your skin the
powerful antioxidant Vitamin E. These ingredients restore and nourish your skin
from head to toe.
Topical and Transdermal Cannabis:
On September 15, 2016, we licensed the exclusive world rights to our topical and
transdermal cannabis products formulated with Invisicare to CannaSkin, LLC, a
cannabis product licensing company with international contacts in the medical
marijuana industry. Skinvisible will be an ancillary business to this industry,
providing Invisicare polymers and formulations to licensed producers.
CannaSkin has the exclusive license to manufacture, market and sub-license our
new cannabis products. Their targets will initially include facilities in the 29
United States jurisdictions currently approved for medical marijuana.
Skinvisible has successfully formulated high-quality topical and transdermal
cannabinoid products containing CBD and in the near future will add THC. CBD has
proven to have many therapeutic effects and it does not produce the "high"
associated with THC. Cannabinoids have been used for pain management and to
treat many skin conditions, from acne, eczema, psoriasis, skin cancer, to
anti-aging, due to their anti-oxidant and anti-inflammatory properties. Our
Invisicare technology allows for the superior binding of these products to the
skin, a controlled release of the cannabinoids both topically and transdermally,
as well as providing patent protection. Cannabis is being touted as a
groundbreaking health solution and Skinvisible plans to bring science-based,
patent protected products into this emerging market.
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Capitalize On Current Licensees:
We have: Avon Products globally and Women's Choice Pharmaceuticals in the United
We continue to work diligently with our licensees to ensure they have a smooth
manufacturing process, ongoing R&D support and marketing feedback.
Avon Products, Inc.
Product: We have a long-term contract with Avon globally for over ten years to
provide Invisicare polymer for their long-lasting lipsticks.
Sales: Invisicare polymers are purchased directly from Skinvisible.
Women's Choice Pharmaceuticals
Product: ProCort, long lasting prescription hemorrhoid cream launched in the
United States August 2011. Sales and Royalties: Skinvisible receives a royalty
based on net sales of ProCort. This past year Women's Choice Pharmaceuticals LLC
partnered with Advanced Medical Enterprises, LLC to market ProCort in Puerto
Rico. With over thirty pharmaceutical sales reps calling on OBGYNs in the US,
Women's Choice has been successfully growing their sales of ProCort and we look
forward to continued increased growth in 2017. Women's Choice is seeking to form
other strategic alliances in order to increase its sales efforts by targeting
new territories and targeting medical specialists which previously were not
Additional Skinvisible Products
Sunless Tanning Products
We have developed a new sunless tanning mousse / foam which uses a unique foam
with Invisicare, developed specifically for its foaming properties. This adds
to Skinvisible's line of sunless tanning products which includes sunless tanning
lotions (light, medium and dark), pre-sun moisturizer and after-sun moisturizer
along with sunless tanning spray products for commercial use. The addition of a
sunless tanning mousse enhances this line of products.
We have developed 3 broad spectrum sunscreens, with SPF 15, 30 and 50 (the
highest SPF allowed by the FDA). All are formulated with Avobenzone, the only
UVA sun filter allowed under the US FDA monograph. This UVA/UVB sunscreen was
granted a patent from the United States patent office in 2013. Avobenzone is
known for breaking down in the sun after only two hours - thus the requirement
to reapply every 2 hours. Skinvisible's patent was granted based on
Invisicare's minimum 8 hour photo stability. For countries outside the United
States, Skinvisible has additionally patented UVA/UVB sunscreens formulated with
Increasing The Value of Skinvisible's Pipeline:
We have a pipeline of over forty products which are available for licensing.
Testing is conducted in-house generating proof of concept including release of
the active ingredient as well as long term shelf life (stability). Additional
studies conducted on specific products including skin sensitivity, toxicity and
product efficacy are outsourced to FDA compliant laboratories. These studies are
critical in attracting potential licensees. Our clinical strategy is to:
Our clinical strategy is to find a partner for our prescription product
portfolio. This would allow for a partner to seek FDA approval using the
505b2 pathway for one or more of our products.
Launch of our DermSafe hand sanitizer in Canada either under Kintari or a
licensee. In 2013, we commissioned an independent laboratory to further
analyze the long-term effectiveness of DermSafe when put in contact with
two bacteria; the "super bug" MRSA and E. coli, the "restaurant bug" since
it is often transmitted by food and food handlers. The long-term
effectiveness of two bacteria; Methicillin-resistant Staphylococcus aureus
or MRSA (ATCC #33591) and Escherichia coli or E. coli (ATCC #43888") were
tested up to four hours after application. The results showed that the
individual arms of subjects which had DermSafe applied and were even
rinsed prior to each bacteria challenge, showed a 95.83% reduction at the 4
hour time point for MRSA and 99.38% for E. coli. In 2013, we obtained the
registration rights for DermSafe in Belgium. This designation allows for
the sale and/ or registration of DermSafe in most EU countries. A strategy
is being developed along with a larger global strategy to bring DermSafe to
the EU and. Skinvisible has also commissioned further testing of DermSafe
against the (Middle East Respiratory Syndrome Coronavirus (MERS-CoV); a
SARS-like virus and the avian influenza A virus, H7N9.
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We have developed two cannabis-based products with CBD from imported hemp
(non-psychoactive) and will continue to develop an entire line of
cannabis-based products which will include CBD and THC from marijuana. The
cannabis market that Skinvisible has entered is vast and one of the fastest
growing markets. There is a growing positive public opinion regarding the
cannabis industry due to the increasing amount of encouraging scientific
research proving the benefits and the increasingly supportive cannabis
laws. The legal marijuana industry (medical and recreational) in the USA
has reached over $6 billion in annual sales and is expected to increase to
over $20 billion by 2020. In Canada, where the entire country is primed to
add recreational marijuana nationally next year, the market is projected to
reach $2.5 billion, with some future estimates at a staggering $10 to $22
billion annually. Skinvisible is poised to be a part of this expanding
market by providing ancillary products (Invisicare) and services. It is
part of the ancillary cannabis market as Skinvisible does not sell or touch
cannabis; it sells its proprietary Invisicare polymers coupled with proven
product formulations and services to its licensees. Skinvisible will help
bring science-based, patent protected products into this emerging industry.
Secure Additional Licensees:
We are in discussions and undergoing internal discussions with various
pharmaceutical companies for licenses.
To facilitate further expansion, we are seeking an exclusive license with a
proven US or global based Pharmaceutical Company for our existing Rx product
formulations. The licensee would be expected to pay all costs in getting FDA
approval. The licensee would pay Skinvisible for the license in milestone
payments as Clinical Phases are proven.
Results of Operations for the Three Months Ended March 31, 2017 and 2016
Our revenue from product sales, royalties on patent licenses and license fees
for the three months ended March 31, 2017 was $12,512, a decrease from $28,337
for the same period ended March 31, 2016.
The decrease in revenue for the three months ended March 31, 2017 was mainly due
to a reduction in product sales. We hope to achieve increased revenues for the
rest of 2017, as a result of our distribution agreement with Interspace Global
and our license agreement in the cannabis industry, along with our direct and
online sales of Kintari products.
Cost of Revenues
Our cost of revenues for the three months ended March 31, 2017 decreased to
$1,561 from the prior year period when cost of revenues was $4,627. Our cost of
revenues decreased for the three months ended March 31, 2017 over the prior year
period as a result of decreased product sales. We expect our cost of revenues to
increase as we continue to push sales from Kintari USA and Canada.
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Gross profit for the three months ended March 31, 2017 was $10,951, or
approximately 88% of sales. Gross profit for the three months ended March 31,
2016 was $23,710, or approximately 83% of sales.
Operating expenses decreased to $165,177 for the three months ended March 31,
2017 from $337,787 for the same period ended March 31, 2016.
Our operating expenses for the three months ended March 31, 2017 consisted
mainly of accrued salaries and wages of $95,240, consulting fees of $28,585,
depreciation and amortization expenses of $14,008, rent of $12,557 and insurance
of $7,301. In comparison, our operating expenses for the three months ended
March 31, 2016 consisted mainly of consulting fees of $145,952, accrued salaries
and wages of $93,240, accounting and audit expenses of $17,046, depreciation and
amortization expenses of $14,477, salaries and wages of $11,250, rent of
$10,786, travel fees of $6,245 and legal fees of $6,228.
We had interest expense of $324,758 for the three months ended March 31, 2017,
compared with other expenses of $315,276 for the three months ended March 31,
We expect to continue to experience high interest payments in the future as a
result of our outstanding liabilities. Moreover, as of the date of this report,
there are a number of secured promissory notes with an aggregate principal
amount of approximately $3,444,010 that have matured. In addition, we also have
a number of unsecured promissory notes with an aggregate principal amount of
$144,880 that have matured. If we are unable to generate sufficient revenues
and/or additional financing to service this debt, there is a risk the lenders
will call the notes, secure our assets, as to those applicable secured notes,
and demand payment. If this happens, we could go out of business.
We recorded a net loss of $478,984 for the three months ended March 31, 2017, as
compared with a net loss of $629,353 for the three months ended March 31, 2016.
Liquidity and Capital Resources
As of March 31, 2017, we had total current assets of $90,077 and total assets in
the amount of $321,834. Our total current liabilities as of March 31, 2017 were
$6,882,887. We had a working capital deficit of $6,792,810 as of March 31, 2017.
Operating activities used $27,344 in cash for the three months ended March 31,
2017, as compared with $77,500 for the three months ended March 31, 2016. Our
net loss of $478,984 was the main component of our negative operating cash flow
for the three months ended March 31, 2017, offset mainly by an increase in
accounts payable and accrued liabilities of $165,322, amortization of debt
discount of $167,247, an increase in accrued interest of $76,722 and stock based
compensation of $24,000. Our net loss of $629,353 was the main component of our
negative operating cash flow for the three months ended March 31, 2016, offset
mainly by amortization of debt discount of $162,890, an increase in accounts
payable and accrued liabilities of $183,921 and stock based compensation of
Cash flows provided by financing activities during the three months ended March
31, 2017 amounted to $27,930, as compared with $77,500 for the three months
ended March 31, 2017. Our cash flows for the three months ended March 31, 2017
consisted of $15,000 in proceeds from convertible notes payable and $2,930 in
related party debt. Our cash flows for the three months ended March 31, 2016
consisted of $83,000 in proceeds from convertible notes payable, $57,000 in
proceeds from notes payable and $9,000 in related party loans, offset by $47,500
in payments on convertible notes payable and $24,000 on notes payable.
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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 funding. If we are not able to secure
additional funding, the implementation of our business plan will be impaired.
There can be no assurance that such additional financing will be available to us
on acceptable terms or at all.
Off Balance Sheet Arrangements
As of March 31, 2017, 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
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. We have incurred
cumulative net losses of $30,361,183 since our inception and require capital for
our contemplated operational and marketing activities to take place. Our ability
to raise additional capital through the future issuances of common stock is
unknown. The obtainment of additional financing, the successful development of
our contemplated plan of operations, and our transition, ultimately, to the
attainment of profitable operations are necessary for us to continue operations.
The ability to successfully resolve these factors raise substantial doubt about
our ability to continue as a going concern. These consolidated financial
statements do not include any adjustments that may result from the outcome of
these aforementioned uncertainties.
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
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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, 2017, the Company had
not recorded a reserve for doubtful accounts. The Company has $1,000,000 in
convertible notes payable which are secured by the accounts receivable of a
license agreement the Company has with Women's Choice Pharmaceuticals, LLC on
its proprietary prescription product, ProCort.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to
have a significant impact on our results of operations, financial position or