Skin Elements (ASX:SKN) has closed an equity facility deal for $20 million that would see it fully funded over the next three years.

The company will use the funds to accelerate the sales and manufacture of its hospital-grade, COVID-19 disinfectant Invisi Shield, which is currently waiting for TGA approval.

The funding deal was done with US-based investment company LDA Capital, and was structured as a put option deal that will enable SKN to sell its shares and receive funds as and when required over the next 36 months.  SKN will also be allowed the flexibility to set its own floor price..

Stockhead spoke exclusively with SKN executive chairman, Peter Malone – a 30-year veteran in global financial markets who has been involved in developing startups over the last two decades – and asked him why the company opted for a funding facility via options issuance instead of a standard equity placement.

Malone says he reviewed numerous alternative funding offers from investment firms  additional to their options underwriting which brought in $3.3M   –  but says the LDA deal is the most desirable as it offers the flexibility to raise capital in parallel with the company’s growth.

“The funds are very much a facility in readiness for the launch of the Invisi Shield product range. This facility allows us to put a floor price on the stock, and we can place it when we want to do it.”

“A simple placement on the other hand, would mean that we’re giving away the stocks at the current market price,” he added.

Malone also says that LDA stands ready to partner with SKN over the long term, potentially providing it with any additional funding over the next decade if required.

The ‘game changer’

Asked  if the company’s focus has pivoted to disinfectant products and away from its traditional natural creams, Malone says the Invisi Shield is the “product for our time”.

He says the company has been  developing a range of natural skincare  products over the last few years when the pandemic hit, and  that’s when it quickly decided to focus on Invisi Shield.

“We’ve just come out of an R&D phase, as all these creams take over a decade to develop, test and commercialise. We’ve persevered and stayed with it . And just as we’re about to launch them, Covid hit.

With Invisi Shield, the company has effectively progressed from microbial, to the virus category. And Malone believes that the product will be a game changer in terms of where the world sits right now in virus disinfections.

Lab tests performed in London have confirmed that the plant-based, alcohol free sanitiser is 99.99 per cent effective against a surrogate of the novel coronavirus that causes COVID-19.

“Invisi Shield is human sensitive, and it’s the only product globally doing this. We can get Covid-19 chemical sprays to fog and clean rooms, but they’re toxic. Hydrogen peroxide bleaching types and others that contain chlorides like BZK, and none of them can be sprayed when humans are there – unlike you can with Invisi Shield.”

Malone added that the common alcohol-based sprays out there can’t be sprayed through the air, as it’s volatile and could catch fire. He likens Invisi Shield’s clean technology to what Tesla’s engine is to the car industry.

Without intending to second guess the TGA, Malone believes the market might get a surprise when the rating comes out in the near future. He says it’s possible the Invisi Shield might get a TGA rating above the current 99.99 per cent hospital grade submitted for.

Our main Australian  distributor, Prudential Associates, is  also  waiting in the wings, ready to market the product to potential customers including schools, offices, hotels, and public transportations – once the TGA labeling is obtained.

As for its sunscreens, SKN says it will release the full range of its sunscreens in the summer of 2021.

“For our natural sunscreens, we’re trying to get production up at the right level, so we can produce substantial quantities that creates a  a price point where you and I can buy it comfortably every day,” Malone said.

What’s ahead

As part of the funding facility deal, SKN will pay LDA Capital a commitment fee of $400k, which is payable in cash in four equal instalments at closing of the company’s first four capital calls.

In addition, it has granted LDA Capital 26 million unlisted options, with each option having an exercise period of three years.

If SKN does not drawdown on the facility in the first 24 months of the term, the company will still be liable to pay LDA the commitment fee of $400k in full. SKN has, however, committed to make the first drawdown by April 16th.

The SKN share price has been on a voluntary suspension since January, but the company expects shares to start trading again when the ASX has completed its review of this latest funding.

The shares last traded at 10c.

This article was developed in collaboration with Skin Elements, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.