Skyline Medical Inc. (Form: 10-Q, Received: 11/14/2013 06:02:20)

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________ to

Commission File Number: 000-54361

Skyline Medical Inc.

(Exact name of registrant as specified in its charter)

Minnesota		33-1007393
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2915 Commers Drive, Suite 900		Eagan, Minnesota 55121
(Address of principal executive offices)		(Zip Code)

651-389-4800

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of November 6 , 2013 , the registrant had 221,068,939 shares of common stock, par value $.01 per share, outstanding .

SKYLINE MEDICAL INC.

TABLE OF CONTENTS

	Page No.
PART I.

Item 1. Condensed Financial Statements	3

Condensed Balance Sheets September 30, 2013 and December 31, 2012	3

Condensed Statements of Operations for the three-and nine month periods ended September 30, 2013 and September 30, 2012 and for the period from April 23, 2002 (Inception) to September 30, 2013	4

Statement of Stockholders’ Deficit from April 23, 2002 (Inception) to September 30, 2013	5

Condensed Statements of Cash Flows for the nine-month periods ended September 30, 2013 and September 30, 2012 and for the period from April 23, 2002 (Inception) to September 30, 2013	6

Notes to Condensed Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	31

Item 4. Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	31

Item 1A. Risk Factors	31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3. Defaults Upon Senior Securities	35

Item 4. Mine Safety Disclosures	35

Item 5. Other Information	35

Item 6. Exhibits	35

Signatures	36

Exhibit Index	37

	2

FINANCIAL INFORMATION

PART 1. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

SKYLINE MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEETS

(Unaudited)

		September 30, 2013		December 31, 2012
ASSETS
Current Assets:
Cash	$	328,362	$	13,139
Accounts Receivable, net of Allowance for Doubtful Accounts of $0 in 2013 and $4,073 in 2012.		83,191		39,711

Inventories		101,067		145,209
Prepaid Expense and other assets		34,462		27,409
Total Current Assets		547,082		225,468

Fixed Assets, net		37,491		3,521
Intangibles, net		52,074		140,588

Total Assets	$	636,647	$	369,577

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current portion of convertible debt, net of discounts of $0 and $21,138 (See Note 6)	$	-	$	1,081,187
Convertible Notes Payable – Related Party (See Note 9)		-		-

Accounts payable		636,085		733,595

Accrued expenses		744,089		1,599,519
Deferred Revenue		5,000		-
Total Current Liabilities		1,385,174		3,414,301
Long-term convertible debt		-		89,300

Accrued Expenses		444,902		-

Liability for equity-linked financial instruments (See Note 8)		15,219		169,179
Total Liabilities		1,845,295		3,672,780
Stockholders' Deficit:
Common stock, $.01 par value, 300,000,000 authorized, 219,640,021 and 104,247,228 outstanding		2,196,401		1,042,473

Additional paid-in capital		23,138,027		14,945,435

Deficit accumulated during development stage		(26,543,076)		(19,291,111)

Total Stockholders' Deficit		(1,208,648)		(3,303,203)

Total Liabilities and Stockholders' Deficit	$	636,647	$	369,577

See Notes to Condensed Financial Statements

	3

SKYLINE MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

										Period From April 23, 2002 (Inception)
	Three Months Ended September 30,				Nine Months Ended September 30,					To September 30,
	2013		2012		2013		2012		2013
Revenue	$	107,835	$	51,615	$	386,418	$	99,210	$	687,852

Cost of goods sold		26,181		69,962		135,120		85,478		326,880

Gross Margin		81,654		(18,347)		251,298		13,732		360,972

General and administrative expense		3,195,589		2,518,114		5,906,805		5,034,810		21,657,168

Operations expense		354,027		300,719		763,422		519,019		3,054,003

Sales and marketing expense		164,712		13,508		357,274		74,572		1,418,729

Interest expense		407,516		23,703		629,722		168,462		1,556,178

Loss (gain) on valuation of equity-linked financial instruments		(65,287)		(18,678)		(153,960)		(78,275)		(782,030)

Total expense		4,056,557		2,837,366		7,503,263		5,718,587		26,904,048

Net income (loss) available to common shareholders	$	(3,974,903)	$	(2,855,713)	$	(7,251,965)	$	(5,704,855)	$	(26,543,076)

Loss per common share basic and diluted	$	(0.03)	$	(0.04)	$	(0.06)	$	(0.10)	$	(1.63)

Weighted average shares used in computation, basic and diluted		136,728,212		79,467,603		126,664,802		55,370,243		16,302,589

See Notes to Condensed Financial Statements

	4

SKYLINE MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' DEFICIT

PERIOD FROM APRIL 23, 2002 (INCEPTION)

TO SEPTEMBER 30, 2013

	Shares	Amount		Paid- in Capital		Deficit		Total
Issuance of common stock 9/1/02, $.0167 (1)	598,549	$	5,985	$	4,015	$	-	$	10,000

Issuance of common 10/23/02, $1.67/share	2,993		30		4,970				5,000
Net loss							(51,057)		(51,057)
Balance 12/31/02	601,542	$	6,015	$	8,985	$	(51,057)	$	(36,057)

Issuance of common 2/12/03, $.0167 (2)	23,942		239		161				400
Issuance of common 6/11&12,$1.67 (3)	21,548		216		34,784				35,000
Net loss							(90,461)		(90,461)
Balance 12/31/03	647,032	$	6,470	$	43,930	$	(141,518)	$	(91,118)

Issuance of common 5/25/04, $.0167 (4)	6,567		66		44				110
Net loss							(90,353)		(90,353)
Balance 12/31/04	653,599	$	6,536	$	43,974	$	(231,871)	$	(181,361)

Issuance of common 12/14/05, $.0167 (5)	14,964		150		100				250
Vested stock options and warrants					2,793				2,793
Net loss							(123,852)		(123,852)
Balance 12/31/05	668,563	$	6,686	$	46,867	$	(355,723)	$	(302,170)

Issuance of common 5/16 & 8/8, $.0167 (6)	86,869		869		582				1,451
Issuance of common 10/19 & 23, $.0167 (7)	38,906		389		261				650
Issuance of common 12/01, $1.67 (8)	28,739		287		44,523				44,810
Vested stock options and warrants					13,644				13,644
Net loss							(273,026)		(273,026)
Balance 12/31/06	823,077	$	8,231	$	105,877	$	(628,749)	$	(514,641)

Issuance of common 1/30/07 @ $1.67 (9)	599		6		994				1,000
Value of equity instruments issued with debt					132,938				132,938
Capital contributions resulting from waivers of debt					346,714				346,714
Vested stock options and warrants					73,907				73,907
Net loss							(752,415)		(752,415)
Balance 12/31/07	823,676	$	8,237	$	660,430	$	(1,381,164)	$	(712,497)

Issuance of common 6/11 to 9/30, $.35 (10)	4,552,862		45,528		1,547,974				1,593,502
Shares issued to finders, agents	2,012,690		20,127		(20,127)				-
Shares issued to pay direct legal fees	285,714		2,857		(2,857)				-
Issuance of common due to anti-dilution provisions	205,899		2,059		(2,059)				-
Shares issued to pay investor relations services 6/23/08, $.35	250,000		2,500		85,000				87,500
Vested stock options and warrants					354,994				354,994
Capital contributions resulting from waivers of debt					129,684				129,684
Net loss							(1,762,628)		(1,762,628)
Balance 12/31/08	8,130,841	$	81,308	$	2,753,039	$	(3,143,792)	$	(309,445)
Cumulative effect of adoption of EITF 07-5					(486,564)		6,654		(479,910)
Vested stock options and warrants					111,835				111,835
Shares issued 3/20/09 to pay for fund raising	125,000		1,250		(1,250)				-
Shares issued under PMM in 2009, $.50	2,147,810		21,478		1,052,427				1,073,905
Capital contributions resulting from waivers of debt					84,600				84,600
Value of equity-linked financial instruments issued in connection with PPMs					(222,296)				(222,296)
Value of equity instruments issued with debt					30,150				30,150
Shares issued to consultant for fund raising	30,000		300		(300)				-
Shares issued upon conversion of debt and interest, $.27	935,446		9,354		247,100				256,454
Shares issued upon conversion of shareholder note, $.35	14,024		140		4,766				4,906
Net loss							(2,892,230)		(2,892,230)
Balance 12/31/09	11,383,121	$	113,830	$	3,573,507	$	(6,029,368)	$	(2,342,030)

Shares issued in 2010 under PPM, $.50	354,550		3,546		173,729				177,275
Shares issued to consultants for IR and consulting, $.50	374,090		3,741		183,304				187,045
Value of equity instruments issued for consulting services					354,602				354,602
Vested stock options and warrants					11,382				11,382
Value of equity-linked financial instruments issued in connection with PPM in first quarter					(25,553)				(25,553)
Shares issued in May 2010 to consultant, $.50	12,850		129		6,296				6,425
Shares issued in May 2010 to 2008 investors as a penalty for late registration, $.50	710,248		7,102		348,022				355,124
Value of equity instruments issued with debt					119,474				119,474
Value of equity-linked financial instruments issued in connection with PPM in second quarter					(31,332)				(31,332)
Value of equity-linked financial instruments issued in connection with PPM in third quarter					(31,506)				(31,506)
Shares issued in September 2010 under PPM, $.10	250,000		2,500		22,500				25,000
Shares issued to consultants in third quarter at $.22 per share	488,860		4,889		102,660				107,549
Shares issued in November 2010 upon exercise of warrants at $.135 per share	128,571		1,286		16,071				17,357
Shares issued in November 2010 to directors as compensation at $.15 per share	300,000		3,000		42,000				45,000
Vested stock options in fourth quarter					161,107				161,107
Equity instruments issued to consultants in fourth quarter					26,234				26,234
Net loss							(1,352,709)		(1,352,709)
Balance 12/31/2010	14,002,290	$	140,023	$	5,052,497	$	(7,382,077)	$	(2,189,557)

Value of equity instruments issued with debt in first quarter					47,908				47,908
Shares issued at $.075 per share under PPM	5,333,334		53,334		346,666				400,000
Shares issued at $.085 per share under PPM	1,882,353		18,823		141,177				160,000
Shares issued at $.09 per share under PPM	200,000		2,000		16,000				18,000
Shares issued at $.10 per share under PPM	150,000		1,500		13,500				15,000
Vested stock options and warrants in first quarter					1,937,638				1,937,638
Equity instruments issued to consultants in first quarter					91,504				91,504
Stock issued upon conversion of debt in first quarter	416,010		4,160		15,840				20,000
Stock issued to pay interest on debt	158,036		1,580		20,920				22,500
Shares issued at $.07 per share under PPM	1,071,429		10,715		64,285				75,000
Stock issued upon conversion of debt and interest	941,034		9,410		22,590				32,000
Equity instruments issued to consultants					12,256				12,256
Equity instruments issued to consultants					147,116				147,116
Restricted stock issued to consultants	822,842		8,228		46,772				55,000
Shares issued at $.06 per share under PPM	3,500,000		35,000		175,000				210,000
Shares issued at $.20 per share under PPM	1,375,000		13,750		261,250				275,000
Shares issued upon exercise of stock options at $.01	100,000		1,000						1,000
Shares issued at $.35 per share IR compensation	575,000		5,750		195,500				201,250
Equity instruments upon conversion of Accounts Payable					20,000				20,000
Shares issued to private investor at $.15 per share	1,546,667		15,467		216,533				232,000
Net loss							(4,486,879)		(4,486,879)
Balance 12/31/2011	32,074,000	$	320,740	$	8,844,952	$	(11,868,956)	$	(2,703,264)

Shares issued to institutional investor upon conversion of Note Payable at $.1342 per share	59,613		596		7,404				8,000
Shares issued to institutional investor upon conversion of Note Payable at $.13 per share	107,692		1,077		12,923				14,000
Shares issued to institutional investor upon conversion of Note Payable at $.088 per share	170,455		1,705		13,295				15,000
Shares issued to institutional investor upon conversion of Note Payable at $.0446 per share	343,348		3,433		12,567				16,000
Shares issued to institutional investor upon conversion of Note Payable at $.0446 per share	269,058		2,690		9,310				12,000
Shares issued to institutional investor upon conversion of Note Payable at $.0446 per share	268,670		2,687		7,313				10,000
Shares issued to institutional investor upon conversion of Note Payable at $.0397 per share	428,212		4,282		4,218				8,500
Shares issued to a private investor at $.065 per share	9,230,770		92,308		507,692				600,000
Shares issued for consulting to the then interim CEO at $.065 per share	300,000		3,000		16,500				19,500
Vested stock options and warrants					830,372				830,372
Shares issued to an institutional investor upon conversion of Note Payable at $.0286 per share	349,650		3,497		6,503				10,000
Shares issued to a private investor per a convertible note default at $.15 per share	7,500,000		75,000		1,050,000				1,125,000
Shares issued to a private investor at $.15 per share	263,333		2,633		36,867				39,500
Shares issued upon exercise of options at $.01 per share	412,963		4,130						4,130
Stock issued upon conversion of debt at $.15 per share	3,292,557		32,926		460,958				493,884
Stock issued upon conversion of debt at $.065 per share	2,850,754		28,508		156,791				185,299
Shares issued to private investor upon conversion of Note Payable at $.18 per share	316,898		3,169		53,873				57,042
Shares issued to private investor upon conversion of Note Payable at $.052 per share	1,147,078		11,471		48,063				59,534
Shares issued to private investor upon conversion of Note Payable at $.10 per share	565,834		5,658		50,926				56,584
Shares issued to a private investor upon conversion of Note Payable at $.032 per share	1,572,327		15,723		34,277				50,000
Shares issued to an institutional investor upon conversion of Note Payable at $.031 per share	387,097		3,871		8,129				12,000
Stock issued upon conversion of debt at $.15 per share	397,267		3,973		55,617				59,590
Shares issued to a Director as compensation at $.09 per share	277,778		2,778		22,222				25,000
Shares issued under PPM at $.07 per share	9,870,666		98,707		592,239				690,946
Shares issued to institutional investor upon conversion of Note Payable at $.0353 per share	509,915		5,099		12,901				18,000
Shares issued to a private investor upon conversion of Note Payable at $.032 per share	283,718		2,837		6,185				9,022
Shares issued to an institutional investor upon conversion of Note Payable at $.0297 per share including $11,021 of interest.	740,741		7,407		25,614				33,021
Shares issued at $.15 per share as Investor Relations compensation	625,000		6,250		87,500				93,750
Shares issued as settlement to remove anti-dilution agreement at $.065 per share	26,500,000		265,000		1,457,500				1,722,500
Shares issued in settlement with former COO at $.15 per share less shares cancelled at $.09 per share	803,701		8,037		134,296				142,333
Equity value for options and warrants					150,189				150,189
Shares issued at $.07 per share as Investor Relations compensation	300,000		3,000		18,000				21,000
Shares issued at $.15 per share as conversion of debt	157,088		1,571		21,992				23,563
Shares issued to a private investor exercising options at $.01 per share	71,826		718						718
Shares issued to debtors as compensation at $.10 per share	1,563,031		15,630		140,613				156,243
Value of equity instruments issued with debt					33,469				33,469
Shares issued upon conversion of Note Payable at $.07 per share	236,092		2,361		14,165				16,526
Share true-up to certified shareholders list per the stock transfer agency	100		1						1
Net loss							(7,422,155)		(7,422,155)
Balance at 12/31/2012	104,247,228	$	1,042,473	$	14,945,435	$	(19,291,111)	$	(3,303,203)

Shares issued to debtors as compensation at $.15 per share	290,143		2,901		40,620				43,521
Shares issued under PPM to five investors at $.07 per share	7,142,857		71,429		428,571				500,000
Shares issued to an escrow account underlying a debt agreement (11)	1,000,000		10,000						10,000
Shares issued to debtors as compensation at $.15 per share	230,332		2,303		32,247				34,550
Shares issued to an institutional investor at $.07 per share	7,142,858		71,429		428,571				500,000
Value of shares per an agreement with a former officer (12)					40,480				40,480
Vesting expense					1,585,518				1,585,518
Shares issued to consultant as compensation at $.067 per share	250,000		2,500		14,250				16,750
Value of Equity instruments issued with debt					392,556				392,556
Shares issued to former consultant exercising options at $.01 per share	200,000		2,000		-				2,000
Shares issued to former CEO exercising options at $.01 per share.	333,330		3,333		-				3,333
Shares issued upon conversion of four notes payable at $.15 per share	1,041,622		10,416		145,827				156,243
Shares issued for interest to the four notes payable at $.15 per share	74,462		745		10,425				11,170
Shares issued for cashless exercise of warrants at $.12 per share	277,778		2,778						2,778
Shares issued for cashless exercise of warrants at $.16 per share	163,334		1,633						1,633
Shares issued for cashless exercise of warrants at $.15 per share	632,708		6,327						6,327
Shares issued for cashless exercise of warrants at $.20 per share	261,848		2,618						2,618
Shares issued to 24 warrant holders exercised at a reduced price for $.10 per share	10,444,898		104,449		940,041				1,044,490
Shares issued to 4 PPM investors converting notes at $.12 per share	2,637,534		26,375		290,129				316,504
Shares issued to 10 PPM investors converting notes at $.18 per share	5,405,431		54,054		966,146				1,020,200
Shares issued to consultant as compensation at $.38 per share	150,000		1,500		55,500				57,000
Shares issued for two note conversions at $.014 per share	71,066,331		710,663		284,265				994,928
Shares issued for warrant exercise at $.15 per share	1,071,429		10,715		150,000				160,715
Shares issued cashless exercise of warrants at $.075	4,527,947		45,280						45,280
Shares issued to an investor for a cashless exercise of warrants at $.17 per share	204,306		2,044						2,044
Shares issued to one investor for cashless warrant exercise at $.075 per share	231,023		2,310						2,310
Shares issued to former Board Directors as compensation at $.325 per share	100,000		1,000		99,000				100,000
Reduced warrant exercise compensation expense					2,140,946				2,140,946
Options issued as part of employee bonus					147,500				147,500
Shares issued to one investor for cashless warrant exercised at $.12 per share	277,778		2,778						2,778
Shares issued for cashless warrant exercise at $.13 per share	234,844		2,348						2,348
Net loss							(7,251,965)		(7,251,965)
Balance at 9/30/13	219,640,021	$	2,196,401	$	23,138,027	$	(26,543,076)	$	(1,208,648)

(1) Founders shares, 1,000,000 pre-split

(2) 23,492 (40,000 pre-split) shares valued at $.0167 per share as compensation for loan guarantees by management

(3) Investment including 670 shares issued as a 10% finder’s fee

(4) For payment of patent legal fees

(5) Compensation for loan guarantees by management

(6) For vendor contractual consideration

(7) Employment agreements

(8) Investment

(9) Conversion of convertible notes by management

(10) Investment, "October 2008 financing".

(11) The shares reduce by 1/3 yearly and are returned to the Company as the debt is paid.

(12) The Company purchased shares previously issued to a former officer equal to the cost of withholding taxes advanced by the Company. The value here represents the net pay from the transaction that was retained by the Company.

See Notes to Financial Statements

	5

SKYLINE MEDICAL INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,				April 23, 2002 (Inception)
	2013		2012		To September 30, 2013
Cash flow from operating activities:
Net loss		(7,251,965)		(5,704,855)		(26,543,076)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		156,409		768		167,053
Compensation Expense for stock options and warrants		3,791,802		663,770		7,289,474
Equity instruments issued for management and consulting		137,230		3,775,250		5,926,998
Stock-based registration payments		-		-		355,124
Capital contributions resulting from waivers of debt		-		-		476,398
Amortization of debt discount		413,695		45,187		756,497
(Gain) loss on valuation of equity-linked instruments		(153,960)		(78,275)		(782,030)
Changes in assets and liabilities:
Accounts receivable		(43,480)		10,475		(83,191)
Inventories		44,142		(36,811)		(101,067)
Prepaid expense and other assets		(7,053)		7,141		(34,462)
Notes payable to shareholders				-		(14,957)
Accounts payable		3,012		387,294		1,721,851
Accrued expenses		(430,998)		149,347		1,286,691
Deferred Revenue		5,000		-		5,000
Net cash used in operating activities:		(3,336,166)		(780,709)		(9,573,697)
Cash flow from investing activities:
Purchase of fixed assets		(49,791)		-		(62,049)
Purchase of intangibles		(52,074)		-		(194,569)
Net cash used in investing activities		(101,865)		-		(256,618)

Cash flow from financing activities:
Proceeds from long-term and convertible debt		1,542,718		372,284		3,655,209
Repayment of convertible debt				(50,000)		(250,000)
Principal payments on long-term debt				-		(75,667)

Issuance of common stock		2,210,536		437,576		6,829,135
Net cash provided by financing activities		3,753,254		759,860		10,158,677

Net increase (decrease) in cash		315,223		(20,849)		328,362
Cash at beginning of period		13,139		122,985		-
Cash at end of period		328,362		102,136		328,362
Non cash transactions:

Conversion of debt to accrued liabilities		415,775				515,775
Common Stock/Options issued for accrued liabilities		395,304		99,784		613,474
Conversion of accounts payable to convertible debt		-