PetVivo Holdings, Inc. - Quarter Report: 2019 December (Form 10-Q)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 December 31, 2019

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

For the transition period from _______ to _______

Commission File No. 000-55167

PetVivo Holdings Inc.

(Name of small business issuer in its charter)

5251 Edina Industrial Blvd.

Edina, Minnesota 55439

(Address of principal executive offices)

(952) 405-6216

(Issuer’s telephone number)

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001

(Title of Class)

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes [X] 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 (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2019

INDEX

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of PetVivo Holdings Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I.

ITEM 1. FINANCIAL STATEMENTS

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Nine Months Ended December 31, 2019

Nine Months Ended December 31, 2018

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Shares retroactively restated for 9-for-10 reverse stock split in November of 2019.

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

PetVivo Holdings, Inc.

Notes to Financial Statements

December 31, 2019

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Organization and Description

The Company is in the business of licensing and commercializing our proprietary medical devices and biomaterials for the treatment of afflictions and diseases in animals, initially for dogs and horses. The Company’s operations are conducted from its headquarter facilities in suburban Minneapolis, Minnesota.

(B) Basis of Presentation

PetVivo Holdings, Inc. (the “Company”) was incorporated in Nevada under a former name in 2009 and entered its current business in 2014 through a stock exchange reverse merger with PetVivo, Inc., a Minnesota corporation. This merger resulted in Minnesota PetVivo becoming a wholly-owned subsidiary of the Company.

In April 2017, the Company acquired another Minnesota corporation, Gel-Del Technologies, Inc., through a statutory merger, which is also a wholly-owned subsidiary of the Company.

In November 2019, the Company effected a 9-for-10 reverse split of our authorized and outstanding shares of common stock. Pursuant to this reverse stock split, each ten (10) shares of PetVivo’s outstanding common stock, $.001 par value per share, was combined and converted into nine (9) post-split outstanding shares of common stock, $.001 par value per share; 24,974,518 pre-reverse-split shares of common stock were combined during the 9-for-10 reverse split into 22,477,320 shares of post-reverse-split shares of common stock with 254 shares being issued for fractional shares through the date of the balance sheet. Accordingly, all references to number of shares of common stock and per share data have been adjusted retroactively where applicable to account for this reverse split.

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and note disclosures, which are included in annual financial statements, have been omitted pursuant to these rules and regulations. We believe the disclosures made in these interim unaudited financial statements are adequate to make the information not misleading.

These interim financial statements at December 31, 2019 and for the three and nine months ended December 31, 2019 and 2018, in the opinion of our management, include all adjustments (consisting of normal recurring entries) necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The results for the three and nine months ended December 31, 2019 are not necessarily indicative of the results to be expected for the year ended March 31, 2020 or for any future period.

These unaudited interim financial statements should be read and considered in conjunction with our audited financial statements and the notes thereto for the year ended March 31, 2019, included in our annual report on Form 10-K filed with the SEC.

(C) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its two wholly-owned Minnesota corporations. All intercompany accounts have been eliminated upon consolidation.

(D) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of intangible assets and property and equipment, estimate of fair value of share-based payments and derivative instruments and recorded debt discount, valuation of deferred tax assets and valuation of inventory.

(E) Cash and Cash Equivalents

The Company considers all highly-liquid, temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2019, the Company had $106,240 in cash and no cash equivalents. At March 31, 2019, the Company had $6,460 in cash and no cash equivalents.

(F) Concentration-Risk

The Company maintains its cash with various financial institutions, which at times may exceed limits insured by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2019, cash did not exceed the FDIC uninsured balances and management believes the Company is not exposed to any significant credit risk on cash.

(G) Property & Equipment

Property and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual values) over the asset’s estimated useful life of (3) years for equipment, (5) years for automobile, and (7) years for furniture and fixtures.

(H) Patents and Trademarks

The Company capitalizes direct costs for the maintenance and advancement of their patents and trademarks and amortizes these costs over the lesser of a useful life of 60 months or the life of the patent. We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

(I) Loss Per Share

Basic loss per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

The Company has 5,220,443 warrants outstanding as of December 31, 2019 with varying exercise prices ranging from $3.89 to $.30/share. The weighted average exercise price for these warrants is $.54/share. These warrants are excluded from the weighted average number of shares because they are considered antidilutive.

The Company had 2,896,412 warrants outstanding as of December 31, 2018 with varying exercise prices ranging from $3.89 to $.33/share. The weighted average exercise price for these warrants was $.72/share. These warrants are excluded from the weighted average number of shares because they are considered antidilutive.

The Company uses the guidance in ASC 260 to determine if-converted loss per share. ASC 260 states that convertible securities should be considered exercised at the later date of the first day of the reporting period’s quarter or the inception date of the debt instrument. Also, the if-converted method shall not be applied for the purposes of computing diluted EPS if the effect would be antidilutive.

At December 31, 2019, the Company had $280,000 in convertible notes and $7,057 in accrued interest outstanding, these notes mature in our fiscal quarter ended June 30, 2021; see Note 8 to these financial statements for more information on these convertible notes. If converted, the $287,057 in outstanding convertible notes and accrued interest would convert into 397,464 shares of common stock at a rate of $.72 per share.

(J) Revenue Recognition

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 606, “Revenue From Contracts With Customers”. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company adopted the guidance on April 1, 2018 using the cumulative catch-up transition method. This change in accounting did not have any material effect on the Company’s financial statements.

(K) Research and Development

The Company expenses research and development costs as incurred.

(L) Fair Value of Financial Instruments

The Company applies the accounting guidance under FASB ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The guidance also establishes a fair value hierarchy for measurements of fair value as follows:

The Company’s financial instruments consist of investments – equity securities receivable, notes payable and accrued interest, notes payable and accrued interest - related party, and convertible notes payable. The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 2019 and March 31, 2019, due to the short-term nature of these instruments and the Company’s borrowing rate of interest.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation of the Company’s notes recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.

The Company measured its investments – equity securities receivable at fair value at December 31, 2019, see Note 5 to the financial statements included in this Form 10-Q.

The Company had no assets and liabilities measured at fair value on a recurring basis at December 31, 2019.

(M) Stock-Based Compensation - Non-Employees

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model. The ranges of assumptions for inputs are as follows:

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised.

(N) Income Taxes

The Company accounts for income taxes under Accounting Standards Codification (ASC) Topic 740. Deferred tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company accounts for income taxes under Accounting Standards Codification (ASC) Topic 740.

As required by ASC Topic 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied ASC Topic 740 to all tax positions for which the statute of limitations remained open. As a result of the implementation of ASC Topic 740, the Company did not recognize any change in the liability for unrecognized tax benefits.

The Company is not currently under examination by any federal or state jurisdiction.

The Company’s policy is to record tax-related interest and penalties as a component of operating expenses.

(O) Inventory

Inventories are recorded in accordance with ASC 330 and are stated at the lower of cost and net realizable value. We account for inventories using the first in first out (FIFO) methodology and capitalize costs on a project basis as they occur. The current marketed shelf life of our Kush inventory is 2 years. However, management reserves the right to review and adjust this as appropriate.

(P) Recently Issued and Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this ASU supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2016-02 on April 1, 2019.

In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments (Subtopic 825) to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The amendments in this Update affect all entities that hold financial assets or owe financial liabilities. The amendments are meant to improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income since this Update requires equity securities to be measured at fair value with changes in the fair value recognized through net income. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU 2016-01 on April 1, 2018.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cashflows (Topic 230) to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. This Update addresses eight specific cash flow issues and their presentations in the statement of cash flows. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company adopted ASU 2016-15 on April 1, 2018.

All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.

NOTE 2 - GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.

The Company incurred a net loss of $1,571,252 and had net cash used in operating activities of $415,138 for the nine-month period ending December 31, 2019. Additionally, the Company has an accumulated deficit of $54,077,165, stockholders’ deficit of $748,110, and working capital deficit of $716,138 at December 31, 2019. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months after the date of issuance on these financial statements. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to achieve a level of profitability and/or to obtain adequate financing through the issuance of debt or equity in order to finance its operations.

Management intends to raise additional funds either through a private placement or public offering of its equity securities. Management believes that the actions presently being taken to further implement its business plan will enable the Company to continue as a going concern. While the Company believes in its viability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and raise additional funds.

These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – INVENTORY

As of March 31, 2019 and December 31, 2019, respectively, the Company had approximately $78,000 and $56,000 of finished goods inventory; however, reserves of equal amounts for each respective period were taken because of the substantial doubt in the Company’s ability to utilize this inventory to obtain material sales, primarily due to (among other things) the fact the Company has not obtained controlled study data detailing the safe and effective use of Kush™ in dogs and horses.

As of March 31, 2019, all of the Company’s finished goods inventory was in quarantine due to a contamination issue. During the nine months ended December 31, 2019, the Company cleared $19,044 in inventory for release to the public and is utilizing the product to gather data and establish strategic partner relationships. Of the $19,044, $13,054 is the value of the product before quarantined that remains reserved for and $5,990 is the expense incurred to clear this product for use during the nine-month period ended December 31, 2019, which has been expensed as incurred through Cost of Goods Sold. The Company may continue to clear the remainder of our inventory during the fiscal year ended March 31, 2020 and capitalize and take a reserve for certain expenses incurred, which are estimated to be approximately $7,000.

Total Inventory is broken out as follows:

NOTE 4 – LEASE AND COMMITMENTS

Rent expense for the three and nine months ended December 31, 2019 was $13,434 and $37,724, respectively. Rent expense for the three and nine months ended December 31, 2018 was $25,807 and $55,020, respectively.

On July 2^nd, 2018 the Company gave its manufacturing contractor in Rochester, MN a 90-day notice to cancel the lease and agreement, which it had the right to do so, under which the Company was renting manufacturing and office space; while the Company has yet to recognize any expense directly related to this lease termination through the date of this filing besides approximately $2,000 in moving and labor costs. Subsequently, the Company entered into an one-year agreement on July 13, 2018 with a 60-day notice of termination clause for 1,000 square feet of manufacturing and office space in White Bear Lake, MN.

The Company entered into an eighty-four-month lease for 3,577 square feet of newly constructed office, laboratory and warehouse space located in Edina, Minnesota on May 3, 2017. The base rent is $2,078 per month and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. This lease is terminable by the landlord if damage causes the property to no longer be utilized as an integrated whole and by the Company if damage causes the facility to be unusable for a period of 45 days.

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of December 31, 2019:

In compliance with ASC 842 the Company adopted new guidance in relation to lease accounting on April 1, 2019 whereby we recognized operating lease right-to-use assets and corresponding and equal operating lease liabilities for the lease of our facility in Edina, MN. As of December 31, 2019, planned future base rent lease payments total $108,056, which has been discounted to $105,512 using the 52-week treasury bill coupon equivalent discount rate of 2.18% and a present value model. As of December 31, 2019, the Company only had one operating lease so that the remaining lease term and weighted average discount rate are approximately 5 years and 2.18%, respectively.

As of December 31, 2019, the present value of future base rent lease payments – net is classified between current and non-current assets and liabilities as follows:

Pursuant to a lease wherein our subsidiary, Gel-Del Technologies, Inc., was the lessee until the lease’s termination in 2017, the Company owes approximately $330,000 to the lessor as of December 31, 2019; this amount is included in accounts payable.

NOTE 5 – INVESTMENTS – EQUITY SECURITIES

On June 28, 2019, the Company entered into a purchase agreement with a third-party to purchase 1,500,000 shares of Emerald Organic Products, Inc. (OTC Pink: “EMOR”) common stock for consideration of $1,500. The Company applied guidance from ASU No. 2016-01 Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities and ASC 820 to arrive at a fair value at December 31, 2019, of $1,500. The Company took into account many factors when determining the stock’s fair value including, but not limited to, the nature and duration of the restriction on the stock, the extent to which potential buyers would be limited by the restriction, and qualitative and quantitative factors specific to both the instrument and the issuer.

NOTE 6 – PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:

During the three and nine months ended December 31, 2019, depreciation expense was $2,438 and $12,861, respectively. During the three and nine months ended December 31, 2018, depreciation expense was $2,148 and $5,974, respectively.

During the nine months ended December 31, 2019, we recorded a gain on sale of asset in the amount of $450 wherein we sold an asset that was fully depreciated and originally purchased for $1,004 for $450.

NOTE 7 – INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:

During the three and nine-month periods ended December 31, 2019, amortization expense was $134,283 and $409,994, respectively. During the three and nine-month periods ended December 31, 2018, amortization expense was $160,442 and $479,356, respectively.

Also, during the three and nine-month periods ended December 31, 2019, an intangible impairment expense was recognized whereby we wrote down unamortized, previously-capitalized patent costs amounting to $28,038. During the three and nine-month periods ended December 31, 2018, $-0- in intangible impairment expense was recognized.

NOTE 8 – CONVERTIBLE NOTES

At December 31, 2019, the Company is obligated for several convertible notes payable in the total amount of $287,057 made up of $280,000 in principal and $7,057 in interest. The Company entered into these convertible notes during the quarter ended June 30, 2019. All of these convertible notes mature during the quarter ended June 30, 2021, two years from their inception dates. These convertible notes accrue interest at a rate of 10%. Accrued interest is due and payable each calendar quarter in cash; during the three and nine months ended December 31, 2019, the Company paid out $-0- and $11,479, respectively, in accrued interest to these convertible note holders. These convertible notes automatically convert into shares of common stock at a rate of $.72 per share at the earlier of the maturity date or an uplist to a national securities exchange (e.g. NASDAQ or New York Stock Exchange) provided that the Company’s stock price is at least $.87 at the time of the uplist. The convertible note holders have the right to convert their outstanding principal and interest into shares of the Company’s common stock at any time during their note’s term at $.72 per share. No note holders have converted their notes through the date of this 10-Q filing. As of December 31, 2019, these convertible notes did not include a beneficial conversion feature.

NOTE 9 – NOTES PAYABLE – RELATED PARTY

At December 31, 2019 and March 31, 2019 the Company was obligated for a related party note payable and accrued interest in the total amount of $63,165 and $85,752, respectively; the maturity date of this note is April 30, 2020. The related party note payable terms are accrual of interest at 8% annually with payments of $3,100 per month, which are applied to interest first, then principal. The terms also include a stipulation that if the Company receives additional financing during any 24-month period from the date of the note in the amount greater than $3,500,000, the Company will immediately pay the officer the principal amount of the note along with all interest due.

NOTE 10 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

At December 31, 2019 and March 31, 2019, the Company is obligated to pay $723,680 and $854,990, respectively, in accounts payable and accrued expenses. Of the total at December 31, 2019 of $723,680, $484,069 is made up of accounts payable, while the $239,611 in accrued expenses is made up of past employee’s accrued salaries and related payroll taxes payable. Of the total at March 31, 2019 of $854,990, $524,273 is made up of accounts payable, while the $330,717 in accrued expenses is made up of past employee’s accrued salaries and related payroll taxes payable. The Company has not paid the payroll taxes relating to the accrued salaries, consisting primarily of Social Security and Medicare taxes. At December 31, 2019 and March 31, 2019, respectively, we had accrued $22,235 and $21,482 in payroll taxes payable.

NOTE 11 – ACCRUED EXPENSES – RELATED PARTY

At December 31, 2019, the Company is obligated to pay $228,335 in accrued expenses due to related parties. Of the total, $22,783 is made up of payroll taxes payable.

At March 31, 2019, the Company was obligated to pay $576,393 in accrued expenses due to related parties. Of the total, $89,186 is made up of accounts payable, while $487,207 is made up of accrued salaries and payroll taxes payable.

NOTE 12 - COMMON STOCK AND WARRANTS

Common Stock

On November 22^nd, 2019, the Company approved and declared a reverse stock split of all its outstanding common stock at a ratio of 9-for-10 shares. Pursuant to this reverse stock split, each ten (10) shares of PetVivo’s outstanding common stock, $.001 par value per share, was combined and converted into nine (9) post-split outstanding shares of common stock, $.001 par value per share. This reverse stock split affected all PetVivo shareholders uniformly and accordingly will not alter any shareholder’s percentage interest or ownership of PetVivo equity. Through the date of this filing, 254 shares of common stock have been issued due to rounding up of fractional shares.

During the nine months ended December 31, 2019, the Company issued 2,610,120 shares of common stock as follows:

i) 347,500 shares to John Lai (CEO, President & Director) pursuant to a Settlement Agreement whereby Mr. Lai agreed to release the Company of all claims through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $116,000 and hold the shares for a period of at least 3 years;

ii) 575,808 shares to Randall Meyer (Director) pursuant to a Settlement Agreement whereby Mr. Meyer agreed to release the Company of all claims through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $191,936 and hold the shares for a period of at least 3 years;

iii) 204,000 shares to John Dolan (Secretary & Director) pursuant to a Settlement Agreement whereby Mr. Dolan agreed to release the Company of all claims through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $68,000 and hold the shares for a period of at least 3 years; and

iv) 168,060 shares to a former employee pursuant to a Settlement Agreement dated August 29, 2019, whereby this individual agreed to release the Company of all claims, including compensation earned in the amount of $80,029; and

v) 108,000 shares to a service provider for services provided during the one-year period ended July 13, 2019 and valued at $1.11/share over that period on a pro-rata basis; and

vi) 360,000 shares to one shareholder that the Company sold in exchange for $100,000, which equates to a price per share of $.28/share; and

vii) 270,000 shares to one service provider for services to be provided during the one-year period ended December 31, 2020, whereby this service provider agreed to provide video production, investor relations, and promotional services in exchange for 270,000 shares of common stock. The scope of services includes but is not limited to coordinating the airing of 96 commercials nationally on Bloomberg T.V. network and producing 12, monthly, 10-minute interviews; and

viii) 486,000 shares to various accredited investors in exchange for $135,000 in cash, which equates to a price per share of $.28/share; and

ix) 90,000 shares to service providers for investor relations services to be performed by Barry Kaplan Associates during the six-month period ending in April 2020.

The transactions outlined in this Common Stock section enumerated above i through iii yielded a reduction of $375,936 in Accrued Expenses – Related Party that was owed and payable to them arising from services they provided in the past. The settlement of $80,029 explained in number iv above for a former employee’s accrued salary was accounted for as a reduction of Accounts Payable and Accrued Expenses. A loss on extinguishment of debt was recorded in the amount of $81,738 related to the transactions numbered i through iv.

Also, on December 9, 2019, the Company entered into an agreement whereby we agreed to issue 150,000 shares of common stock to a service provider, Launchpad IR, at $.42/share for total consideration of $70,500, for investor relations services. These shares remained unissued at the balance sheet date, December 31, 2019.

Also, on December 31, 2019, the Company received $104,000 in exchange for 160,000 units, which equates to $.65/unit, whereby a unit is made up of one share of common stock and ½ warrant share wherein the common stock was recorded at its relative fair value of $69,391 and the warrants are described below in this Note 12’s “Warrants” subsection. These shares remained unissued at the balance sheet date, December 31, 2019.

On October 31, 2019, the Company’s Board of Directors also approved a compensation plan for John Lai that included his retention of 600,000 escrowed shares that he never returned to the Company’s Treasury.

Warrants

During the nine months ended December 31, 2019, the Company granted 360,000 warrants to management team members that vest upon achieving certain performance conditions (milestones). These 360,000 warrants were valued using the Black Scholes valuation model at $199,982. On a quarterly basis, the Company evaluates the probability of these certain milestones being reached and recognizes expense relating to these warrants based on that probability and other criteria. As of December 31, 2019, these milestones were not met and were not probable to occur and as a result the Company recognized $-0- in expense related to these 360,000 warrants that may or may not vest pursuant to their respective milestones.

During the nine months ended December 31, 2019, the Company granted warrants to purchase a total of 1,734,524 shares of common stock valued using the Black-Scholes model including:

i) warrants for 270,000 shares, valued at $119,954, to three new Directors, Messrs. Scott Johnson, Gregory Cash, and James Martin, with 135,000 vested immediately and 135,000 vesting quarterly between August 2020 and May 2021, and exercisable over a five-year term at $.33/share; and

ii) warrants for 220,500 shares, valued at $122,489, to John Dolan, whereby 40,500 were granted as a bonus and were vested immediately on the October 31, 2019 grant date, 90,000 that vest upon a performance-based milestone, and 90,000 that vest quarterly over three years starting on October 1, 2019; and whereby all of these warrants are exercisable for a five-year term at $.56/share; and

iii) warrants for 540,000 shares, valued at $299,973, to John Lai, whereby 180,000 vest upon performance-based milestones and 360,000 vest quarterly over three years starting on October 1, 2019; and whereby all of these warrants are exercisable for a five-year term at $.56/share; and

iv) warrants for 450,000 shares, valued at $249,997, to John Carruth, whereby 90,000 vest upon performance-based milestones and 360,000 vest quarterly over three years starting on October 1, 2019; and whereby all of these warrants are exercisable for a five-year term at $.56/share; and

v) warrants for 41,250 shares, valued at $22,915, to David Deming, whereby they vest monthly during the eleven-month period ending August 31, 2020, have a strike price of $.49 and a five-year term; and

vi) warrants for 79,397 shares, valued at $38,744, to John Lai, whereby they vested on December 31, 2019, have a strike price of $.50 and a five-year term; and

vii) warrants for 15,880 shares, valued at $7,749, the John Dolan, whereby they vested on December 31, 2019, have a strike price of $.50 and a five-year term; and

viii) warrants for 80,000 shares, issued as a detachable warrant in purchased units with a relative fair value of $34,609, whereby an accredited investor purchased 160,000 units for $104,000 at a rate of $.65/unit and a unit equates to one share of common stock and one-half warrant, and furthermore where the warrants are exercisable for a term of 3 years, have a strike price of $1.00/share and are vested immediately; and

ix) warrants to several directors for service to the Company, issued and vested on December 31, 2019, with a strike price of $.49/share, and exercisable for a five-year term as follows:

These warrants’ values were arrived at by using the Black-Scholes valuation model with the following assumptions:

i) an expected volatility of the Company’s shares on the date of the grants ranging between approximately 313% and 361%, which was arrived at by taking the number of trading days during the year ended on the date of the grant multiplied by the standard deviation of the percentage change in the closing market price on a day-by-day basis; and

ii) a risk-free rate identical to the U.S. Treasury 13-week treasury bill rate on the date of the grants between 2.30% and 1.51%.

During the nine months ended December 31, 2019, the Company cancelled 333,000 warrants to purchase a total of 333,000 shares of common stock including:

i) warrants for 270,000 shares, valued at $300,770 using the Black-Scholes model, $117,144 in expense of which had yet to be taken at the time of cancellation were cancelled pursuant to the terms of such warrants dictating cancellation upon the two-month anniversary of a cease of service; and

ii) warrants for 54,000 shares that were never originally valued, were to be vested upon billing from service providers, and were cancelled because those services were never received; and

iii) warrants for 9,000 shares, valued at $6,800 using the Black-Scholes model, $6,800 in expense of which had yet to be taken at the time of cancellation were cancelled pursuant to termination of the holder’s service agreement by the Company.

A summary of warrant activity for the year ending March 31, 2019 and nine-month period ending December 31, 2019 is as follows:

At December 31, 2019, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life is as follows:

For the nine-month periods ended December 31, 2019 and 2018, the total stock-based compensation on all instruments was $791,257 and $878,065, respectively. It is expected that the Company will recognize expense after December 31, 2019 related to warrants issued, outstanding, and valued using the Black Scholes pricing model as of December 31, 2019 in the amount of approximately $650,000.

NOTE 13 – SUBSEQUENT EVENTS

In January 2020 the Company issued 150,000 shares pursuant to our agreement with Launchpad IR entered into and accounted for in December of 2019 and 160,000 shares to an accredited investor for purchase of 160,000 units as described in this Form 10-Q’s Note 12’s Common Stock section.

In January 2020 the Company issued 63,141 shares of common stock to a former director of the Company pursuant to a cashless conversion provision within the holder’s warrant whereby 168,750 warrants with a strike price of $.30 per share were converted into 63,141 shares of common stock on a cashless basis.

On January 31^st, 2020, the Company’s CEO, John Lai, converted on a cashless basis 168,750 warrants into 61,396 shares of common stock pursuant to a cashless conversion provision within a warrant he held whereby 168,750 warrants with a strike price of $.33 per share were converted into 61,396 shares of common stock on a cashless basis.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

We were incorporated in Nevada in 2009 under a former name. In 2014, we entered our current business through a reverse merger with PetVivo Inc., a Minnesota corporation founded in 2013. From this merger, PetVivo Inc. became our wholly-owned subsidiary, and concurrently we changed our Nevada corporate name to PetVivo Holdings, Inc. Our common stock is publicly traded in the over-the-counter (OTC) market under the symbol “PETV.”

In April 2017, the Company acquired another Minnesota corporation, Gel-Del Technologies, Inc., through a statutory merger, which is also a wholly-owned subsidiary of the Company.

Minnesota PetVivo Inc.

On March 11, 2014, our Board of Directors authorized the execution of that certain securities exchange agreement dated March 11, 2014 (the “Securities Exchange Agreement”) with PetVivo Inc., a Minnesota corporation (“PetVivo”), and the shareholders of PetVivo. In accordance with the terms and provisions of the Securities Exchange Agreement, we acquired all of the issued and outstanding shares of stock of PetVivo, thus making PetVivo our wholly-owned subsidiary, in exchange for the issuance to the PetVivo shareholders of an aggregate 2,310,939,804 shares of our common stock.

PetVivo was founded in 2013 by John Lai and John Dolan, and is based in suburban Minneapolis, Minnesota. PetVivo is a biomedical device company engaged in the business of acquiring/in-licensing and adapting human biomedical technology and products for commercial sale in the veterinary market to treat pets and other animals suffering from arthritis and other afflictions. PetVivo’s initial product, which is now being commercialized, is a medical device featuring the injections of patented gel-like, protein-based biomaterials into the afflicted body parts of dogs and horses suffering from osteoarthritis. PetVivo obtained the exclusive rights in a License Agreement for commercialization of Gel-Del technology for the treatment of pets and other animals.

Gel-Del Technologies Inc.

Gel-Del is a biomaterial and medical device development and manufacturing company with its offices in Edina, Minnesota, and was founded in 1999 by Dr. David B. Masters. Dr. Masters developed Gel-Del’s proprietary biomaterials that simulate a body’s cellular tissue and thus can be readily and effectively utilized to manufacture implantable therapeutic medical devices. The chief advantage of Gel-Del biomaterials is their enhanced biocompatibility with living tissues throughout the body. We are commercializing this technology in the veterinary field for the treatment of osteoarthritis. Gel-Del has also successfully completed a phase II clinical trial using their novel thermoplastic biomaterial as dermal filler for human cosmetic applications. Gel-Del’s core competencies are developing and manufacturing medical devices containing its proprietary thermoplastic protein-based biomaterials that mimic the body’s tissue to allow integration, tissue repair, and regeneration for long-term implantation. These biomaterials are produced using a patented and scalable self-assembly production process. The inherent thermoplastic properties of these biomaterials are then utilized to manufacture or coat implantable devices.

While working together relating to the Licensing Agreement, in 2014 our management and the management of Gel-Del determined to combine the two companies into one business entity producing, marketing and selling medical products based on Gel-Del technology for both humans and animals.

CURRENT BUSINESS OPERATIONS

We are an emerging biomedical device company focused on the licensing and commercialization of innovative medical devices and therapeutics for pets, based in Minneapolis, Minnesota. We operate in the $19 billion US veterinary care market that has grown at a CAGR of 4.8% over the past five years according to the American Pet Products Association. Despite the market size, veterinary clinics and hospitals have very few treatments and/or drugs for use in treating osteoarthritis in pets and other animals. Also, the role of pets in the family has greatly evolved in recent years. Many pet owners consider their pets an important member of the family. They are now willing to spend greater amounts of money on their pets to maintain their health and quality of life.

We intend to leverage investments already expended in the development of human therapeutics to commercialize treatments for pets in a capital and time-efficient way. A key component of this strategy is the accelerated timeline to revenues for veterinary medical devices, which enter the market earlier than the more-stringently regulated veterinary pharmaceuticals or human therapeutics.

On July 31, 2019, the Company entered into an exclusive license agreement with Emerald Organic Products, Inc. (“Emerald”) whereby PetVivo granted an exclusive license to Emerald to use PetVivo’s proprietary Technology in the formulation, manufacture and sale of Emerald’s nutritional supplements including its hemp-based CBD wellness products.

The Technology of PetVivo licensed to Emerald under the exclusive license agreement includes Patents and Know-how involved with protein-based active agent delivery systems and related carrier formulations for utilization in human nutritional supplement applications.

The Company’s CEO and President, John Lai, owns approximately 3% of Emerald’s outstanding common stock. The Company’s Secretary, John Dolan, owns approximately 2% of Emerald’s outstanding common stock.

We launched our lead product, Kush™ in calendar Q2 2018. In Q4 2018 we issued a “Notice of Product Quarantine and Product Monitoring Period” notifying all product holders to suspend use of the product and place it in quarantine while the Company, through utilization of third-party testing vendors, perform additional testing of the product. During the nine months ended December 31, 2019, the Company began clearing product for release to the general public for Company-directed strategic purposes; see Note 3 for additional details. Kush is a veterinarian-administered joint injection for the treatment of osteoarthritis and lameness in dogs and horses. The Kush device is made from natural components that are lubricious and cushioning to perform like cartilage for the treatment of pain and inflammation associated with osteoarthritis.

We believe that Kush is a superior treatment that safely improves joint function. The reparative Kush particles are lubricious, cushioning and long-lasting. The spongy, protein-based particles mimic the composition and protective function of cartilage (i.e., providing both a slippery cushion and healing scaffolding) and protect the joint as an artificial cartilage.

Using industry sources, we estimate osteoarthritis afflicts approximately 20 million owned dogs in the United States and the European Union, making canine osteoarthritis a $4 billion market opportunity if selling the product at $200 per canine unit; this does not factor in any contra-lateral usage of the product by veterinarians. See Johnston, Spencer A. “Osteoarthritis. Joint anatomy, physiology, and pathobiology.” The Veterinary clinics of North (1997):699-723;

http://www.humanesociety.org/issues/petoverpopulation/facts/pet_ownership_statistics.html;

and

http://www.americanpetproducts.org/press_industrytrends.asp.

In addition to being a treatment for osteoarthritis, the joint-cushioning and lubricity effects of Kush have shown an ability to treat equine lameness that is due to navicular disease (a problem associated with misalignment of joints and bones in the hoof and digits).

Based on a variety of industry sources we estimate that 1 million owned horses in the United Stated and European Union suffer from lameness and/or navicular disease each year, making the equine lameness and navicular disease market an annual opportunity worth $600 million if selling the product at $600 per equine unit; this does not factor in any contra-lateral usage of the product by veterinarians. See Kane, Albert J., Josie Traub-Dargatz, Willard C. Losinger, and Lindsey P. Garber; “The occurrence and causes of lameness and laminitis in the US horse population” Proc Am Assoc Equine Pract. San Antonio (2000): 277-80; Seitzinger, Ann Hillberg, J. L. Traub-Dargatz, A. J. Kane, C. A. Kopral, P. S. Morley, L. P. Garber, W. C. Losinger, and G. W. Hill. “A comparison of the economic costs of equine lameness, colic, and equine protozoal myeloencephalitis (EPM).” In Proceedings, pp. 1048-1050. 2000; and Kilby, E. R. 10 CHAPTER, The Demographics of the U.S. Equine Population, The State of the Animals IV: 2007.

Osteoarthritis is a condition with degenerating cartilage, creating joint stiffness from mechanical stress resulting in inflammation and pain. The lameness caused by osteoarthritis worsens with time from the ongoing loss of protective cushion and lubricity (i.e., loss of slippery padding). There are currently very few, if any, treatments for osteoarthritis; some of which are palliative pain therapy and joint replacement. Non-steroidal, anti-inflammatory drugs (NSAIDs) are used to alleviate the pain and inflammation, but long-term use has been shown to cause gastric problems. NSAIDs do not treat the cartilage degeneration issue to halt or slow the progression of the osteoarthritis condition.

We believe that our treatment of osteoarthritis in canines using Kush is far superior to the current methodology of using NSAIDs. NSAIDs have many side effects, especially in canines, whereas the company’s treatment using Kush, to our knowledge, has not elicited any adverse side effects in dogs. Remarkably, Kush-treated dogs have shown an increase in activity even after they no longer are receiving pain medication.

No special training is required for the administration of the Kush device. The treatment is injected into synovial joint space using standard intra-articular injection technique and multiple joints can be treated simultaneously. Kush immediately treats effects of osteoarthritis with no special post-treatment requirements.

Historically, drug sales represent up to 30% of revenues at a typical veterinary practice (Veterinary Practice News). Revenues and margins at veterinary practices are being eroded because online, big-box and traditional pharmacies recently started filling veterinary prescriptions. Veterinary practices are looking for ways to replace the lost prescription revenues. The Kush device is veterinarian-administered and should expand practice revenues and margins. We believe that the increased revenues and margins provided by Kush will accelerate its adoption rate and propel it forward as the standard of care for canine and equine lameness related to or due to synovial joint issues.

We anticipate growing our product pipeline through the acquisition or in-licensing of additional proprietary products from human medical device companies specifically for use in pets. In addition to commercializing our own products in strategic market sectors and in view of the company’s vast proprietary product pipeline, the Company is seeking to continue to develop strategic out-licensing partnerships to provide secondary revenues.

We plan to commercialize our products in the United States through distribution relationships supported by regional and national distributors and complemented by the use of digital marketing to educate and inform pet owners; and in Europe and the rest of the world through commercial partners. In September 2019, the Company entered into an agreement with a service provider to film a 12-part, monthly series of interviews with our CEO, John Lai, Company KOLs, and other media content to be aired on Bloomberg Television Network alongside 96 commercials throughout calendar year 2020.

Most veterinarians in the United States buy a majority of their equipment and supplies from one of four veterinary-product distributors. Combined, these four distributors deliver more than 85%, by revenue, of the products sold to companion animal veterinarians in the U.S. We plan to have our product distribution leverage the existing supply chain and veterinary clinic and clinician relationships already established by these large distributors. We plan to support this distribution channel with regional sales representatives. Our representatives will support our distributors and the veterinary clinics and hospitals. We will also target pet owners with product education and treatment awareness campaigns utilizing a variety of digital marketing tools. The unique nature and the anticipated benefits provided by our products are expected to generate significant consumer response.

Our biomaterials have been through a human clinical trial and have been classified as a medical device for use as a dermal filler. The FDA does not require submission of a 510(k) or formal pre-market approval for medical devices used in veterinary medicine.

RESULTS OF OPERATIONS

We are a development stage company with no history of commercial revenues, and we have incurred recurring substantial losses since inception. The following discussion should be read in conjunction with our unaudited financial statements and related notes included in this report.

Results of Operations for the Three Months Ended December 31, 2019 and 2018

Revenue – Revenue was $500 for the three-month period ended December 31, 2019 and $-0- for the three-month periods ended December 31, 2018.

Cost of Sales – Cost of sales was $2,145 for the three-month period ended December 31, 2019, which was made up entirely of costs incurred to clear product from quarantine phase, and $-0- for the three-month period ended December 31, 2018.

Gross Loss – Gross loss was ($1,645) for the three-month period ended December 31, 2019 and $-0- for the three-month period ended December 31, 2018.

Operating Expenses – Operating expenses for the three months ended December 31, 2019 were $571,116 compared to $559,617 for the three months ended December 31, 2018; the increase of $11,499 was primarily due to increased advertising and marketing expense of approximately $70,000 offset by decreased stock-based compensation expense of $80,000 among other things during the three months ended December 31, 2019. During the three-month period ended December 31, 2019, operating expenses were primarily made up of $137,725 in depreciation and amortization, $77,109 in sales and marketing expenses, and $323,476 in other general and administrative expenses. During the three-month period ended December 31, 2018, operating expenses were primarily made up of $162,590 in depreciation and amortization and $339,937 in other general and administrative expenses.

Other Income (Expense) – Other Income (Expense) for the three months ended December 31, 2019 of $21,568 is due to interest expense of ($8,418) related to convertible notes payable and notes payable – related party, and a gain on settlement of $29,986 related to settling an outstanding invoice of $39,986 for a one-time payment of $10,000. Other Income (Expense) for the three months ended December 31, 2018 of ($60,326) is due to interest expense related to notes payable and notes payable – related party.

Net Loss before Taxes and Net Loss – Our net loss for the three months ended December 31, 2019 was ($551,193), or ($.02) per share, compared to ($619,943), or ($.04) per share, for the three months ended December 31, 2018. The decreased loss of $68,750 was attributable primarily to the increase in Other Income (Expense) during the three months ended December 31, 2019 described above in the Other Income (Expense) section. The weighted average number of shares outstanding during the three-month periods ended December 31, 2019 and December 31, 2018 were 22,100,045 and 18,479,975, respectively.

Results of Operations for the Nine Months Ended December 31, 2019 and 2018

Revenue – Revenue was $500 for the nine-month period ended December 31, 2019 and $-0- for the nine-month period ended December 31, 2018.

Cost of Sales – Cost of sales was $5,990 for the nine-month period ended December 31, 2019, which was made up entirely of costs incurred to clear product from quarantine phase, and $-0- for the nine-month period ended December 31, 2018.

Gross Profit – Gross profit was ($5,490) for the nine-month period ended December 31, 2019 and $-0- for the nine-month period ended December 31, 2018.

Operating Expenses – Operating expenses for the nine months ended December 31, 2019 were $1,490,605 compared to $3,384,296 for the nine months ended December 31, 2018; the decrease of $1,893,691 was primarily due a grant of common stock issued to replace shares to officer whereby 803,385 shares valued at $1,446,094 were issued to John Lai during the nine months ended December 31, 2018. During the nine-month period ended December 31, 2019, operating expenses were primarily made up of $422,855 in depreciation and amortization and $942,725 in other general and administrative expenses. During the nine-month period ended December 31, 2018, operating expenses were primarily made up of $485,331 in depreciation and amortization and $2,737,171 in other general and administrative expenses.

Other Income (Expense) – Other Income (Expense) for the nine months ended December 31, 2019 of ($75,158) is primarily due to ($81,738) in loss on extinguishment of debt. Other Income (Expense) for the nine months ended December 31, 2018 of ($76,112) is primarily due to interest incurred related to notes payable and notes payable – related party.

Net Loss before Taxes and Net Loss – Our net loss for the nine months ended December 31, 2019 was ($1,571,252), or ($.08) per share, compared to ($3,460,408), or ($.19) per share, for the nine months ended December 31, 2018. The decreased loss of ($1,889,156) was attributable primarily to the increase in operating expenses during the nine months ended December 31, 2018 described above in the Operating Expenses section. The weighted average number of shares outstanding during the nine-month periods ended December 31, 2019 and December 31, 2018 were 20,681,994 and 18,073,786, respectively

Liquidity and Capital Resources

Our financial position and future prospects depend significantly on our access to financing to fund our operations during our development stage. Much of our current cost structure is based on costs related to personnel and facilities, and not subject to material variability. In order to fund our operations and working capital needs, we historically have utilized loans from accredited investors and others, equity sales of common stock to accredited investors and others having pre-existing relationships with us, and substantial issuances of stock-based compensation to satisfy outstanding debt and pay for development, management, financial, professional and other services.

As of December 31, 2019, our current assets were $323,832 including approximately $106,240 in cash, $12,495 in inventory, $1,500 in investment – equity securities receivable, $500 in accounts receivable and $203,097 in prepaid expenses. In comparison, our current liabilities as of that date were $1,039,970 consisting of $723,680 of accounts payable and accrued expenses, $228,335 of accrued expenses – related party, $24,790 in operating lease liability and $63,165 in notes payable and accrued interest – related party. Our working capital deficiency as of December 31, 2019 was $716,138.

We will need to raise substantial additional capital through private or public offerings of our equity or debt securities, or a combination thereof, and we may have to use a material portion of any capital raised to repay past due debt obligations. To the extent any capital raised is insufficient to both satisfy operational working capital needs and meet any required debt payments, we will most likely need to either extend, refinance or convert to equity our outstanding indebtedness.

We currently have little cash to support our operations and projected commercial growth. Accordingly, we will require substantial additional financing to fund our operational working capital for at least the next 12 months. Financing may be sought by us from a number of sources such as private or public sales of our equity or convertible debt securities, and/or loans from affiliates, banks or other financial institutions. In the event we cannot obtain any such financing when needed on terms acceptable to us, if at all, our business would suffer substantially.

Liquidity represents the ability of a company to generate sufficient cash to provide for its immediate cash needs, which our continued losses have made it difficult for us to accomplish. Over the past several years; we have continued to incur substantial losses without any source of material revenues or liquid assets, which has caused a serious and harmful effect to our liquidity and a substantial strain on our ongoing business operations.

We have not generated any operating cash flows since we are a development stage company which has not yet realized any significant commercial revenues.

Net Cash Used in Operating Activities – We used ($415,138) of net cash in operating activities for the nine months ended December 31, 2019 compared to using ($597,098) of net cash for the nine months ended December 31, 2018. This decrease in cash used in operating activities was attributable primarily to an increase of stock-based compensation that was paid but not used and included in prepaids of approximately $155,000.

Net Cash Used in Investing Activities – We used ($46,872) of net cash in investing activities in the nine months ended December 31, 2019, consisting primarily of ($44,822) of costs capitalized to intangible assets, ($1,000) of costs capitalized to equipment and ($1,500) spent on equity securities of Emerald Organic Products (EMOR). This is compared to ($91,222) net cash used in investing activities in the nine months ended December 31, 2018, which was primarily due to ($70,040) of costs capitalized to intangible assets and ($23,181) in equipment purchases.

Net Cash Provided by Financing Activities – During the nine months ended December 31, 2019, we were provided by financing activities with net cash of $561,790 consisting of $280,000 in proceeds from entering into convertible notes payable and $339,000 in the sale of equity securities, which was partially offset by payments of debt principal and interest totaling ($57,211). In comparison, during the nine months ended December 31, 2018, we were provided by financing activities with net cash of $637,666 primarily due to proceeds from sales of common stock of $390,005, $209,748 from entering into bridge notes shown net of debt discount, and $50,000 from entering into bridge notes with related parties shown net of debt discount; these amounts were partially offset by repayments of debt principal and interest of ($12,087).

Inventory

Inventories are stated at cost, subject to the lower of cost or net realizable value. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. Net realizable value is the estimated selling price less estimated costs of completion, disposal, and transportation. We regularly review inventory quantities on hand through an inventory count.

As of December 31, 2019, the Company’s inventory has a carrying value of $12,495 and is broken down into $56,201 of finished goods inventory, fully offset by a ($56,201) reserve for obsolete inventory, $3,127 of manufacturing supplies and $9,368 of raw materials.

MATERIAL COMMITMENTS

Accrued Salary

We are indebted to related parties. At December 31, 2019, we are obligated for unpaid officer salaries and related payroll taxes and amounts payable to related parties of $228,335. This amount is included in accrued expenses – related party.

Notes Payable

As of December 31, 2019, we are obligated on the following notes:

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2019, and as of the date of this Quarterly Report, we do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

GOING CONCERN

The independent auditors’ report accompanying our March 31, 2019 Form 10-K and financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared assuming that we will continue as a going concern, which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. We have suffered recurring losses from operations and have a working capital deficit. These factors raise substantial doubt about our ability to continue as a going concern.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.

Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective.

Management’s report on internal control over financial reporting.

Our chief executive officer and our chief financial officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework (revised 2013). This assessment included an evaluation of the design and procedures of our control over financial reporting. Management determined that internal control over financial reporting was not effective as of December 31, 2019.

As part of the preparation of this report, we have applied compensating procedures and processes as necessary to attempt to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.

The existence of the material weaknesses in our internal control over financial reporting increases the risks that our financial statements may be misleading materially or even need to be restated. We are committed to improving our financial and oversight organization and procedures. During this fiscal year, we added three independent directors who have taken active roles in committees of the board of directors, and we added a fulltime, experienced CFO who is now responsible for helping to develop and implement our financial controls and procedures appropriate for the stage in which the Company is in.

Changes in internal control over financial reporting.

There were no significant changes in our internal control over financial reporting during the third quarter of our fiscal year ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

AUDIT COMMITTEE

Our board of directors has established an audit committee consisting of three of our independent directors, Messrs James Martin (financial expert), Joseph Jasper, and David Deming. The audit committee’s primary function is to provide advice with respect to our financial matters and to assist our board of directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee’s primary duties and responsibilities are to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management’s establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our board of directors.

PART II. OTHER INFORMATION

ITEM 1. PENDING LEGAL PROCEEDINGS

Management is not aware of any legal proceedings pending by any governmental authority or any other party involving our properties or the Company. As of the date of this Quarterly Report, no director, officer or affiliate is (i) a party adverse to us in any pending legal proceeding, or (ii) has an adverse interest to us in any pending legal proceedings. Management is not aware of any other legal proceedings pending against our properties or the Company.

ITEM 1A. RISK FACTORS

Not required

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended December 31, 2019, the Company sold and issued 486,000 shares of common stock to six shareholders for $135,000 used for general working capital purposes and issued 360,000 shares to two service providers for $171,000 worth of various investor relations services.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not required.

ITEM 4. MINE SAFETY DISCLOSURES

Not required.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits are filed as part of this Quarterly Report.

PETVIVO HOLDINGS, INC.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.