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PetVivo Holdings, Inc. - Quarter Report: 2022 December (Form 10-Q)

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended December 31, 2022

 

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. 001-40715

 

PetVivo Holdings, Inc.

(Name of small business issuer in its charter)

 

Nevada   99-0363559

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

5251 Edina Industrial Blvd, Edina, Minnesota 55439

(Address of principal executive offices) (Zip Code)

 

(952) 405-6216

(Issuer’s telephone number)

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001   PETV   The Nasdaq Stock Market LLC
Warrants to purchase Common Stock   PETVW   The Nasdaq Stock Market LLC

 

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

 

Common Stock, $0.001

(Title of Class)

 

Indicate by check mark 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐

 

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

 

  Large accelerated filer Accelerated filer  
  Non-accelerated filer Smaller reporting company  
      Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

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

 

Class   Outstanding as of February 8, 2023
Common Stock, $0.001   10,827,536

 

 

 

 

 

 

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED December 31, 2022

 

INDEX

 

    Page
     
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS i
     
PART I. FINANCIAL INFORMATION 1
     
Item 1. Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19
Item 3. Qualitative and Quantitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
     
PART II. OTHER INFORMATION 26
     
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Mine Safety Disclosure 26
Item 5. Other information 26
Item 6. Exhibits 27
     
SIGNATURES 28

 

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

 

Information included in this Quarterly Report on 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 in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for our fiscal year ended March 31, 2022 (“2022 10-K Report”) and risks described in other SEC filings. 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.

 

i

 

 

PART I.

 

ITEM 1. FINANCIAL STATEMENTS

 

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

  

December 31, 2022

(Unaudited)

   March 31, 2022 
Assets:          
Current Assets          
Cash and cash equivalents  $374,533   $6,106,827 
Accounts receivable   506,844    2,596 
Inventory, net   374,882    98,313 
Prepaid expenses and other assets   479,670    547,664 
Total Current Assets   1,735,929    6,755,400 
           
Property and Equipment, net   520,321    311,549 
           
Other Assets:          
Operating lease right-of-use   257,469    299,101 
Patents and trademarks, net   41,746    48,452 
Security deposit   12,830    12,830 
Total Other Assets   312,045    360,383 
Total Assets  $2,568,295   $7,427,332 
           
Liabilities and Stockholders’ Equity:          
           
Current Liabilities          
Accounts payable  $456,052   $323,384 
Accrued expenses   1,041,628    784,375 
Operating lease liability – short term   60,061    59,178 
Note payable and accrued interest   6,841    6,549 
Total Current Liabilities   1,564,582    1,173,486 
Other Liabilities          
Note payable and accrued interest (net of current portion)   22,155    27,201 
Operating lease liability (net of current portion)   197,408    239,923 
Total Other Liabilities   219,563    267,124 
Total Liabilities   1,784,145    1,440,610 
Commitments and Contingencies (see Note 9)   -    - 
Stockholders’ Equity:          
Preferred stock, par value $0.001, 20,000,000 shares authorized, 0 and 0 shares issued and outstanding at December 31, 2022 and March 31, 2022   -    - 
Common stock, par value $0.001, 250,000,000 shares authorized, 10,106,525 and 9,988,361 shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively   10,106    9,988 
Additional Paid-In Capital   70,289,100    69,103,155 
Accumulated Deficit   (69,515,056)   (63,126,421)
Total Stockholders’ Equity   784,150    5,986,722 
Total Liabilities and Stockholders’ Equity  $2,568,295   $7,427,332 

 

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

 

1

 

 

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

   2022   2021   2022   2021 
   Three Months Ended December 31,   Nine Months Ended December 31, 
   2022   2021   2022   2021 
Revenues  $510,109   $51,004   $791,563   $60,126 
                     
Cost of Sales   223,687    98,997    424,866    104,048 
Gross Profit   286,422    (47,993)   366,697    (43,922)
                     
Operating Expenses:                    
                     
Sales and Marketing   1,047,549    404,462    2,572,103    689,960 
Research and Development   248,157    34,326    460,197    287,643 
General and Administrative   1,309,534    1,170,870    3,738,876    2,258,001 
                     
Total Operating Expenses   2,605,240    1,609,658    6,771,176    3,235,604 
                     
Operating Loss   (2,318,818)   (1,657,651)   (6,404,479)   (3,279,526)
                     
Other Income                    
Forgiveness of PPP loan and accrued interest   -    -    -    31,680 
Interest Income   7,200    15,522    15,844    9,614 
Total Other Income   7,200    15,522    15,844    41,294 
                     
Loss before taxes   (2,311,618)   (1,642,129)   (6,388,635)   (3,238,232)
                     
Income Tax Provision   -    -    -    - 
                     
Net Loss  $(2,311,618)  $(1,642,129)  $(6,388,635)  $(3,238,232)
                     
Net Loss Per Share:                    
Basic and Diluted  $(0.23)  $(0.17)  $(0.64)  $(0.38)
                     
Weighted Average Common Shares Outstanding:                    
Basic and Diluted   10,098,658    9,756,945    10,047,040    8,426,135 

 

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

 

2

 

 

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

 

Nine Months Ended December 31, 2022

 

       Shares     Amount     Capital     Deficit     Total 
   Common Stock  

Additional

Paid-in

   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
Balance at March 31, 2022   9,988,361   $9,988   $69,103,155   $(63,126,421)  $5,986,722 
Stock-based compensation   -    -    231,231    -    231,231 
Net loss   -    -    -    (1,965,428)   (1,965,428)
Balance at June 30, 2022   9,988,361   $9,988   $69,334,386   $(65,091,849)  $4,252,525 
                          
Cash paid to exercise warrants   48,664    49    66,509    -    66,558 
Vesting of restricted stock units   33,250    33    (33)   -    - 
Stock issues for services   25,000    25    49,895    -    49,920 
Stock based compensation   -    -    305,971    -    305,971 
Net loss   -    -    -    (2,111,589)   (2,111,589)
Balance at September 30, 2022   10,095,275   $10,095   $69,756,728   $(67,203,438)  $2,563,385 
                          
Vesting of restricted stock units   11,250    11    (11)   -    - 
Stock-based compensation   -    -    532,383    -    532,383 
Net Loss   -    -    -    (2,311,618)   (2,311,618)
Balance at December 31, 2022   10,106,525   $10,106   $70,289,100   $(69,515,056)  $784,150 

 

Nine Months Ended December 31, 2021

 

     Shares     Amount     Capital     Deficit     Total 
                 Additional             
   Common Stock   Paid-in   Accumulated     
   Shares   Amount   Capital   Deficit   Total 
Balance at March 31, 2021   6,799,113   $6,799   $57,207,648   $(58,111,426)  $(896,979)
Common stock sold   49,014    50    343,048    -    343,098 
Cash paid to exercise warrants   4,500    4    39,996    -    40,000 
Stock issued for debt conversion   80,522    80    232,578    -    232,658 
Cashless warrant exercises   160,006    160    (160)   -    - 
Stock-based compensation   -    -    55,674    -    55,674 
Net loss   -    -    -    (490,629)   (490,629)
Balance at June 30, 2021   7,093,155   $7,093   $57,878,784   $(58,602,055)  $(716,178)
                          
Common stock sold   2,511,000    2,511    4,966,020    -    4,968,531 
Warrants sold   -    -    4,889,252    -    4,889,252 
Cash paid to exercise warrants   1,594    1    2,030    -    2,031 
Cashless warrant exercise   40,038    40    (40)   -    - 
Stock issued for services   42,000    42    209,958    -    210,000 
Stock-based compensation   -    -    104,092    -    104,092 
Stock and warrants granted for debt conversion   43,556    44    195,956    -    196,000 
Net loss   -    -    -    (1,105,474)   (1,105,474)
 Balance at September 30, 2021   9,731,343   $9,731   $68,246,052   $(59,707,529)  $8,548,254 
                          
                          
Stock issued for services   26,085    27    71,053    -    71,080 
Vesting of restricted stock units   300    -    -    -    - 
Stock-based compensation   -    -    272,717    -    272,717 
Net loss   -    -    -    (1,642,129)   (1,642,129)
Balance at December 31, 2021   9,757,728   $9,758   $68,589,822   $(61,349,658)  $7,249,922 

 

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

 

3

 

 

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

  

December 31,2022

  

December 31,2021

 
   For the Nine Months Ended 
  

December 31,2022

  

December 31,2021

 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net Loss For The Period  $(6,388,635)  $(3,238,232)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:          
Stock-based compensation   1,069,585    432,483 
Amortization of prepaid stock issued for services   258,844    71,080 
Depreciation and amortization   91,785    43,168 
Forgiveness of PPP loan and accrued interest   -    (31,680)
Changes in Operating Assets and Liabilities          
Increase in prepaid expenses and other assets   (140,930)   (44,659)
Increase in accounts receivable   (504,248)   (3,186)
Increase in inventory   (276,569)   (104,965)
Decrease in deferred offering costs   -    280,163 
Interest accrued on convertible notes payable   -    (3,013)
Interest accrued on notes payable - related party   -    4,013 
Increase in accounts payable and accrued expenses   389,921    106,319 
Decrease in accrued expenses - related party   -    (36,808)
Net Cash Used In Operating Activities   (5,500,247)   (2,525,317)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of equipment   (293,851)   (91,908)
Disbursements for patents and trademarks   -    (19,154)
Net Cash Used in Investing Activities   (293,851)   (111,062)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from stock and warrants sold   -    10,200,881 
Proceeds from exercise of warrants   66,558    42,031 
Repayments of note payable   (4,754)   (4,235)
Repayments of PPP loan   -    (3,571)
Repayments of notes payable - related party   -    (48,267)
Repayments of notes payable - directors   -    (20,300)
Net Cash Provided by Financing Activities   61,804    10,166,539 
Net (Decrease) Increase in Cash   (5,732,294)   7,530,160 
Cash at Beginning of Period   6,106,827    23,578 
Cash at End of Period  $374,533   $7,553,738 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash Paid During The Period For:          
Interest  $2,388   $9,071 
SUPPLEMENTAL DISCLOSURE ON NON-CASH FINANCING AND INVESTING ACTIVITIES          
Stock issued for debt conversion   -   $232,658 
Stock and warrants granted for debt conversion   -   $196,000 
Prepaid stock issued for services  $49,920   $210,000 

 

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

 

4

 

 

PetVivo Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

(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 and/or management of afflictions and diseases in animals, initially for dogs and horses. The Company began commercialization of its lead product Spryng™ with OsteoCushion™ Technology, a veterinarian-administered, intraarticular injection for the management of lameness and other joint afflictions such osteoarthritis in dogs and horses, in September 2021. The Company has a pipeline of additional products for the treatment of animals in various stages of development. A portfolio of nineteen patents protects the Company’s biomaterials, products, production processes and methods of use. 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.

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. The results for the three and nine months ended December 31, 2022, are not necessarily indicative of results to be expected for the year ending March 31, 2023, or for any other interim period or for any future year. These unaudited condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, 2022.

 

(C) Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its two wholly-owned Minnesota corporations, Gel-Del Technologies, Inc. and PetVivo, Inc. 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 collectability of accounts receivable, inventory obsolescence, estimated useful lives and potential impairment of property and equipment and intangibles, estimate of fair value of share-based payments, distributor rebate payable, provision for product returns, lease assets and liabilities and valuation of deferred tax assets.

 

(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.

 

5

 

 

(F) Concentration Risk

 

The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. As of December 31, 2022 and March 31, 2022, the Company did have cash balances in excess of the federally insured limits.

 

(G) Accounts Receivable

 

Accounts receivable consists of amounts due from a distributor (see revenue recognition). Accounts receivable are recorded based on management’s assessment of the expected consideration to be received, based on a detailed review of historical collections. Management relies on the results of the assessment, which includes payment history of the applicable payer as a primary source of information in estimating the collectability of our accounts receivable. We update our assessment on a quarterly basis, which to date has not resulted in any material adjustments to the valuation of our accounts receivable. We believe the assessment provides reasonable estimates of our accounts receivable valuation, and therefore we believe that substantially all accounts receivable are fully collectible.

 

(H) Inventory

 

Inventories are recorded in accordance with ASC 330, Inventory, and are stated at the lower of cost or net realizable value. We account for inventories using the first in first out (FIFO) methodology.

 

(I) Property & Equipment

 

Property and equipment are recorded at cost. 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 considering their respective estimated residual values) over the assets estimated useful life of 3 to 5 years for production and computer equipment and furniture and 5 to 7 years for leasehold improvements.

 

(J) 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 the useful life of 60 months or the life of the patent. We evaluate the recoverability of intangible assets periodically by considering events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

 

(K) 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 had 3,634,817 warrants outstanding as of December 31, 2022, with varying exercise prices ranging from $1.20 to $5.63 per share. The weighted average exercise price for these warrants is $5.04 per share. These warrants are excluded from the weighted average number of shares because they are considered anti-dilutive.

 

The Company had 328,168 restricted stock units outstanding as of December 31, 2022 which are excluded from the weighted average number of shares because they are considered anti-dilutive.

 

The Company had 755,849 options outstanding as of December 31, 2022, with varying exercise prices ranging from $1.39 to $2.79 per share. The weighted average exercise price for these options is $2.17 per share. These options are excluded from the weighted average number of shares because they are considered anti-dilutive.

 

The Company had 3,754,484 warrants outstanding as of December 31, 2021, with varying exercise prices ranging from $1.20 to $6.67 per share. The weighted average exercise price for these warrants is $4.95 per share. These warrants were excluded from the weighted average number of shares because they are considered anti-dilutive.

 

6

 

 

The Company had 549,265 restricted stock units outstanding as of December 31, 2021 which were excluded from the weighted average number of shares because they are considered anti-dilutive.

 

The Company uses the guidance in Accounting Standards Codification (“ASC”) 260 to determine if-converted loss per share. ASC 260 states that convertible securities should be considered exercised on the latter 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 anti-dilutive.

 

(L) Revenue Recognition

 

The Company recognizes revenue in accordance with ASC Topic 606 “Revenue from Contracts with Customers.”

 

The Company derives revenue from the sale of its pet care products directly to its veterinarian customers in the United States. The Company recognizes revenue when performance obligations under the terms of a contract with the veterinarian customer are satisfied. Product sales occur once control or title is transferred based on the commercial terms. Revenue is recognized upon delivery to the customer, which is when control of these products is transferred and in an amount that reflects the consideration the Company expects to receive for these products. Shipping costs charged to customers are reported as an offset to the respective shipping costs. The Company does not have any significant financing components as payment is received at or shortly after the point of sale.

 

The Company entered into a Distribution Services Agreement (the “Agreement”) with MWI Veterinary Supply Co. (the “Distributor”) on June 17, 2022. Contracts with the Distributor are evidenced by individual executed purchase orders subject to the terms of the Agreement. The contracts consist of a single performance obligation related to the sale of our pet care products. Product sales occur once control or title is transferred based on the commercial terms in the Agreement. Revenue is recognized upon delivery to the Distributor; payment is due within 60 days. The Agreement provides for a distribution fee payable to the Distributor equal to 5% of gross monthly sales payable in 45 days; the distribution fee is netted against revenue. The Agreement provides for a rebate payable to the Distributor based on annual sales volume that is retroactively applied. The rebate is estimated under the expected value method and is netted against revenue. Sales are subject to various right of return provisions; the Company uses an expected value method to estimate returns and has determined that any returns would be immaterial as of December 31, 2022. As a result, there is no refund liability recorded. Shipping and handling costs are a fulfillment activity and are reported as cost of sales.

 

For the three and nine months ended December 31, 2022, the Company recognized revenue from product sales under the Agreement of $456,502 and $574,766, respectively. This represents 89% and 73% of total revenues for the three and nine months ended December 31, 2022, respectively.

 

Assets and liabilities (included in accrued expenses) under the Agreement were as follows at December 31, 2022:

 

      
Accounts receivable  $506,844 
Rebate liability  $25,000 
Distribution fee payable  $31,566 

 

(M) Research and Development

 

The Company expenses research and development costs as incurred.

 

(N) 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.

 

7

 

 

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

 

  Level 1 - quoted market prices in active markets for identical assets or liabilities.
     
  Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
     
  Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The Company’s financial instruments consist of accounts receivable, accounts payable, accrued expenses and note payable and accrued interest. The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 2022 and March 31, 2022, 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 note recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.

 

The Company had no assets and liabilities measured at fair value on a recurring basis at December 31, 2022 and March 31, 2022.

 

(O) 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 the guidance of Sub-topic 505-50 of the FASB ASC (“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.

 

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:

 

  Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB ASC the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration the contractual term of the instruments and the holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate the holder’s expected exercise behavior.
     
  Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.

 

8

 

 

  Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
     
  Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

 

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 or 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.

 

(P) Stock-Based Compensation

 

Stock options are valued using the Black-Scholes option-pricing model. The Black-Scholes valuation model require the input of highly subjective assumptions. The assumptions include the expected term of the option, the expected volatility of the price of our common stock, expected dividend yield and the risk-free interest rate. These estimates involve inherent uncertainties and the significant application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. We recognize compensation expense for these options on a straight-line basis over the requisite service period (see Note 11 – “Stockholders’ Equity”).

 

(Q) Income Taxes

 

The Company accounts for income taxes under 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.

 

As required by ASC Topic 450, 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 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.

 

(R) Recent Accounting Pronouncements

 

The Company has reviewed the FASB issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.

 

9

 

 

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

 

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

 

NOTE 2 – INVENTORY

 

As of December 31, 2022 and March 31, 2022, the Company had inventory of $374,882 and $98,313, respectively.

 

The inventory components are as follows:

 

   December 31, 2022   March 31, 2022 
Finished goods  $30,947   $11,889 
Work in process   25,860    22,960 
Raw materials   318,075    63,464 
Total Net  $374,882   $98,313 

 

NOTE 3 – PREPAID EXPENSES AND OTHER ASSETS

 

As of December 31, 2022, the Company had $479,670 in prepaid expenses and other assets consisting primarily of $221,000 in insurance costs, $84,000 in board compensation, $57,000 in tradeshows, $45,000 in clinical studies, $17,000 in Nasdaq and FINRA fees and $37,000 in software subscription fees.

 

As of March 31, 2022, the Company had $547,664 in prepaid expenses and other assets consisting primarily of $220,000 in investor relations services, $148,000 in insurance costs, $71,000 in clinical studies, $46,000 in tradeshows and $45,000 in Nasdaq fees.

 

NOTE 4 –PROPERTY AND EQUIPMENT

 

The components of property and equipment were as follows:

 

   December 31, 2022   March 31, 2022 
Leasehold improvements  $216,159   $216,159 
Production equipment   450,927    197,967 
R&D equipment   25,184    25,184 
Computer equipment and furniture   117,789    76,898 
Total, at cost   810,059    516,208 
Accumulated depreciation   (289,738)   (204,659)
Total Net  $520,321   $311,549 

 

Depreciation expense was $31,035 and $13,123 for the three months ended December 31, 2022 and 2021, respectively.

 

Depreciation expense was $85,079 and $36,820 for the nine months ended December 31, 2022 and 2021, respectively.

 

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NOTE 5 – PATENTS AND TRADEMARKS

 

The components of patents and trademarks, all of which are finite-lived, were as follows:

 

   December 31, 2022   March 31, 2022 
Patents  $3,870,057   $3,870,057 
Trademarks   26,142    26,142 
Total at cost   3,896,199    3,896,199 
Accumulated Amortization   (3,854,453)   (3,847,747)
Total net  $41,746   $48,452 

 

Amortization expense was $2,240 and $2,286 for the three months ended December 31, 2022 and 2021, respectively. Amortization expense was $6,706 and $6,348 for the nine months ended December 31, 2022 and 2021, respectively.

 

NOTE 6 – ACCRUED EXPENSES

 

The components of accrued expenses were as follows:

 

   December 31, 2022   March 31, 2022 
Accrued payroll and related taxes  $476,492   $433,926 
Accrued expenses   232,898    18,211 
Accrued lease termination expense   332,238    332,238 
Total  $1,041,628   $784,375 

 

Pursuant to a lease wherein our subsidiary, Gel-Del Technologies, Inc., was the lessee until and through the lease’s termination in fiscal year 2018, the Company had recorded approximately $332,000 as a potential payable to the lessor. This liability remains outstanding as of December 31, 2022 and March 31, 2022.

 

NOTE 7 – NOTE PAYABLE

 

In January 2020, the Company entered into a lease amendment for our corporate office facility whereby the lease term was extended through November of 2026 in exchange for a loan of $42,500. The note payable accrues interest at a rate of 6% per annum. At December 31, 2022 and March 31, 2022, the amount outstanding on the note was $28,996 and $33,750, respectively. At December 31, 2022, the Company classified $6,841 as a current liability and $22,155 in other liabilities. At March 31, 2022, the Company classified $6,549 as a current liability and $27,201 in other liabilities.

 

NOTE 8 – RETIREMENT PLAN

 

In February 2021, the Company established a 401(k) retirement plan for its employees in which eligible employees can contribute a percentage of their compensation. The Company may also make discretionary contributions. For the three months ended December 31, 2022 and 2021, the Company made contributions to the plan of $9,554 and $2,350, respectively. For the nine months ended December 31, 2022 and 2021, the Company made contributions to the plan of $23,895 and $2,350, respectively.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Lease Obligations

 

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 in May 2017. The base rent has annual increases of 2% 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. In January 2020, the Company entered into a lease amendment to extend the lease term through November of 2026 in exchange for receipt of a loan of $42,500 recorded to note payable. The monthly base rent as of December 31, 2022 and March 31, 2022 is $2,205.

 

11

 

 

The Company entered into a sixty-three-month lease for 2,400 square feet of office space located in Edina, Minnesota in January 2022. The base rent has annual increases of 2.5% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. The monthly base rent as of December 31, 2022 and March 31, 2022 is $2,673.

 

Rent expense for the three months ended December 31, 2022 and 2021 was $32,484 and $16,549, respectively. Rent expense for the nine months ended December 31, 2022 and 2021 was $93,460 and $50,952, respectively.

 

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of December 31, 2022:

  

     
2023  $14,901 
2024   60,588 
2025   61,964 
2026   63,372 
2027   55,102 
Total   255,927 
Amount representing interest   1,542 
Total  $257,469 

 

In compliance with ASC 842, the Company recognized, based on the extended lease term to November 2026 and a treasury rate of 0.12%, an operating lease right-to-use asset for approximately $189,600 and corresponding and equal operating lease liabilities for the lease. As of December 31, 2022, the present value of future base rent lease payments based on the remaining lease term and weighted average discount rate of approximately 4.3 years and 0.28%, respectively, are as follows:

  

      
Present value of future base rent lease payments  $257,469 
Base rent payments included in prepaid expenses   - 
Present value of future base rent lease payments – net  $257,469 

 

As of December 31, 2022, the present value of future base rent lease payments – net is classified between current and non-current assets and liabilities as follows:

  

      
Operating lease right-of-use asset  $257,469 
Total operating lease assets  $257,469 
      
Operating lease current liability  $60,061 
Operating lease other liability  $197,408 
Total operating lease liabilities  $257,469 

 

Employment Agreements

 

The Company has employment agreements with its executive officers. As of December 31, 2022, these agreements contain severance benefits ranging from one month to six months if terminated without cause.

 

Legal Proceedings

 

The Company has received correspondence from an attorney representing Dr. David Masters, our former Chief Technology Officer and former director, alleging that the Company, among other items, breached its settlement and consulting agreement with him and owes him additional monies pursuant to these agreements. His attorney also alleges that the Company promised to enter into a new employment agreement with him and failed to fulfill that promise. The Company believes that Dr. Masters’ claims are without merit and has retained legal counsel. The Company does not believe that this matter will have a material impact on its financial position or results of operations.

 

12

 

 

Purchase Commitment

 

We issued purchase orders as of December 31, 2022 totaling $51,000 for inventory that we expect to receive within the next three months.

 

NOTE 10 - 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 net losses of $6,388,635 for the nine months ended December 31, 2022, had net cash used in operating activities of $5,500,247 for the same period and has an accumulated deficit of $69,515,056 at December 31, 2022. 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 of 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.

 

The Company sold shares of its common stock in January 2023 (see Note 12) and management intends to raise additional funds through the 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 ability 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.

 

COVID-19 has had an impact on the global economy, which directly or indirectly may have an impact on our ability to continue as a going concern.

 

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

 

NOTE 11 – STOCKHOLDERS’ EQUITY

 

Equity Incentive Plan

 

On July 10, 2020, our Board of Directors unanimously approved the PetVivo Holdings, Inc “2020 Equity Incentive Plan” (the “2020 Plan”), which authorized the issuance of up to 1,000,000 shares of our common stock as awards under the 2020 Plan, subject to approval by our stockholders at the Annual Meeting of Stockholders held on September 22, 2020, when it was approved by our stockholders and became effective. On October 14, 2022, the stockholders of the Company approved the PetVivo Holdings, Inc. Amended and Restated 2020 Equity Incentive Plan (the “Amended Plan”), which increased the number of shares of the Company’s common stock which may be granted under the Amended Plan from 1,000,000 to 3,000,000. Unless sooner terminated by the Board, the Amended Plan will terminate at midnight on July 10, 2030. The number of shares available to grant under the Amended Plan was 1,673,074 at December 31, 2022.

 

Employees, consultants, and advisors of the Company (or any subsidiary), and non-employee directors of the Company will be eligible to receive awards under the Amended Plan. In the case of consultants and advisors, however, their services cannot be in connection with the offer and sale of securities in a capital-raising transaction nor directly or indirectly to promote or maintain a market for PetVivo common stock.

 

The Amended Plan is administered by the Compensation Committee of our Board of Directors (the “Committee”), which has full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment, any deferral payment, and other terms and conditions of each award. Subject to provisions of the Amended Plan, the Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Committee also has the authority to interpret and establish rules and regulations for the administration of the Amended Plan. In addition, the Board of Directors may also exercise the powers of the Committee.

 

13

 

 

The aggregate number of shares of PetVivo common stock available and reserved to be issued under the Amended Plan is 3,000,000 shares, but includes the following limits:

 

  the maximum aggregate number of shares of Common Stock granted as an Award to any Non-Employee Director in any one Plan Year will be 10,000 shares; provided that such limit will not apply to any election of a Non-Employee Director to receive shares of Common Stock in lieu of all or a portion of any annual Board, committee chair or other retainer, or any meeting fees otherwise payable in cash.

 

Awards can be granted for no cash consideration or for any cash and other consideration as determined by the Committee. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of PetVivo common stock, other securities or property, or any combination of these in a single payment, installments or on a deferred basis. The exercise price per share of any stock option and the grant price of any stock appreciation right may not be less than the fair market value of PetVivo common stock on the date of grant. The term of any award cannot be longer than ten years from the date of grant. Awards will be adjusted in the event of a stock dividend or other distribution, recapitalization, forward or reverse stock split, reorganization, merger or other business combination, or similar corporate transaction, in order to prevent dilution or enlargement of the benefits or potential benefits provided under the Amended Plan.

 

The Amended Plan permits the following types of awards: stock options, stock appreciation rights, restricted stock awards, restricted stock units, deferred stock units, performance awards, non-employee director awards, other stock-based awards, and dividend equivalents.

 

Common Stock

 

For the nine months ended December 31, 2022, the Company issued 118,164 shares of common stock as follows:

 

  i) 24,217 shares in July 2022 pursuant to a warrant holder’s exercise of warrants for purchase with a weighted average strike price of $1.33 per share for cash proceeds of $32,188;
  ii) 24,447 shares in August 2022 pursuant to a warrant holder’s exercise of warrants for purchase with a weighted average strike price of $1.41 per share for cash proceeds of $34,370;
  iii) 25,000 shares in August 2022 to service providers for consulting services valued at $49,920; and
  iv) 44,500 shares related to vesting of restricted stock units (“RSU’s), with 10,000 RSU’s vesting in July 2022, 22,000 RSU’s in August 2022, 1,250 RSU’s in September 2022 and 11,250 RSU’s in December 2022.

 

For the nine months ended December 31, 2021, the Company issued 2,958,615 shares of common stock as follows:

 

  i) 80,522 shares in April 2021 pursuant to a conversion of a $230,000 convertible note and $2,658 in accrued interest at a conversion rate of $2.89 per share;
  ii) 4,500 shares in April 2021 pursuant to the exercise of warrants with a strike price of $4.44 per share for cash proceeds of $40,000;
  iii) 36,915 shares in May 2021 pursuant to John Lai’s (CEO and a Director of the Company) cashless exercise of a warrant for purchase of 42,188 shares of common stock at a strike price of $1.33 per share;
  iv) 79,767 shares in May 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 90,500 shares of common stock at a strike price of $1.40 per share;
  v) 49,014 shares during May and June of 2021 in exchange for $343,098 in cash to accredited investors, including an officer and two directors of the Company at a price of $7.00 per share;
  vi) 43,324 shares in June 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 56,250 shares of common stock at a strike price of $2.22 per share;
  vii) 11,000 shares in July 2021 in exchange for $77,000 in cash to accredited investors at a price of $7.00 per share;

 

14

 

 

  viii) 2,500,000 shares and warrants, as part of the units issued on August 13, 2021 in the Public Offering, in exchange for net proceeds of $9,780,783, at a price of $4.50 per unit;
  ix) 43,556 shares and warrants in August 2021 pursuant to a conversion of $196,000 share-settled debt obligation in the Public Offering at a price of $4.50 per unit;
  x) 40,038 shares in August 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 48,786 shares of common stock at a strike price of $1.40 per share;
  xi) 1,594 shares in September 2021 pursuant to a warrant holder’s exercise of warrants for purchase of 1,594 shares of common stock at a strike price of $1.27 per share for cash proceeds of $2,031;
  xii) 42,000 shares in September 2021 to a service provider for future marketing and investor relations services valued at $210,000;
  xiii) 25,585 shares in October 2021 to members of the Board of Directors valued at $69,080 as compensation for board services;
  xiv) 500 shares in December 2021 to a service provider for consulting services valued at $2,000, and
  xv) 300 shares in December 2021 related to vesting of restricted stock units.

 

The Company has issued shares of common stock to providers of consulting services which are reported in the Consolidated Statements of Stockholders’ Equity. The value of these shares are reported as a prepaid expense and are amortized to expense over the contractual life of the respective consulting agreements. The amortization of stock issued for services as reported in the Consolidated Statements of Cash Flows was $258,844 and $71,080 for the nine months ended December 31, 2022 and 2021, respectively.

 

Time-Based Restricted Stock Units

 

We have granted time-based restricted stock units to certain participants under the Amended Plan that are stock-settled with common shares. Time-based restricted stock units granted under the Amended Plan vest over three years. Stock-based compensation expense included in the Consolidated Statements of Operations for time-based restricted stock units was $182,377 and $251,885 for the three months ended December 31, 2022 and 2021, respectively and $547,131 and $359,992 for the nine months ended December 31, 2022 and 2021, respectively. On December 31, 2022, there were approximately $958,000 of total unrecognized pre-tax compensation expense related to time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.5 years.

 

Our time-based restricted stock unit activity for the year ended March 31, 2022, and the nine-month period ended December 31, 2022 is as follows:

  

  

Units

Outstanding

   Weighted Average Grant Date Fair Value Per Unit   Aggregate Intrinsic Value (1) 
Balance at March 31, 2021   -    -    - 
Granted   549,565   $3.86    - 
Expired   (4,073)  $2.70    - 
Vested   (172,824)  $3.44    - 
Balance at March 31, 2022   372,668   $4.07   $760,243 
Vested   (44,500)  $4.80    - 
Balance at December 31, 2022   328,168   $3.97   $643,209 

 

1) The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

 

Stock Options

 

Stock options issued to employees typically vest over three years and have a contractual term of seven years. Stock-based compensation expense included in the Consolidated Statements of Operations for stock options was $350,006 for the three months ended December 31, 2022 and $480,792 for the nine months ended December 31, 2022. At December 31, 2022, there was approximately $1,126,000 of total unrecognized stock option expense which is expected to be recognized on a straight-line basis over a weighted-average period of 1.8 years.

 

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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Annually, we make predictive assumptions regarding future stock price volatility, dividend yield, expected term and forfeiture rate. The dividend yield assumption is based on expected annual dividend yield on a grant date. To date, no dividends on common stock have been paid by us. Expected volatility for grants is based on our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility. The risk-free interest rate is based on yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. We use the “simplified method” to determine the expected term of the stock option grants. We utilize this method because we do not have sufficient public company exercise data in which to make a reasonable estimate.

 

The following table sets forth the assumptions used to estimate fair values of our stock options granted:

  

  

Nine Months Ended

December 31, 2022

  

Year Ended

March 31, 2022

 
Expected term   7 years    7 years 
Expected volatility   173.2% - 207.8%   205.0% - 210.5%
Risk-free interest rate   2.96% - 4.35%   1.47% – 2.14%
Expected dividend yield   0%   0%
Fair value on the date of grant   $ 1.87 - $2.79    $ 1.39 - $1.99 

 

Our stock option activity for the year ended March 31, 2022 and the nine month period ended December 31, 2022 is as follows:

  

  

Options

Outstanding

   Weighted- Average Exercise Price Per Share (1)   Weighted-Average Remaining Contractual Life   Aggregate Intrinsic Value (2) 
Balance at March 31, 2021   -    -    -    - 
Granted   195,000   $1.56         - 
Balance at March 31, 2022   195,000   $1.56    6.9 years   $100,200 
Granted   585,849   $2.39           
Cancelled   (25,000)  $2.46           
Balance at December 31, 2022   755,849   $2.17    6.3 years   $84,150 
                     
Options exercisable at December 31, 2022   110,456                

 

(1) The exercise price of each option granted during the period shown above was equal to the market price of the underlying stock on the date of grant.
   
(2) The aggregate intrinsic value of stock options outstanding was based on our closing stock price on the last trading day of this period.

 

The following summarizes additional information about our stock options:

  

   December 31, 2022 
Number of:     
Non-vested options, beginning of period   195,000 
Non-vested options, end of period   645,393 
Vested options, end of period   110,456 

 

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   December 31, 2022 
Weighted-average grant date fair value of:     
Non-vested options, beginning of period  $1.56 
Non-vested options, end of period  $2.16 
Vested options, end of period  $2.27 
Forfeited options, during the period   - 

 

Warrants

 

During the three and nine months ended December 31, 2022, no warrants were issued.

 

During the nine months ended December 31, 2021, the Company issued warrants to purchase an aggregate of 3,043,556 shares of common stock in connection with its public offering of units, as follow:

 

  warrants to purchase 2,500,000 shares of the Company’s common stock with a relative value of $4,805,528, at an exercise price of $5.625 per share for five years from the grant date of August 10, 2021 issued to investors in the Public Offering as part of the units,
     
  warrants to purchase 43,556 shares of the Company’s common stock, pursuant to a conversion of $196,000 share-settled debt obligation in the Public Offering, with a relative value of $83,724, at an exercise price of $5.625 per share for five years from the grant date of August 10, 2021 to the Company’s former Director of Science and Technology and Director pursuant to a note conversion in the Public Offering as part of the units,
     
  warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $5.625 per share for five years from the grant date of August 10, 2021 issued to ThinkEquity upon exercise of its over-allotment option and pursuant to the Underwriting Agreement. These warrants were considered issuance costs of the Public Offering which resulted in a zero impact on additional paid-in capital.

 

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

 

i) an expected volatility of the Company’s shares on the date of the grant of approximately 315% based on historical volatility.

ii) risk-free rate identical to the U.S. Treasury 5-year treasury bill rate on the date of the grant of 0.82%.

 

A summary of warrant activity for the year ended March 31, 2022 and the nine-month period ended December 31, 2022 is as follows:

  

  

Number of

Warrants

  

Weighted-

Average

Exercise

Price

  

Warrants

Exercisable

  

Weighted-

Average

Exercisable

Price

 
Outstanding, March 31, 2021   1,081,668   $2.02    881,982   $2.00 
Issued and granted   3,043,556   $5.63           
Exercised for cash   (6,094)  $(6.90)          
Cashless warrant exercises   (237,724)  $(1.58)          
Expired   (15,922)  $(5.27)          
Cancelled   (108,000)  $(1.79)          
Outstanding, March 31, 2022   3,757,484   $4.95    3,693,734   $5.00 
Exercised for cash   (48,664)  $(1.37)          
Expired   (74,003)  $(2.97)          
Outstanding, December 31, 2022   3,634,817   $5.04    3,612,317   $5.06 

 

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On December 31, 2022, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life is as follows:

SCHEDULE OF RANGE OF WARRANT PRICES 

      Warrants Outstanding     Warrants Exercisable  

Range of Warrant

Exercise Price

   

Number of

Warrants

   

Weighted-

Average Exercise

Price

   

Weighted-

Average

Remaining

Contractual Life

(Years)

   

Number of

Warrants

   

Weighted-

Average

Exercise

Price

 
$ 1.20-$2.00       347,073     $ 1.35       3.68       347,073     $ 1.35  
                                             
$ 2.01-4.00       165,438     $ 2.33       1.74       142,938     $ 2.35  
                                             
$ 4.01-5.63       3,122,306     $ 5.60       3.52       3,122,306     $ 5.60  
                                             
  Total       3,634,817     $ 5.04       3.45       3,612,317     $ 5.06  

 

Stock-based compensation expense included in the Consolidated Statements of Operations for warrants was $0 and $20,332 for the three months ended December 31, 2022 and 2021, respectively. Stock-based compensation expense included in the Consolidated Statements of Operations for warrants was $41,662 and $72,491 for the nine months ended December 31, 2022 and 2021, respectively. At September 30, 2022, there was no future unrecognized warrant expense.

 

For the three months ended December 31, 2022 and 2021, the total stock-based compensation on all instruments was $532,383 and $272,717, respectively. For the nine months ended December 31, 2022 and 2021, the total stock-based compensation on all instruments was $1,069,585 and $432,483, respectively.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On January 5, 2023, the Company sold 610,011 shares of its common stock in a registered direct offering at a purchase price of $2.32 per share, with the first and second closings on January 9 and 13, 2023, respectively. Proceeds from this offering were approximately $1.4 million, after deducting transaction expenses.

 

On January 10, 2023, the Company entered into a new lease agreement for 14,073 square feet of production and warehouse space with a commencement date of April 1, 2023, which is when the control and right of use for this lease asset will take place. The initial monthly base rent is $8,420 and has annual increases of 2.5%. The Company is also responsible for its proportional share of common space expenses, property taxes, and building insurance. The lease will terminate on June 30, 2033 and the Company has a renewal option for a period of five years.

 

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

 

GENERAL

 

PetVivo Holdings, Inc. (the “Company,” “PetVivo,” “we” or “us) is an emerging biomedical device company focused on the manufacturing, commercialization and licensing of innovative medical devices and therapeutics for animals. The Company began commercialization of its lead product Spryng™ with OsteoCushion™ Technology, a veterinarian-administered, intra-articular injection for the management of lameness and other joint afflictions such as osteoarthritis in dogs and horses, in September 2021. The Company has a pipeline of additional products for the treatment of animals in various stages of development. A portfolio of nineteen patents protects the Company’s biomaterials, products, production processes and methods of use.

 

In August 2021, we received net proceeds of approximately $9.8 million in a registered public offering (“Public Offering”) of 2.5 million units at a public offering price of $4.50 per unit. Each unit consisted of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of $5.625 per share. The shares of common stock and warrants were transferable separately immediately upon issuance. In connection with the Public Offering, the Company’s common stock and warrants were registered under Section 12(b) of the Exchange Act and began trading on The Nasdaq Capital Market, LLC under the symbols “PETV” and “PETVW,” respectively.

 

The Company was incorporated in March 2009 under Nevada law under a different name. The Company operates as one segment from its corporate headquarters in Edina, Minnesota.

 

CURRENT BUSINESS OPERATIONS

 

The Company is primarily engaged in the business of commercializing and licensing products in the veterinary market to treat and/or manage afflictions of companion animals such as dogs and horses. The Company’s lead product, Spryng™, is based on proprietary technology developed for human biomedical applications, and we intend to leverage the investments already expended in this development to commercialize treatments for companion animals in a capital and time-efficient way.

 

The Company’s lead product, Spryng™ is derived from proprietary biomaterials that simulate a body’s cellular or acellular tissue by virtue of their reliance upon natural protein and carbohydrate compositions which incorporate such “tissue building blocks” as collagen, elastin and heparin. Since these are naturally-occurring in the body, we believe they have an enhanced biocompatibility with living tissues compared to polymeric biomaterials such as those based upon alpha-hydroxy polymers (e.g. PLA, PLGA and the like), polycryamides and other “synthetic” biomaterials that may lack the multiple “natural” proteins and carbohydrates incorporated into our biomaterials. These proprietary protein-based biomaterials appear to mimic the body’s tissue thus allowing integration and tissue repair in long-term implantation in certain applications.

 

The Company’s lead product, Spryng™ is a veterinary medical device designed to help reinforce and augment articular cartilage tissue for the management of lameness and other joint related afflictions, such as osteoarthritis, in companion animals. Spryng™ is an intra-articular injectable product of biocompatible and insoluble particles that are slippery, wet-permeable, durable, and resilient to enhance the force cushioning function of the synovial fluid and cartilage. The particles are similar to natural cartilage in composition, structure, and hydration. Multiple joints can be treated simultaneously. Our particles are comprised of collagen, elastin and heparin, similar components found in natural cartilage. These particles show an effectiveness to reinforce and augment the cartilage, which enhances the functionality of the joint (e.g. provide cushion or shock-absorbing features to the joint and to provide joint lubricity).

 

Osteoarthritis, a common inflammatory joint disease in both dogs and horses, is a chronic, progressive, degenerative joint disease that is caused by a loss of synovial fluid and/or the deterioration of joint cartilage. Osteoarthritis affects approximately 14 million dogs and 1 million horses in the $11 billion companion animal veterinary care and product sales market.

 

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Despite the market size, veterinary clinics and hospitals have very few treatments and/or drugs for use in treating osteoarthritis in dogs, horses and other pets. As there is no cure for osteoarthritis, current solutions treat symptoms but do not manage the cause. The current treatment for osteoarthritis in dogs generally consists of the use of nonsteroidal anti-inflammatory drugs (or “NSAIDs”) which are approved to alleviate pain and inflammation but present the potential for side effects relating to gastrointestinal, kidney and liver damage and do not halt or slow joint degeneration. The Company offers an alternative to traditional treatments that only address the symptoms of the affliction. Spryng™ with OsteoCushion™ Technology addresses the affliction, loss of synovial fluid and/or the deterioration of joint cartilage, rather than treating just the symptoms and, to the best our knowledge, has elicited minimal adverse side effects in dogs and horses. Based on information provided to us by veterinarians and pet owners, Spryng™-treated dogs and horses have shown an increase in activity even after they no longer are receiving pain medication or other treatments. Other treatments for osteoarthritis include steroid and/or hyaluronic acid injections, which are used for treating pain and inflammation and/or enhancing joint lubrication, but can be slow acting and/or short lasting.

 

We believe Spryng™ is an optimal solution to safely improve joint function in animals for several reasons:

 

  Spryng™ addresses the underlying problems which relate to deterioration of cartilage causing bones to contact each other and a lack of synovial fluid. Spryng™ provides a biocompatible lubricious cushion to the joint, which establishes a barrier between the bones, thereby protecting the remaining cartilage and bone.
  Spryng™ is easily administered with the standard intra-articular injection technique. Multiple joints can be treated simultaneously.
 

Case studies indicate many dogs and horses have long-lasting improvement in lameness

after having been treated with Spryng™.

 

After receiving a Spryng™ injection, many canines are able to discontinue the use of NSAID’s, eliminating

the risk of negative side effects.

  Spryng™ is an effective and economical solution for treating osteoarthritis. A single injection of Spryng™ is approximately $600 to $900 per joint and typically lasts for at least 12 months.

 

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 have recently started filling veterinary prescriptions. Veterinary practices are looking for ways to replace lost prescription revenues with safe and effective products. Spryng™ is a veterinarian-administered medical device that will help veterinarians provide a new solution for treating dogs and horses which have lameness due to synovial joint issues, while expanding revenues and margins for their practices.

 

Spryng™ is classified as a veterinary medical device under the United States Food and Drug Administration (“FDA”) rules and pre-market approval is not required by the FDA. Spryng™ completed a safety and efficacy study in rabbits in 2007. Since that time, more than 1,500 horses and dogs have been treated with Spryng™. We entered into a clinical trial services agreement with Colorado State University on November 5, 2020. We expect this university clinical study to be completed in March 2024. Additionally, the Company successfully completed an equine tolerance study in March 2022 and began a canine clinical study with Ethos Veterinary Health in May 2022 with anticipated completion in fiscal 2023. We anticipate these and other studies that we plan to initiate will be primarily used to support our commercialization efforts and expand the use of Spryng™ in other applications.

 

We commenced sales of Spryng™ in the second quarter of fiscal 2022 and plan to increase our commercialization efforts of Spryng™ in the United States through our distribution relationship with MWI Veterinary Supply Co. (“Distributor” or “MWI”) and the use of sales reps, clinical studies and market awareness to educate and inform key opinion leaders on the benefits of Spryng™.

 

We entered into a Distribution Services Agreement (“Distribution Agreement”) with MWI on June 17, 2022. Pursuant to the Agreement, we appointed MWI to distribute, advertise, promote, market, supply and sell the Company’s lead product, Spryng™ on an exclusive basis for two (2) years within the United States (the “Territory”), transitioning to a non-exclusive basis thereafter; provided however that the Company shall extend the exclusivity for an additional one (1) year if MWI achieves certain performance targets agreed upon by the parties. The Company can continue to sell Spryng™ within the Territory to established accounts, which include: (a) customers who have purchased Spryng™ from the Company prior to the date of the Agreement, (b) customers who require that they deal directly with the Company, (c) governmental agencies, and (d) customers that order via the internet who are not directly solicited by MWI to purchase Spryng™. All customers must be licensed veterinary practices.

 

20

 

 

We manufacture our products in our ISO 7 certified clean room facility in Minneapolis using our patented and scalable self-assembly production process, which minimizes the infrastructure requirements and manufacturing risks to deliver a consistent, high-quality product while being responsive to volume requirements. A second ISO 7 cleanroom facility is expected to be operational later this year. We believe that having two manufacturing facilities will help us minimize supply risks, allow for the continued scaling of our production capacity, and expand our research and development facilities.

 

RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with our 2022 10-K Report and the consolidated financial statements and related notes in Item 1, Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q (“10-Q Report”). The following discussion may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our 2022 10-K Report under the heading “Risk Factors,” as updated and supplemented by risks described in other SEC filings. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

 

We are a smaller reporting company and have not generated material revenues to date and have incurred substantial losses in connection with our limited operations. We need substantial capital to pursue our current plans to commercialize our initial product, Spryng™.

 

RESULTS OF OPERATIONS

 

  

For the Three Months Ended

December 31,

  

For the Nine Months Ended

December 31,

 
   2022   2021   2022   2021 
Revenues  $510,109   $51,004   $791,563   $60,126 
Cost of Sales   223,687    98,997    424,866    104,048 
                     
Operating Expenses   2,605,240    1,609,658    6,771,176    3,235,604 
                     
Other Income   7,200    15,522    15,844    41,294 
Net Loss  $(2,311,618)  $(1,642,129)  $(6,388,635)  $(3,238,232)
Net loss per share - basic and diluted  $(0.23)  $(0.17)  $(0.64)  $(0.38)

 

For The Three Months Ended December 31, 2022 Compared to The Three Months Ended December 31, 2021

 

Revenues. Revenues were $510,109 for the three months ended December 31, 2022 compared to revenues of $51,004 for the three months ended December 31, 2021. Revenues in the three months ended December 31, 2022 consisted of sales of our Spryng™ product to our Distributor of $456,502 and to veterinary clinics in the amount of $53,607. In the three months ended December 31, 2021, our revenues of $51,004 consisted of sales to veterinary clinics. The increase in our revenues in the three months ended December 31, 2022 is due to sales to our Distributor pursuant to our Distribution Agreement.

 

Cost of Sales. Cost of sales was $223,687 and $98,997 for the three months ended December 31, 2022 and 2021, respectively. Cost of sales includes product costs related to the sale of our Spryng™ products and labor and overhead costs. The increase in cost of sales in the three months ended December 31, 2022 is due to the increased sales to our Distributor pursuant to our Distribution Agreement.

 

21

 

 

Operating Expenses. Operating expenses were $ 2,605,240 and $1,609,658 for the three months ended December 31, 2022 and 2021, respectively. Operating expenses consisted of general and administrative, sales and marketing, and research and development expenses. The Company began commercialization of its Spryng™ product in September 2021, which resulted in increased general and administrative expenses and sales and marketing expenses related to the sale of its Spryng™ product in the three months ended December 31, 2022 compared to the same period in the prior year.

 

General and administrative (“G&A”) expenses were $1,309,534 and $1,170,870 for the three months ended December 31, 2022 and 2021, respectively. G&A expenses include compensation and benefits, contracted services, consulting fees, stock compensation and legal fees. The increase in G&A expenses was related to compensation and benefits, legal and consulting fees and stock compensation.

 

Sales and marketing expenses were $1,047,549 and $404,462 for the three months ended December 31, 2022 and 2021, respectively. Sales and marketing expenses include compensation, consulting, tradeshows and stock compensation costs to support the launch of our Spryng™ product. The increase in sales and marketing expenses in the three months ended December 31, 2022 was due to the hiring of sales personnel and related costs, increased presence at tradeshows and awareness initiatives as part of the commercialization of Spryng™ and supporting our Distributor relationship.

 

Research and development (“R&D”) expenses were $248,157 and $34,326 for the three months ended December 31, 2022 and 2021, respectively. The increase in R&D expenses was related to the increase in clinical studies in the three months ended December 31, 2022 compared to the same period in the prior year.

 

Operating Loss. As a result of the foregoing, our operating loss was $2,318,818 and $1,657,651 for the three months ended December 31, 2022 and 2021, respectively. The increase in our operating loss was related to the increased operating expenses incurred to support the commercial launch of Spryng™ incurred in the three months ended December 31, 2022 compared to the same period in the prior year.

 

Other Income. Other income was $7,200 and $15,522 for the three months ended December 31, 2022 and 2021, respectively, consisted of net interest income.

 

Net Loss. Our net loss for the three months ended December 31, 2022 was $2,311,618 or ($0.23) per share as compared to a net loss of $1,642,129 or ($0.17) per share for the three months ended December 31, 2021. The increase in our net loss was related to the increased operating expenses incurred to support the launch of Spryng™ compared to the same period in the prior year. The weighted average number of shares outstanding was 10,098,658 compared to 9,756,945 for the three months ended December 31, 2022 and 2021, respectively.

 

For The Nine Months Ended December 31, 2022 Compared to The Nine Months Ended December 31, 2021

 

Revenues. Revenues were $791,563 for the nine months ended December 31, 2022 compared to revenues of $60,126 for the nine months ended December 31, 2021. Revenues for the nine months ended December 31, 2022 consisted of sales of our Spryng™ product to our Distributor in the amount of $574,766 and to veterinary clinics in the amount of $191,797. In the nine months ended December 31, 2021, our revenues of $60,126 consisted of sales to veterinary clinics. The increase in our revenues in the nine months ended December 31, 2022 is due to (i) sales to our Distributor pursuant to our Distribution Agreement and (ii) increased sales to veterinary clinics due to our marketing and other commercialization efforts which began in September 2021.

 

Cost of Sales. Cost of sales was $424,866 and $104,048 for the nine months ended December 31, 2022 and 2021, respectively. Cost of sales includes product costs related to the sale of products and labor and overhead costs. The increase in cost of sales is due to the increased sales to our Distributor pursuant to our Distribution Agreement.

 

Operating Expenses. Operating expenses were $6,771,176 and $3,235,604 for the nine months ended December 31, 2022 and 2021, respectively. Operating expenses consisted of general and administrative, sales and marketing, and research and development expenses. The Company began commercialization of its Spryng™ product in September 2021, which resulted in increased general and administrative expenses and sales and marketing expenses related to the sale of its Spryng™ product in the nine months ended December 31, 2022 compared to the same period in the prior year.

 

22

 

 

General and administrative (“G&A”) expenses were $3,738,876 and $2,258,001 for the nine months ended December 31, 2022 and 2021, respectively. G&A expenses include compensation and benefits, contracted services, consulting fees, legal fees and stock compensation. The increase in G&A expenses was related to compensation and benefits, legal and consulting fees and stock compensation.

 

Sales and marketing expenses were $2,572,103 and $689,960 for the nine months ended December 31, 2022 and 2021, respectively. Sales and marketing expenses include compensation, consulting, tradeshows, and stock compensation costs to support the launch of our Spryng™ product. The increase in sales and marketing expenses was due to the hiring of sales personnel and related costs, increased presence at tradeshows and awareness initiatives as part of the commercialization of Spryng™ and supporting our Distributor relationship.

 

Research and development (“R&D”) expenses were $460,197 and $287,643 for the nine months ended December 31, 2022 and 2021, respectively. The increase in R&D expenses was related to the increase in clinical studies in the nine months ended December 31, 2022 compared to the same period in the prior year.

 

Operating Loss. As a result of the foregoing, our operating loss was $6,404,479 and $3,279,526 for the nine months ended December 31, 2022 and 2021, respectively. The increase in our operating loss was related to the costs to support the launch of Spryng™ incurred in the nine months ended December 31, 2022 compared to the same period in the prior year.

 

Other Income. Other income was $15,844 for the nine months ended December 31, 2022 as compared to other income of $41,294 for the nine months ended December 31, 2021. Other income in 2022 consisted of net interest income. Other income in 2021 consisted of the forgiveness of PPP Loan and accrued interest of $31,680 and net interest income of $9,614.

 

Net Loss. Our net loss for the nine months ended December 31, 2022 was $6,388,635 or ($0.64) per share as compared to a net loss of $3,238,232 or ($0.38) per share for the nine months ended December 31, 2021. The weighted average number of shares outstanding was 10,047,040 compared to 8,426,135 for the nine months ended December 31, 2022 and 2021, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

On August 13, 2021, we closed an underwritten public offering of 2,500,000 units, at a price of $4.50 per unit. Net proceeds from the Public Offering were approximately $9,781,000, net of commissions and expenses of the offering.

 

As of December 31, 2022, our current assets were $1,735,929, including $374,533 in cash and cash equivalents. In comparison, our current liabilities as of that date were $1,564,582 including $1,497,680 of accounts payable and accrued expenses. Our working capital as of December 31, 2022 was $171,347.

 

The Company has continued to realize losses from operations. However, as a result of our Public Offering and the recent sale of our common stock in a registered direct offering which closed in January 2023, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements for the next four months. We will need to raise additional capital in the future to support our efforts to commercialize Spryng™ and our ongoing operations. We expect to continue to raise additional capital through the sale of our securities from time to time for the foreseeable future to fund our business expansion. Our ability to obtain such additional capital will likely be subject to various factors, including our overall business performance and market conditions. There can be no guarantee that the Company will be successful in its ability to raise additional capital to fund its business plan.

 

Net Cash Used in Operating Activities – We used $5,500,247 of net cash in operating activities for the nine months ended December 31, 2022. This cash used in operating activities was primarily attributable to our net loss of $6,388,635, an increase in inventories of $276,569, an increase in prepaid expenses and other assets of $140,930 and an increase in accounts receivable of $504,248, partially offset by stock compensation expense of $1,069,585 and stock issued for services of $258,844.

 

23

 

 

Net Cash Used in Investing Activities – We used $293,851 of net cash in investing activities for the nine months ended December 31, 2022, consisting of costs capitalized for manufacturing and computer equipment.

 

Net Cash Provided by Financing Activities – Cash provided from financing activities was $61,804 for the nine months ended December 31, 2022 consisting of cash received of $66,558 from the exercise of warrants partially offset by $4,754 in repayments of a note payable.

 

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.

 

At December 31, 2022, the Company’s inventory has a carrying value of $374,882 and is broken down into $30,947 of finished goods, $25,860 of work in process and $318,075 in raw materials.

 

At March 31, 2022, the Company’s inventory had a carrying value of $98,313 and was broken down into $11,889 of finished goods, $22,960 of work in process and $63,464 in raw materials.

 

MATERIAL COMMITMENTS

 

Note Payable

 

As of December 31, 2022, we are obligated on a note and accrued interest of $28,996.

 

Purchase Commitment

 

We issued purchase orders as of December 31, 2022 totaling $51,000 for inventory that we expect to receive within the next three months.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of December 31, 2022, 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 2022 10-K Report 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. In August 2021, we raised approximately $9,781,000 from the sale of units in a Public Offering. Our working capital at December 31, 2022 was $171,347. In January 2023, the Company sold 610,011 shares of its common stock in a registered direct offering at a purchase price of $2.32 per share. Proceeds from this offering were approximately $1.4 million, after deducting transaction expenses. We believe this working capital is sufficient to fund operations for the next four months (see “Liquidity and Capital Resources” above).

 

We have continued to realize losses from operations. However, as a result of our Public Offering and the recent sale of our common stock in a registered direct offering, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements for at least the next four months. We will need to raise additional capital in the future to support our efforts to commercialize Spryng™ and our ongoing operations. We expect to continue to raise additional capital through the sale of our securities from time to time for the foreseeable future to fund our business expansion. Our ability to obtain such additional capital will likely be subject to various factors, including our overall business performance and market conditions. There can be no guarantee that the Company will be successful in its ability to raise additional capital to fund its business plan.

 

24

 

 

CRITICAL ACCOUNTING POLICIES

 

We prepare our consolidated financial statements in accordance with generally accepted accounting standards in the United States of America. Our significant accounting policies are described in Note 1 to our consolidated financial statements attached hereto. We believe these accounting policies involve the most significant judgments and estimates used in the preparation of the consolidated financial statements.

 

RECENTLY ISSUED ACCOUNTING STANDARDS

 

The Company has reviewed the FASB-issued ASU accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the Company’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of the Company’s financial management.

 

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts on an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exceptions. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.

 

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

 

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.

 

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.

 

Changes in internal control over financial reporting.

 

There were no significant changes in our internal control over financial reporting in the third quarter of our fiscal year ending March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business, the resolution of which we do not anticipate would have, individually or in the aggregate, a material adverse effect on our business, financial condition, or results of operations.

 

Refer to Note 9. Commitments and Contingencies, in the Notes to Consolidated Financial Statements set forth in Part I, Item 1 Financial Statements of this Quarterly Report, for further information regarding legal contingencies.

 

ITEM 1A. RISK FACTORS

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in our 2022 10-K Report. The risks discussed in our 2022 10-K Report could materially affect our business, financial condition and future results. The risks described in our 2022 Form 10-K Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition or operating results in the future.

 

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

 

Unregistered Sales of Equity Securities

 

For the three months ended December 31, 2022, the Company issued 11,250 shares of common stock in December related to vesting of restricted stock units issued to three employees.

 

All of these transactions described above were exempt from registration in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction by an issuer not involving a public offering. The purchasers of securities in each of these transactions represented their intention to acquire the securities for investment only and not with a view to offer or sell, in connection with any distribution of the securities, and appropriate legends were affixed to the share certificates and instruments issued in such transactions.

 

Use of Proceeds from IPO

 

On August 13, 2021, we completed our Public Offering pursuant to which we issued and sold an aggregate of 2,500,000 units at the public offering price of $4.50 per unit. Each unit consisted of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of $5.625 per share. The shares of common stock and warrants were transferable separately immediately upon issuance. At the closing of the Public Offering, the underwriter exercised its over-allotment option to purchase an additional 375,000 warrants for an aggregate purchase price of $3,850.

 

The offer and sale of all of the units in our Public Offering were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-249452), which was declared effective by the SEC on August 10, 2021 (“Registration Statement”). ThinkEquity, a division of Fordham Financial Management, Inc. acted as the sole book-running manager for the offering. In connection with the Public Offering, the Company’s common stock and warrants were registered under Section 12(b) of the Exchange Act and began trading on The Nasdaq Capital Market, LLC under the symbols “PETV” and “PETVW,” respectively.

 

We received aggregate gross proceeds from our Public Offering of $11,253,850 (inclusive of the underwriter’s exercise of its overallotment option to purchase warrants). After deducing underwriting discounts and commissions and other offering expenses, we received net proceeds of approximately $9,781,000 from the Public Offering.

 

As disclosed in the Registration Statement, we used a portion of the net proceeds from the Public Offering for debt repayment of $101,400 consisting of (i) $36,808 in accrued salary and expenses relating to the CEO; (ii) $20,000 in notes payable to four directors, which accrued interest at a rate of 6.5% per annum and matured in September 2021; and (iii) repayment of $44,554 in a note payable to our former Director of Science and Technology and a director, which accrued interest at a rate of 8% per annum, and maturity date of June 30, 2022.

 

There has been no material change in our intended use of proceeds from our Public Offering as described in the Prospectus filed with the SEC pursuant to Rule 424(b)(4) on August 13, 2021.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not required.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not required.

 

ITEM 5. OTHER INFORMATION

 

None

 

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ITEM 6. EXHIBITS

 

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

 

Exhibit No.   Description
     
10.1   PetVivo Holdings, Inc. Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on October 17, 2022).
10.2   Amendment No. 1 to Employment Agreement between the Company and John Lai to be effective as of November 1, 2022 10.1 (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2022).
10.3   Amendment No. 1 to Employment Agreement between the Company and Robert Folkes, effective as of November 1, 2022 (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2022).
10.4   Amendment No. 1 to Employment Agreement between the Company and Randall Meyer, effective as of November 1, 2022 (incorporated by reference to Exhibit 10.3 in the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2022).
10.5   Amendment No. 1 to Employment Agreement between the Company and John Dolan, effective as of November 1, 2022 ( incorporated by reference to Exhibit 10.4 in the Company’s Current Report on Form 8-K filed with the SEC on October 24, 2022).
31.1   Section 302 Certification of Chief Executive Officer*
31.2   Section 302 Certification of Chief Financial Officer*
32.1   Section 906 Certification of Chief Executive Officer**
32.2   Section 906 Certification of Chief Financial Officer **
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Schema
101.CAL   Inline XBRL Taxonomy Calculation Linkbase
101.DEF   Inline XBRL Taxonomy Definition Linkbase
101.LAB   Inline XBRL Taxonomy Label Linkbase
101.PRE   Inline XBRL Taxonomy Presentation Linkbase
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)
     
    *Filed herewith
    **Furnished herewith

 

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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.

 

February 9, 2023 By: /s/ John Lai
    John Lai
  Its:

CEO, President and Director

(Principal Executive Officer)

     
February 9, 2023 By: /s/ Robert J. Folkes
    Robert J. Folkes
  Its:

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

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