U.S. SECURITIES AND EXCHANGE COMMISSION
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
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| The
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Securities registered pursuant to Section 12(g) of the Act:
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| ☒ | Smaller reporting company | |||
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PETVIVO HOLDINGS, INC.
FORM 10-Q
FOR THE PERIOD ENDED June 30, 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 | 15 |
| Item 3. | Qualitative and Quantitative Disclosures About Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II. OTHER INFORMATION | 22 | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. | Defaults Upon Senior Securities | 22 |
| Item 4. | Mine Safety Disclosure | 22 |
| Item 5. | Other information | 22 |
| Item 6. | Exhibits | 23 |
| SIGNATURES | 24 | |
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
June 30, 2022 (Unaudited) | March 31, 2022 | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| Other Assets: | ||||||||
| Operating lease right-of-use | ||||||||
| Patents and trademarks, net | ||||||||
| Security deposit | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Operating lease liability – short term | ||||||||
| Note payable and accrued interest | ||||||||
| Total Current Liabilities | ||||||||
| Other Liabilities | ||||||||
| Note payable and accrued interest (net of current portion) | ||||||||
| Operating lease liability (net of current portion) | ||||||||
| Total Other Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (see Note 9) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value $, shares authorized, and shares issued and outstanding at June 30, 2022 and March 31, 2022 | ||||||||
| Common stock, par value $, shares authorized, shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively | ||||||||
| Additional Paid-In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 1 |
PETVIVO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2022 | 2021 | |||||||
| Revenues | $ | $ | ||||||
| Cost of Sales | ||||||||
| Gross Profit (Loss) | ( | ) | ||||||
| Operating Expenses: | ||||||||
| Sales and Marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Forgiveness of PPP loan and accrued interest | ||||||||
| Interest income (expense) | ( | ) | ||||||
| Total Other Income | ||||||||
| Loss before taxes | ( | ) | ( | ) | ||||
| Income Tax Provision | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Share: | ||||||||
| Basic and Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Common Shares Outstanding: | ||||||||
| Basic and Diluted | ||||||||
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)
Three Months Ended June 30, 2022
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
Three Months Ended June 30, 2021
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common stock sold | ||||||||||||||||||||
| Cash paid to exercise warrants | ||||||||||||||||||||
| Stock issued for debt conversion | ||||||||||||||||||||
| Cashless warrant exercises | ( | ) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
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)
| For the Three Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss For The Period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Stock-based compensation | ||||||||
| Investor relations services paid in stock | ||||||||
| Depreciation and amortization | ||||||||
| Forgiveness of PPP loan and accrued interest | ( | ) | ||||||
| Deferred offering costs | ( | ) | ||||||
| Changes in Operating Assets and Liabilities | ||||||||
| (Increase) Decrease in prepaid expenses and other assets | ( | ) | ||||||
| Increase in accounts receivable | ( | ) | ||||||
| Increase in inventory | ( | ) | ||||||
| Interest accrued on convertible notes payable | ||||||||
| Interest accrued on notes payable - related party | ||||||||
| Interest accrued on notes payable | ||||||||
| Increase in accounts payable and accrued expenses | ||||||||
| Increase in accrued expenses - related party | ||||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of equipment | ( | ) | ||||||
| Increase in patents and trademarks | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from common stock sold | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
| Net (Decrease) Increase in Cash | ( | ) | ||||||
| Cash at Beginning of Period | ||||||||
| Cash at End of Period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash Paid During The Period For: | ||||||||
| Interest | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE ON NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Stock granted for debt conversion | $ | |||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
PetVivo Holdings, Inc.
Notes to Consolidated Financial Statements
June 30, 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 of afflictions and diseases in animals, initially for dogs and horses. The Company’s operations are conducted from its headquarter facilities in suburban Minneapolis, Minnesota.
| (B) | Basis of Presentation |
PetVivo Holdings, Inc. (the “Company”) was incorporated in Nevada under a former name in 2009 and entered its current business in 2014 through a stock exchange reverse merger with PetVivo, Inc., a Minnesota corporation. This merger resulted in Minnesota PetVivo becoming a wholly-owned subsidiary of the Company. In April 2017, the Company acquired another Minnesota corporation, Gel-Del Technologies, Inc., through a statutory merger, which is also a wholly-owned subsidiary of the Company.
| (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 inventory obsolescence, estimated useful lives and potential impairment of property and equipment and intangibles, estimate of fair value of share-based payments and derivative instruments and recorded debt discount, 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.
| (F) | Concentration-Risk |
The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. As of June 30, 2022 and March 31, 2022, the Company did have cash balances in excess of the federally insured limits.
| (G) | 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
| (H) | Patents and Trademarks |
The Company capitalizes direct costs for the maintenance and advancement of their patents and trademarks and amortizes these costs over the lesser of 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.
| 5 |
| (I) | Loss Per Share |
Basic loss per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company had warrants outstanding as of June 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these warrants is $ per share. These warrants are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had restricted stock units outstanding as of June 30, 2022 which are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had options outstanding as of June 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these options is $ per share. These options are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had warrants outstanding as of June 30, 2021, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these warrants is $ per share. These warrants are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company uses the guidance in Accounting Standards Codification 260 (“ASC 260”) to determine if-converted loss per share. ASC 260 states that convertible securities should be considered exercised at the later date of the first day of the reporting period’s quarter or the inception date of the debt instrument. Also, the if-converted method shall not be applied for the purposes of computing diluted EPS if the effect would be anti-dilutive.
At June 30, 2021, the Company had a Share-Settled Debt Obligation to a Related Party of $ which converted into common shares pursuant to an underwritten public offering that closed on August 13, 2021. The if-converted method was not applied for the purposes of computing EPS as the effect would be anti-dilutive.
| (J) | Revenue Recognition |
The Company derives revenue from the sale of pet care products to its veterinarian customers in the United States. For performance obligations related to the sale of our pet care products, control transfers to the customer at a point in time. Revenue is recognized upon shipment, which is when control of these products is transferred to our customers 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 with MWI Veterinary Supply Co. on June 17, 2022. For the three months ended June 30, 2022, no revenue was recognized under this agreement.
| (K) | Research and Development |
The Company expenses research and development costs as incurred.
(L) |
Fair Value of Financial Instruments |
The Company applies the accounting guidance under FASB ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
| 6 |
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 June 30, 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 notes recorded at fair value is determined using Level 3 inputs, which consider (i) time value, (ii) current market and (iii) contractual prices.
The
Company had
| (M) | Stock-Based Compensation - Non-Employees |
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).
Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
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 Accounting Standards Codification 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.
● 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.
| 7 |
● 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.
| (N) | Income Taxes |
The Company accounts for income taxes under Accounting Standards Codification (“ASC”) Topic 740. Deferred tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
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.
| (O) | 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.
| (P) | 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.
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.
| 8 |
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The adoption of the standard had no impact on the consolidated financial statements.
All other new issued, but not yet effective, accounting pronouncements have been deemed either immaterial or not applicable.
NOTE 2 – INVENTORY
As
of June 30, 2022 and March 31, 2022, the Company had inventory of $
The inventory components are as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Finished goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Total Net | $ | $ | ||||||
NOTE 3 – PREPAID EXPENSES AND OTHER ASSETS
As
of June 30, 2022, the Company had $
As
of March 31, 2022, the Company had $
NOTE 4 –PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Leasehold improvements | $ | $ | ||||||
| Production equipment | ||||||||
| R&D equipment | ||||||||
| Computer equipment and furniture | ||||||||
| Total, at cost | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Total Net | $ | $ | ||||||
Depreciation
expense was $
NOTE 5 – PATENTS AND TRADEMARKS
The components of patents and trademarks, all of which are finite-lived, were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Patents | $ | $ | ||||||
| Trademarks | ||||||||
| Total at cost | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Total net | $ | $ | ||||||
Amortization
expense was $
| 9 |
NOTE 6 – ACCRUED EXPENSES
The components of accrued expenses were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Accrued payroll and related taxes | $ | $ | ||||||
| Accrued lease termination expense | ||||||||
| Total | $ | $ | ||||||
Pursuant
to a lease wherein our subsidiary, Gel-Del Technologies, Inc., was the lessee until and through the lease’s termination in
fiscal year 2017-2018, the Company had recorded approximately $
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 $
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. The Company made contributions to the plan of $
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Lease Obligations
The
Company entered into an -month lease for
The
Company entered into a month lease for
Rent
expense for the three months ended June 30, 2022 and 2021 was $
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2022:
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| $ | ||||
| Less: amount representing interest | ( | ) | ||
| Total | $ |
| 10 |
In
compliance with ASC 842, the Company recognized, based on
| Present value of future base rent lease payments | $ | |||
| Base rent payments included in prepaid expenses | ||||
| Present value of future base rent lease payments – net | $ |
As of June 30, 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 | $ | |||
| Total operating lease assets | ||||
| Operating lease current liability | ||||
| Operating lease other liability | ||||
| Total operating lease liabilities | $ |
Employment Agreements
The Company has employment agreements with its executive officers. As of June 30, 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.
Purchase Commitment
We
issued purchase orders as of June 30, 2022 totaling $
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 $
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.
| 11 |
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”), subject to approval by our stockholders at the Regular Meeting of Stockholders held on September 22, 2020, when it was approved by our stockholders and became effective. The number of shares of our common stock available and that may be issued as awards under the 2020 Plan is shares. Unless sooner terminated by the Board, the 2020 Plan will terminate at midnight on . The number of shares available to grant under the Plan was at June 30, 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 2020 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 2020 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 2020 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 2020 Plan. In addition, the Board of Directors may also exercise the powers of the Committee.
The aggregate number of shares of PetVivo common stock available and reserved to be issued under the 2020 Plan is 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 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 2020 Plan.
The 2020 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.
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Common Stock
The Company did not issue any shares of its common stock in the three months ended June 30, 2022. The Company issued shares of common stock in the three months ended June 30, 2021 as follows:
i)
shares in April 2021 pursuant to a conversion of a $
ii)
iii)
shares in May 2021 pursuant to John Lai’s (CEO and a Director of the Company) cashless exercise of a warrant for purchase
of
iv)
shares in May 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of
v)
shares during May and June of 2021 in exchange for $
vi)
shares in June 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of
Time-Based Restricted Stock Units
We
have granted time-based restricted stock units to certain participants under the 2020 Plan that are stock-settled with common shares.
Time-based restricted stock units granted under the 2020 Plan vest over three years. Stock-based compensation expense included in the
Consolidated Statements of Operations for time-based restricted stock units was $
Our time-based restricted stock unit activity for the year ended March 31, 2022, and the three month period ended June 30, 2022 is as follows:
| Units Outstanding | Weighted Average Grant Date Fair Value Per Unit | Aggregate Intrinsic Value (1) | ||||||||||
| Balance at March 31, 2021 | ||||||||||||
| Granted | $ | - | ||||||||||
| Expired | ( | ) | - | |||||||||
| Vested | ( | ) | - | |||||||||
| Balance at March 31, 2022 | $ | |||||||||||
| Balance at June 30, 2022 | $ | $ | ||||||||||
| (1) |
Stock Options
Stock options issued to employees typically vest over and have a contractual term of . Stock-based compensation expense included in the Consolidated Statements of Operations for stock options was $ for the three months ended June 30, 2022. options vested in the three month period ended June 30, 2022. At June 30, 2022, there was approximately $of total unrecognized stock option expense which is expected to be recognized on a straight-line basis over a weighted-average period of 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.
| Three Months | Year Ended | |||||||
| June 30, 2022 | March 31, 2022 | |||||||
| Expected term | years | years | ||||||
| Expected volatility | % - | % | % - | % | ||||
| Risk-free interest rate | % - | % | % – | % | ||||
| Expected dividend yield | % | % | ||||||
| Fair value on the date of grant | $ | - $ | $ | - $ | ||||
| Options Outstanding | Weighted- Average Exercise Price Per Share (1) | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value (2) | |||||||||||||
| Balance at March 31, 2021 | - | |||||||||||||||
| Granted | $ | - | ||||||||||||||
| Balance at March 31, 2022 | years | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Balance at June 30, 2022 | $ | years | $ | |||||||||||||
| (1) | |
| (2) |
There were options exercisable at June 30, 2022.
The following summarizes additional information about our stock options:
| June 30, 2022 | ||||
| Number of: | ||||
| Non-vested options, beginning of period | ||||
| Non -vested options, end of period | ||||
| Vested options, end of period | ||||
| June 30, 2022 | ||||
| Weighted-average grant date fair value of: | ||||
| Non-vested options, beginning of period | $ | |||
| Non-vested options, end of period | $ | |||
| Vested options, end of period | ||||
| Forfeited options, during the period | ||||
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Warrants
During
the three months ended June 30, 2022 and 2021,
A summary of warrant activity for the year ended March 31, 2022 and three month period ended June 30, 2022 is as follows:
| Number of Warrants | Weighted- Average Exercise Price | Warrants Exercisable | Weighted- Average Exercisable Price | |||||||||||||
| Outstanding, March 31, 2021 | $ | $ | ||||||||||||||
| Issued and granted | ||||||||||||||||
| Exercised for cash | ( | ) | ( | ) | ||||||||||||
| Cashless warrant exercises | ( | ) | ( | ) | ||||||||||||
| Expired | ( | ) | ( | ) | ||||||||||||
| Cancelled | ( | ) | ( | ) | ||||||||||||
| Outstanding, March 31, 2022 | ||||||||||||||||
| Outstanding, June 30, 2022 | $ | $ | ||||||||||||||
| 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 | |||||||||||||||||
| $ | -$ | $ | $ | |||||||||||||||||||
| - | ||||||||||||||||||||||
| - | ||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||
For the three months ended June 30, 2022 and 2021, the total stock-based compensation on all instruments was $ and $, respectively. It is expected that the Company will recognize expense after June 30, 2022 related to warrants issued, outstanding, and valued using the Black Scholes pricing model as of June 30, 2022 in the amount of approximately $.
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 has a pipeline of seventeen products for the treatment of animals. A portfolio of nineteen patents protects the Company’s biomaterials, products, production processes and methods of use. 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 as osteoarthritis in dogs and horses, in the second quarter of its fiscal year ended March 31, 2022.
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In August 2021, we received net proceeds of approximately $9.7 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. Most of our technology was developed for human biomedical applications, and we intend to leverage the investments already expended in their development to commercialize treatments for pets in a capital and time-efficient way.
Many of the Company’s products are derived from proprietary biomaterials that simulate a body’s cellular 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 synthetic biomaterials such as those based upon alpha-hydroxy polymers (e.g. PLA, PLGA and the like) and other “natural” biomaterials that may lack the multiple proteins 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.
Our initial product, Spryng™ is a veterinary medical device designed to help reinforce 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 mimic 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.
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. 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, inflammation and/or 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 multi-month improvement in lameness after having been treated with Spryng™. |
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| ● | 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 should expand practice revenues and margins. We believe that the increased revenues and margins provided by Spryng™ will accelerate its adoption rate and propel it forward as the standard of care for canine and equine lameness related to or due to synovial joint issues.
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 800 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 November 2023. 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 expand our distribution outlets since the large international and national distributors generally require a third-party university study and other third-party studies prior to including a product in their catalog of products.
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 the use of sales reps, clinical studies and market awareness to educate and inform key opinion leaders on the benefits of Spryng™. We plan to support our commercialization efforts with the use of social media and other methods to educate and inform key opinion leaders and decision makers at the top distributors and high prescriber veterinarians for companion animals of the availability and benefits of Spryng™.
We have established an ISO 7 certified clean room manufacturing facility located in our Minneapolis facility using a patented and scalable self-assembly production process, which reduces the infrastructure requirements and manufacturing risks to deliver a consistent, high-quality product while being responsive to volume requirements. We recently began manufacturing commercial quantities and anticipate our ISO 7 certified facility will be able to handle projected production in units for at least the next five years.
We entered into a Distribution Services Agreement (“Agreement”) with MWI Veterinary Supply Co. 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 includes: (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 the Spryng™. All customers must be licensed veterinary practices.
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 any 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, Spyng™.
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RESULTS OF OPERATION
| For the Three Months Ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Revenues | $ | 58,174 | $ | 4,145 | ||||
| Total Cost of Sales | 53,020 | 5,051 | ||||||
| Total Operating Expenses | 1,971,247 | 517,613 | ||||||
| Total Other Income | 665 | 27,890 | ||||||
| Net Loss | $ | (1,965,428 | ) | $ | (490,629 | ) | ||
| Net loss per share - basic and diluted | $ | (0.20 | ) | $ | (0.07 | ) | ||
For The Three Months Ended June 30, 2022 Compared to The Three Months Ended June 30, 2021
Total Revenues. Revenue was $58,174 and $4,145 for three months ended June 30, 2022 and 2021, respectively, and consisted of Spryng™ sales to veterinary clinics. The Company began commercialization of its Spryng™ product in September 2021, which resulted in increased revenues in the three months ended June 30, 2022 compared to the same period in the prior year.
Total Cost of Sales. Cost of sales was $53,020 and $5,051 for the three months ended June 30, 2022 and 2021, respectively. Cost of sales includes product costs related to the sale of products and labor and overhead costs. The Company began commercialization of its Spryng™ product in September 2021, which resulted in increased cost of sales in the three months ended June 30, 2022 compared to the same period in the prior year.
Operating Expenses. Operating expenses were $1,917,247 and $517,613 for the three months ended June 30, 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 June 30, 2022 compared to the same period in the prior year.
General and administrative (“G&A”) expenses were $1,243,021 and $330,945 for the three months ended June 30, 2022 and 2021, respectively. G&A expenses include compensation and benefits, contracted services, consulting fees, stock compensation and incremental public company costs. The increase in G&A expenses was related to compensation and benefits, legal and consulting fees, stock compensation and incremental public company costs.
Sales and marketing expenses were $656,569 and $49,731 for the three months ended June 30, 2022 and 2021, respectively. Sales and marketing expenses include compensation, consulting, tradeshows and stock compensation costs to support the launch of our Spryng™ product.
Research and development (“R&D”) expenses were $71,656 and $136,937 for the three months ended June 30, 2022 and 2021, respectively. The decrease in R&D expenses was related to the timing of clinical studies in the three months ended June 30, 2022 compared to the same period in the prior year.
Operating Loss. As a result of the foregoing, our operating loss was $1,966,093 and $518,519 for the three months ended June 30, 2022 and 2021, respectively. The increase in our operating loss, was related to the costs to support the launch of Spryng™ and the incremental public company costs incurred in the three months ended June 30, 2022 compared to the same period in the prior year.
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Other Income. Other income was $665 for the three months ended June 30, 2022 as compared to other income of $27,890 for the three months ended June 30, 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 partially offset by interest expense of $3,790.
Net Loss. Our net loss for the three months ended June 30, 2022 as $1,965,428 or ($0.20) per share as compared to a net loss of $490,629 or ($0.07) per share for the three months ended June 30, 2021. The increase in our net loss was related to the costs to support the launch of Spryng™ and the incremental public company costs incurred in the three months ended June 30, 2022 compared to the same period in the prior year. The weighted average number of shares outstanding was 9,988,361 compared to 6,946,353 for the three months ended June 30, 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 June 30, 2022, our current assets were $5,069,038, including $4,378,668 in cash and cash equivalents. In comparison, our current liabilities as of that date were $1,220,632 including $1,154,501 of accounts payable and accrued expenses. Our working capital as of June 30, 2022 was $3,848,406.
The Company has continued to realize losses from operations. However, as a result of our Public Offering, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements for at least the next seven 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 $1,701,699 of net cash in operating activities for the three months ended June 30, 2022. This cash used in operating activities was primarily attributable to our net loss of $1,965,428, partially offset by stock compensation expense of $231,231 and an increase in accounts payable and accrued expenses of $46,742.
Net Cash Used in Investing Activities – We used $24,897 of net cash in investing activities for the three months ended June 30, 2022, consisting of costs capitalized for manufacturing and computer equipment.
Net Cash Provided by Financing Activities – During the three months ended June 30, 2022, we used net cash of $1,563 in financing activities consisting of $1,563 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 June 30, 2022, the Company’s inventory has a carrying value of $180,874 and is broken down into $22,989 of finished goods, $31,455 of work in process and $126,430 in raw materials.
At March 31, 2022, the Company’s inventory has a carrying value of $98,313 and is broken down into $11,889 of finished goods, $22,960 of work in process and $63,464 in raw materials.
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MATERIAL COMMITMENTS
Notes Payable
As of June 30, 2022, we are obligated on a note and accrued interest of $32,187.
OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 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 June 30, 2022 was $3,848,406. We believe this working capital is sufficient to fund operations for the next seven months (see “Liquidity and Capital Resources” above).
We have continued to realize losses from operations. However, as a result of our Public Offering, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements for at least the next seven 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.
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 do 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.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard had no impact on the consolidated financial statements.
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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 first 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
None
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 a note payables 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.
+ Certain confidential portions of this Exhibit were omitted by means of marking such portion with brackets ([***]) because the identified confidential portions are both (i) not material and (ii) the type of information that PetVivo Holdings, Inc. treats as private or confidential.
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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.
| August 11, 2022 | By: | /s/ John Lai |
| John Lai | ||
| Its: | CEO, President and Director (Principal Executive Officer) | |
| August 11, 2022 | By: | /s/ Robert J. Folkes |
| Robert J. Folkes | ||
| Its: | Chief Financial Officer (Principal Financial and Accounting Officer) |
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