Skinvisible, Inc. (OTC BB: SKVI) Positive start in 2009 after an uneventful second half of 2008

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Siddharth Rajeev, B.Tech, MBA Analyst February 2, 2009 Investment Analysis for Intelligent Investors Skinvisible, Inc. (OTC BB: SKVI) Positive start in 2009 after an uneventful second half of 2008 Sector/Industry: Healthcare/Biotech/Pharma www.skinvisible.com Market Data (as of February 2, 2009) Current Price US$0.09 Fair Value US$0.65 ( ) Rating* B UY Risk* 4 (Speculative) 52 Week Range US$0.03 US$0.14 Shares O/S 84.65 mm Market Cap US$7.62 mm Current Yield N/A P/E (forward) N/A P/B N/A YoY Return -30.8% YoY OTCBB N/A *see back of report for rating and risk definitions 300,000 $0.16 $0.14 250,000 $0.12 200,000 $0.10 150,000 $0.08 $0.06 100,000 $0.04 50,000 $0.02 0 $0.00 31-Jan-08 31-May-08 29-Sep-08 28-Jan-09 Q3-2008 Highlights Skinvisible was fairly quiet in the second half of 2008, after making good progress in the first half of 2008, by licensing out three of its acne formulations. The company started 2009 on a positive note by signing a joint marketing and development agreement with Cambrex Corporation, (NYSE: CBM) a leading provider of products and services to the pharmaceutical industry. In July 2008, the company announced the successful development of a sunscreen combining the active ingredient avobenzone (trade name Parsol 1789) with Invisicare. Skinvisible's sunscreens with Invisicare achieved eight hours of photostability with minimal degradation, while most products only offer two to four hours of protection. The company announced the appointment of Dr. Geert Cauwenbergh to head its International Advisory Board. Dr. Cauwenbergh has vast international experience in the dermatology market including research, development and the successful commercialization of pharmaceutical products with Barrier Therapeutics, Johnson and Johnson and Janssen Pharmaceutica. Skinvisible has 26 different active ingredients targeting nine different applications; 25 of them are currently available to be licensed. We had mentioned in our previous reports that, although management is actively trying to license their products, it is very important for investors to understand that it can be a very time consuming process, and therefore, requires patience. We continue to believe that Invisicare, because of its advantages over other delivery platforms, has the potential to generate significant interest in the industry as it gets more exposure, and as more products are licensed out. Most of the revenues in the first nine months of FY2008 came from the recognition of unearned licensing revenues recorded in previous years. Our models indicate that the company will have to raise close to $1.5 million in the next 12 months to fund its operations and working capital. However, this estimate will change if the company signs an agreement with significant upfront licensing fees. Key Financial Data (FYE - December 31) (U$) 2005 2006 2007 2008E 2009E Revenue 850,280 691,452 777,685 753,700 852,180 Net Income (1,031,151) (2,097,604) (1,606,922) (1,610,773) (1,159,518) EPS (0.02) (0.03) (0.02) (0.02) (0.01) Cash 30,729 50,070 63,168 8,662 873 Working Capital (941,096) (1,043,664) (644,277) (321,422) (222,229) Total Assets 1,271,495 887,191 712,841 387,543 407,165 Total Debt - 25,728 140,251 127,368 127,368 Skinvisible, Inc. is a research and development company that has formulated and patented innovative polymer delivery technology and compositions for topical skin applications. Its primary objective and focus is to license its patented polymer delivery technology (Invisicare ) and sell its trademarked polymer delivery vehicles and formulated products to established dermatological, medical, cosmetic, cosmeceutical and skincare brand manufacturers.

Skinvisible, Inc. (OTC BB: SKVI) Update Page 2 Uneventful second half of 2008 Skinvisible was fairly quiet in the second half of 2008, after making good progress in the first half of 2008, by licensing out three of its acne formulations. In January 2008, the company signed an agreement with Panalab Internacional S.A. for their anti-acne product formulated with Adapalene (licensed territories - Argentina, Brazil and Chile), and in May 2008, the company signed an agreement with Embil Pharmaceutical Co. Ltd. for products formulated with the active ingredients Clindamycine HCL and Retinoic Acid (licensed territories six countries in Eastern Europe and three in South East Asia). Skinvisible has not announced the specifics of the agreements (such as development fees, licensing fees, and royalties) so as not to influence their other potential negotiations. The financial statements for the period ended September 2008, did not show any receipt of any significant licensing fees. Skinvisible currently has 26 different active ingredients targeting nine different applications; 25 of them are currently available to be licensed (see table below). Category Active Ingredients Rx/OTC/Cosmetic Availability Patent Status 1 Acne 1 4 Rx/OTC 4 Pending 2 Analgesics 2 OTC 2 Pending 3 Anti-aging 1 Cosmetic 1 Pending 4 Anti-fungal 3 Rx/OTC 3 Pending 5 Anti-inflammatory 4 Rx/OTC 3 Pending 6 Antimicrobial Hand Sanitizing Lotion 2,3 3 OTC 3 Approved for two 7 Other Skin/Hair 3 Cosmetic 3 Pending 8 Moisturizers 4 Rx/OTC/Cosmetic 4 Pending 9 UVA/UVB Sunscreen 2 OTC 2 Pending Total 26 25 1. Licensed out two active ingredients to Embil (6 countries in eastern Europe and 3 countries in S.E.Asia) Licensed out one active ingredient to Panalab (three countries in S.America) 2. One of the active ingredients is chlorhexidine which is approved for sale in Canada. The company is in discussions with consultants in the US, China and the EU for regulatory approval. 3. Two of the three active ingredients are already licensed in North America We had mentioned in our previous reports that, although management is in discussions with several industry players to license their products, it is very important for investors to understand that it can be a very time consuming process, and therefore, requires patience. We continue to believe that Invisicare, because of its advantages over other delivery platforms, has the potential to generate significant interest in the industry as it gets more exposure, and as more products are licensed out. Positive start in 2009 - Signs agreement with Cambrex On January 22, 2009, the company announced that it had signed a joint marketing and development agreement with Cambrex Corporation, (NYSE: CBM Market Capitalization $100 million; Revenues in 2007: $252 million) a leading provider of products and services to the pharmaceutical industry. The agreement provides for research and development into acne formulations based on Skinvisible's Invisicare technology and benzoyl peroxide manufactured by Cambrex. In addition, Skinvisible announced that its own new series of benzoyl peroxide with Invisicare formulations are now available for licensing. We believe this agreement is very positive for the company, and supportsour positive outlook on the company s Invisicare technology.

Skinvisible, Inc. (OTC BB: SKVI) Update Page 3 the company, and supportsour positive outlook on the company s Invisicare technology. Other developments since our previous report Offers 8 Hour Photostability for Parsol 1789 - In July 2008, the company announced the successful development of a sunscreen combining the active ingredient avobenzone (trade name Parsol 1789) with Invisicare. According to the company, Avobenzone is one of only two UVA sunscreens approved in the US, and is on the FDA's Category I sunscreen list, as it offers broad-range UVA protection and helps protect the skin against the harmful effects of the sun. Skinvisible's sunscreens with Invisicare achieved eight hours of photostability with minimal degradation, while most products only offer two to four hours of protection. In addition, Invisicare holds ingredients like avobenzone on the skin for extended periods of time, while resisting wash-off and perspiration. Skinvisible is now trying to license this product. Appoints Dr. Geert Cauwenbergh to Its International Advisory Board In November 2008, the company announced the appointment of Geert Cauwenbergh, PhD, to head its International Advisory Board. A brief biography of Dr. Cauwenbergh, as provided by the company, follows: Dr. Cauwenbergh has vast international experience in the dermatology market including research, development and the successful commercialization of pharmaceutical products with Barrier Therapeutics, Johnson and Johnson and Janssen Pharmaceutica. In 2001 he founded Barrier Therapeutics, raising over $250 million in venture capital as well as a listing on the NASDAQ stock exchange. He developed a portfolio of dermatology products, taking the company to annual sales exceeding $45 million until it was recently acquired by Stiefel Laboratories, Inc. In August Dr. Cauwenbergh took on the role of CEO of RHEI Pharmaceuticals, a specialty pharmaceutical company with operations in Belgium, the U.S. and China. Dr. Cauwenbergh has authored over 100 publications and co-authored several books. He received his Ph.D. in Medical Sciences from the Catholic University of Leuven, Faculty of Medicine, in Belgium. Review of Q3 Results Q3-2008 revenues were up 10%YOY, increasing from $0.22 million to $0.24 million. In the nine month period, revenues were down by 4%YOY, from $0.60 million to $0.58 million. Most of the revenues came through the recognition of unearned licensing revenues recorded in previous years. We believe, the decrease in revenues from polymer sales was one of the reasons for the drop in revenues for the nine-month period in FY2008. As the company has not received any significant licensing fees during FY2006 08, unearned licensing fees (in its balance sheet) dropped from $0.98 million at the end of FY2005, to $0.15 million at the end of Q3-2008. Therefore, unless the company receives significant licensing or development fees in FY2009, the company s revenues will drop YOY in FY2009. Our revenue forecast for FY2009, is based on the assumption that the company will receive licensing and production development fees from the acne formulations that were recently licensed out.

Skinvisible, Inc. (OTC BB: SKVI) Update Page 4 The company continued to report high gross margins as most of the reported revenues came through the recognition of unearned licensing revenues, which have zero associated COGS. Gross margins in Q3-2008, and the nine-month period of FY2008, were 96% and 97%, respectively, versus 78% and 83% in the comparable periods in the previous year. We have revised our revenue forecasts because of the slower than expected progress. Our revised revenue forecasts for FY2008, and FY2009, are $0.75 million (down from $1.17 million) and $0.85 million (down from $1.82 million), respectively. Selling, General and Administrative expenses (SG&A) in Q3 dropped YOY from $0.47 million to $0.38 million. In the nine month period, SG&A costs increased from $1.16 million to $1.23 million. In the nine month period, EBITDA was ($1.05 million) in FY2008 versus ($0.76 million) in FY2007. Revised EPS Forecasts: Net losses in Q3-2008 were $0.24 million (EPS: -$0.00) versus $0.47 million (EPS: -$0.01) in Q3-2007. In the nine month period, net losses increased YOY from $1.17 million to $1.37 million (EPS: -$0.02). Our revised EPS forecasts for FY2008, and FY2009, are net losses of $1.61 million (EPS: -$0.02) and $1.16 million (EPS: -$0.01), respectively, down from $1.08 million and $0.64 million, respectively. Cash flows and Cash position The company spent $0.70 million on operations and nil in capital expenditures for the first nine months of FY2008. These were funded by cash on hand, the issuance of common shares, and convertible notes payables. Skinvisible s cash position dropped, as a result, from $63,168 at the end of FY2007, to $15,095 at the end of Q3-2008. The working capital deficit dropped from $0.64 million at the end of FY2007, to $0.50 million at the end of Q3-2008, primarily because of the $0.30 million drop in unearned revenues. The company has no long-term debt. The table below shows a summary of the company s cash and liquidity position. 2004A 2005A 2006A 2007A Q3-2008 Working Capital (in C$) (721,254) (941,096) (1,043,664) (644,277) (499,030) Current Ratio 0.26 0.21 0.09 0.40 0.37 Debt / Capital 0.0% 0.0% -10.9% -64.7% -56.8% Debt / Equity 0.0% 0.0% -9.8% -39.3% -36.2% Interest Coverage Ratio (EBIT) * - - - - - * Has yet to report positive EBIT At the end of Q3-2008, the company had $0.32 million in accounts payables (current liabilities), however, cash + accounts receivables at the end of Q3-2008 were only $0.03 million. However, the company has maintained a high accounts payable relative to its cash + accounts receivables position in previous years, and they have paid off portions of their accounts payables by issuing shares. As the company is currently not generating positive cash

Skinvisible, Inc. (OTC BB: SKVI) Update Page 5 flows, the company will have to raise additional capital through debt or equity, receive significant licensing/product development fees, or issue shares to pay off its current accounts payables. Our models indicate that the company will have to raise close to $1.5 million in the next 12 months to fund its operations and working capital. However, this estimate will change if the company signs an agreement with significant upfront licensing fees in 2009, or pays down its debt by issuing shares. Stock Options and Warrants Valuation and Rating At the end of Q3-2008, the company had 5.57 million stock options (weighted average exercise price of $0.17) and 5.84 million warrants (weighted average exercise price of $0.15) outstanding. Our revised valuation on the company dropped from $0.73 per share to $0.65 per share as we lowered our revenue forecasts. DCF Valuation Model (in US$) 2008F 2009F 2010F 2011F 2012F 2013F FFO (162,418) (975,807) (716,654) 1,823,175 4,240,123 7,597,204 -increase in w/c (237,015) (106,982) (502,344) (354,670) (296,128) (421,032) =CFO (399,433) (1,082,789) (1,218,998) 1,468,504 3,943,995 7,176,171 -capex - (25,000) (25,000) (25,000) (25,000) (25,000) FCF (399,433) (1,107,789) (1,243,998) 1,443,504 3,918,995 7,151,171 PV (399,433) (964,544) (943,083) 952,826 2,252,349 3,578,519 2014F 2015F 2016F 2017F 2018F Terminal FFO 8,798,656 9,400,748 10,477,658 20,576,886 22,776,471 14,008,921 -increase in w/c (279,975) (520,358) (201,919) (1,839,232) (507,630) (192,213) =CFO 8,518,681 8,880,389 10,275,739 18,737,654 22,268,840 13,816,708 -capex (25,000) (25,000) (25,000) (25,000) (25,000) (25,000) FCF 8,493,681 8,855,389 10,250,739 18,712,654 22,243,840 13,791,708 PV 3,700,729 3,359,419 3,385,922 5,381,736 5,570,087 29,141,725 Discount Rate 14.9% Weighted Average Cost of Capital (WACC) Terminal Growth 3.00% Cost of Equity 15.8% Sum PV 55,016,250 Cost of Debt 10.0% Cash $15,095 Debt / Capital (long-term avg) 10.0% Debt $147,397 Equity / Capital (long-term avg) 90.0% PV Equity $54,883,948 Tax 36.0% Shares O/S 84,645,888 WACC 14.9% Value per share $0.65

Skinvisible, Inc. (OTC BB: SKVI) Update Page 6 Therefore, based on our revised valuation models and review of the company s progres since our previous report, we reiterate our BUY rating, and lower our fair value from $0.75 to $0.65 per share. Risks The following factors, though not exhaustive, will cause our estimates to differ from actual results: Market recognition and brand awareness are key factors that will impact long-term growth prospects. Ongoing success depends on achieving innovative polymer delivery results, licensing agreement negotiations, royalty revenues, various patents pending, as well as their legalities, and conformance to any regulatory and environmental requirements. Our revenues and EPS projectionsdepend heavily on the company s ability to license their products. Delays in approvals of pending patents will put downward pressure on our revenue forecasts. Liquidity risks - The company continues to maintain a high accounts payable balance relative to its cash and accounts receivables. Skinvisible will have to raise additional capital through debt or equity, receive significant licensing or product development fees, or issue shares to pay off its accounts payables. We rate the company s shares Risk 4 (Speculative).

Skinvisible, Inc. (OTC BB: SKVI) Update Page 7 CONSOLIDATED STATEMENT OF OPERATIONS Year ended December 31 (expressed in US$) 2005A 2006A 2007A 2008F 2009F Revenues 850,280 691,452 777,685 753,700 852,180 Cost of revenues 140,399 77,465 140,875 25,090 32,259 Gross profit 709,881 613,987 636,810 728,610 819,921 Stock-based compensation 241,803 859,160 475,006 451,256 170,436 SG & A 1,225,626 1,590,493 1,508,773 1,619,664 1,781,630 EBITDA (757,548) (1,835,666) (1,346,969) (1,342,310) (1,132,145) Amortization and Depreciation 275,710 261,187 18,176 18,211 13,276 EBIT (1,033,258) (2,096,853) (1,365,145) (1,360,521) (1,145,421) Other income (expense) 2,107 192 3,000 Interest Income (expense) (943) (241,777) (253,252) (14,097) EBT (1,031,151) (2,097,604) (1,606,922) (1,610,773) (1,159,518) Taxes - - - Foreign currency translation adjustment - Net Income (1,031,151) (2,097,604) (1,606,922) (1,610,773) (1,159,518) EPS (0.02) (0.03) (0.02) (0.02) (0.01)

Skinvisible, Inc. (OTC BB: SKVI) Update Page 8 CONSOLIDATED BALANCE SHEET As at December 31 (expressed in US$) 2005A 2006A 2007A 2008F 2009F ASSETS Current Cash 30,729 50,070 63,168 8,662 873 Accounts receivables 127,989 28,812 42,088 19,272 31,129 Inventory 73,794 22,902 20,455 18,843 21,305 Due from related party 4,765 1,119 1,196 1,196 1,196 Prepaid expenses & others 6,344 3,461 298,621 250,469 251,837 Total current assets 243,621 106,364 425,528 298,441 306,339 Fixed Assets 26,480 29,652 22,440 13,464 36,444 Deposits Patents and trademarks 51,394 41,175 34,873 25,638 14,382 License and distributor rights 50,000 50,000 50,000 50,000 50,000 Prepaid royalty fees 900,000 660,000 180,000 - - Total Assets 1,271,495 887,191 712,841 387,543 407,165 LIABILITIES AND SHAREHOLDERS EQUITY Current Bank overdraft Accounts payable and accrued liabilities 206,717 299,300 479,554 437,389 387,594 Accrued interest payable 6,948 13,606 13,606 Loan from related party and others 25,728 78,860 6,741 6,741 Convertible notes payables 54,443 120,627 120,627 Unearned revenues 978,000 825,000 450,000 41,500 Total current liabilities 1,184,717 1,150,028 1,069,805 619,863 528,568 Long-term liabilities Total liabilities 1,184,717 1,150,028 1,069,805 619,863 528,568 Shareholders equity (deficiency) Equity 11,544,227 13,427,761 14,939,884 16,675,301 17,945,737 Stock subscription payable 134,873 Accumulatd other comprehensive income (672) Accumulated Profit (Deficit) (11,592,322) (13,689,926) (15,296,848) (16,907,621) (18,067,139) Total shareholders equity (deficiency) 86,778 (262,837) (356,964) (232,320) (121,402) Total Liabilities and Shareholder's equity 1,271,495 887,191 712,841 387,543 407,165

Skinvisible, Inc. (OTC BB: SKVI) Update Page 9 CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31 (expressed in US$, 000's) 2005A 2006A 2007A 2008F 2009F OPERATING ACTIVITIES Net income (loss) (1,031,151) (2,097,604) (1,606,922) (1,610,773) (1,159,518) Add (deduct) non-cash items Depreciation and amortization 275,710 21,187 18,176 18,211 13,276 Stock based compensation 241,803 859,160 480,006 451,256 170,436 Stock issued for donation Others Interest expense 943 217,056 238,512 Funds from Operations (513,638) (1,216,314) (891,684) (902,794) (975,807) Changes in working capital Inventory 38,848 50,892 2,447 1,613 (2,462) Accounts receivables (108,048) 99,177 (37,207) 22,816 (11,857) Prepaid expenses and others (4,423) 2,883 13,324 228,152 (1,368) Related party receivables 16,361 - (77) - - Deposits 240,000 240,000 Bank draft Accounts payables and liabilities 11,399 113,322 317,927 (42,165) (49,796) Accrued interest - 11,398 Unearned revenues 355,000 (153,000) (400,000) (408,500) (41,500) 309,137 353,274 147,812 (198,084) (106,982) Cash flow from operations (204,501) (863,040) (743,872) (1,100,878) (1,082,789) FINANCING ACTIVITIES Proceeds from related party loans and others 25,728 153,132 (72,119) Proceeds from convertible notes payables - 410,500 575,991 Proceeds from stock subscription payables 134,873 - - Proceeds from issuance of common stock 12,000 870,500 198,000 542,500 1,100,000 Cash provided by financing activities 146,873 896,228 761,632 1,046,372 1,100,000 INVESTING ACTIVITIES Purchase of fixed assets and untangible assets (4,077) (13,847) (4,662) (25,000) Proceeds from disposal of fixed assets Cash used in investing activities (4,077) (13,847) (4,662) - (25,000) Exchange rate changes Increase in cash and cash equivalents (61,705) 19,341 13,098 (54,506) (7,789) Cash and cash equivalents, beginning of year 92,434 30,729 50,070 63,168 8,662 Cash and cash equivalents, end of year 30,729 50,070 63,168 8,662 873

Skinvisible, Inc. (OTC BB: SKVI) Update Page 10 Fundamental Research Corp. Equity Rating Scale: Fundamental Research Corp. Equity Rating Scale: Buy Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold Annual expected rate of return is between 5% and 12% Sell Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though curent free cash flow may be negative due to capital investment). The company s capital structure is conservative with litle to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative. Disclaimers and Disclosure The opinions expresed in this report are the true opinions of the analyst about this company and industry. 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