U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Mark One
For
the quarterly period ended
For the transition period from _______ to _______
Commission
File No.
(Name of small business issuer in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(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 | ||
| The
| ||||
| The
|
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.
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.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
| Large accelerated filer | ☐ | 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 ☐
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 November 13, 2023 | |
| Common Stock, $0.001 |
PETVIVO HOLDINGS, INC.
FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2023
INDEX
| Page | ||
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | 3 | |
| PART I. FINANCIAL INFORMATION | 4 | |
| Item 1. | Financial Statements | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Qualitative and Quantitative Disclosures About Market Risk | 29 |
| Item 4. | Controls and Procedures | 29 |
| PART II. OTHER INFORMATION | 29 | |
| Item 1. | Legal Proceedings | 29 |
| Item 1A. | Risk Factors | 29 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 |
| Item 3. | Defaults Upon Senior Securities | 30 |
| Item 4. | Mine Safety Disclosure | 30 |
| Item 5. | Other information | 30 |
| Item 6. | Exhibits | 31 |
| SIGNATURES | 32 | |
| 2 |
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of PetVivo Holdings, Inc. (the “Company”), to be materially different from future results, performance, or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies, and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that the 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, 2023, (“2023 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.
| 3 |
PART I.
ITEM 1. FINANCIAL STATEMENTS
PETVIVO HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2023 (Unaudited) | March 31, 2023 | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| Other Assets: | ||||||||
| Operating lease right-of-use asset | ||||||||
| 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 | ||||||||
| Non-Current Liabilities | ||||||||
| Note payable and accrued interest (net of current portion) | ||||||||
| Operating lease liability (net of current portion) | ||||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (see Note 9) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred Stock, par value $, shares authorized, shares issued and outstanding at September 30, 2023 and March 31, 2023 | ||||||||
| Common Stock, par value $, shares authorized, and issued and outstanding at September 30, 2023 and March 31, 2023, respectively | ||||||||
| Common Stock to be Issued | ||||||||
| Additional Paid-In Capital | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| 4 |
PETVIVO HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of Sales | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Sales and Marketing | ||||||||||||||||
| Research and Development | ||||||||||||||||
| General and Administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Expense) Income | ||||||||||||||||
| Loss on Extinguishment of Debt | ( | ) | ( | ) | ||||||||||||
| Settlement Expense | ( | ) | ( | ) | ||||||||||||
| Interest (Expense) Income | ( | ) | ( | ) | ||||||||||||
| Total Other (Expense) 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 condensed notes are an integral part of these unaudited consolidated financial statements.
| 5 |
PETVIVO HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three and Six Months Ended September 30, 2023
| Common Stock | Additional Paid-in | Accumulated | Common Stock to be | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Issued | Total | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock sold | ( | ) | ||||||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Vesting of restricted stock units in lieu of compensation | ||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | ||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock and warrants sold | ||||||||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||||||
| Conversion of debt and interest to common stock | ||||||||||||||||||||||||
| Value of stock and warrants issued on extinguishment of debt | - | |||||||||||||||||||||||
| Cashless warrant exercise | ( | ) | ||||||||||||||||||||||
| Vesting of restricted stock units in lieu of compensation | ||||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Three and Six Months Ended September 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 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Cash paid to exercise warrants | ||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | ||||||||||||||||||
| Stock issued for services | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.
| 6 |
PETVIVO HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| 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 | ||||||||
| Depreciation and amortization | ||||||||
| Investor relations services paid in stock | ||||||||
| Consulting services paid in stock | ||||||||
| Stock issued in lieu of compensation | ||||||||
| Loss on extinguishment of debt | ||||||||
| Interest on convertible debentures | ||||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Increase in accounts receivable | ( | ) | ( | ) | ||||
| Increase in inventory | ( | ) | ( | ) | ||||
| Increase in accounts payable and accrued expenses | ||||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the sale of common stock and warrants | ||||||||
| Proceeds from issuance of convertible debentures | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Net Cash Provided by (Used in) Financing Activities | ||||||||
| Net Decrease 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 | $ | $ | ||||||
| Taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||||||
| Convertible debentures and accrued interest converted to common stock | $ | $ | ||||||
| Stock granted for consulting services | $ | $ | ||||||
| Increase to operating lease right of use asset and operating lease liability | $ | $ | ||||||
The accompanying condensed notes are an integral part of these unaudited consolidated financial statements
| 7 |
PetVivo Holdings, Inc.
Condensed Notes to Financial Statements
September 30, 2023
(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 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 twenty 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 PetVivo, Inc. 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 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 six months ended September 30, 2023, are not necessarily indicative of results to be expected for the year ending March 31, 2024, or for any other interim period or for any future year. These unaudited 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, 2023.
(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 reporting 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, right of use 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.
The Company had
| 8 |
(F) Concentration Risk
The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. At September 30, 2023, the Company did not have cash balances in excess of the federally insured limits.
(G) Accounts Receivable
Accounts
receivable consists primarily of amounts due from a distributor (see revenue recognition). Accounts receivable is 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 as well as a forecast of projected credit losses. 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 since all receivables to date
have been collected. We believe the assessment provides reasonable estimates of our accounts receivable valuation, and therefore we believe
that substantially all accounts receivable are fully collectible. Accordingly, as of September 30, 2023 and March 31, 2023, our allowance
for credit losses was
(H) Inventory
Inventories
are recorded in accordance with Accounting Standards Codification (“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. Provisions for
inventory obsolescence are charged to Cost of Sales. There were
(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
(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
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 September 30, 2023, 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 were considered anti-dilutive.
The Company had restricted stock units outstanding as of September 30, 2023, which are excluded from the weighted average number of shares because they were considered anti-dilutive.
The Company had stock options outstanding as of September 30, 2023, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these options is $ per share. These stock options are excluded from the weighted average number of shares because they were considered anti-dilutive.
| 9 |
The Company had warrants outstanding as of September 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these warrants was $ per share. These warrants were excluded from the weighted average number of shares because they were considered anti-dilutive.
The Company had restricted stock units outstanding as of September 30, 2022, which were excluded from the weighted average number of shares because they were considered anti-dilutive.
The Company had options outstanding as of September 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these options was $ per share. These options were excluded from the weighted average number of shares because they were considered anti-dilutive.
The Company uses the guidance in ASC 260 to determine if-converted loss per share. ASC 260 states that convertible securities should be considered exercised 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 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
For
the three months ended September 30, 2023 and 2022, the Company recognized revenue from product sales under the Agreement of $
For
the six months ended September 30, 2023 and 2022, the Company recognized revenue from product sales under the Agreement of $
Assets and liabilities (included in accrued expenses) under the Agreement were as follows:
| September 30, 2023 | March 31, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
| Rebate liability | ||||||||
| Distribution fee payable | ||||||||
(M) Research and Development
The Company expenses research and development costs as incurred.
| 10 |
(N) Fair Value of Financial Instruments
The Company applies the accounting guidance under ASC 820-10, “Fair Value Measurements”, as well as certain related Financial Accounting Standards Board (“FASB”) staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
| ● | 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 September 30, 2023 and March 31, 2023, 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
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”‘ which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on grant-date fair value of the award. The Company has elected to recognized forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
(P) Income Taxes
The Company accounts for income taxes under ASC 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.
| 11 |
As required by ASC 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.
(Q) 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.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the existing “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. Under the CECL model, the Company is required to present certain financial assets carried at amortized cost, such as accounts receivable, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted this standard in the consolidated financial statements for the six months ended September 30, 2023. The change had no impact on the Company’s 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 September 30, 2023 and March 31, 2023, the Company had inventory of $
The inventory components are as follows:
| September 30, 2023 | March 31, 2023 | |||||||
| Finished Goods | $ | $ | ||||||
| Work in process | ||||||||
| Raw materials | ||||||||
| Total | $ | $ | ||||||
NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
As
of September 30, 2023, the Company had $
| 12 |
The
deferred consulting fees totaling $
As
of March 31, 2023, the Company had $
NOTE 4 – PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
| September 30, 2023 | March 31, 2023 | |||||||
| 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:
| September 30, 2023 | March 31, 2023 | |||||||
| Patents | $ | $ | ||||||
| Trademarks | ||||||||
| Total at cost | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Total net | $ | $ | ||||||
Amortization
expense was $
NOTE 6 – ACCRUED EXPENSES
The components of accrued expenses were as follows:
| September 30, 2023 | March 31, 2023 | |||||||
| Accrued payroll and related taxes | $ | $ | ||||||
| Accrued expenses | ||||||||
| 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 2018, the Company had recorded approximately $
| 13 |
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. For the three months ended September 30, 2023 and 2022,
the Company made contributions to the plan of $
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Lease Obligations
We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (‘‘ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options is at our discretion and is included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.
We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Consolidated Balance Sheets.
None of our lease agreements contain material restrictive covenants or residual value guarantees.
| 14 |
Buildings
The
Company entered into an month lease for
The
Company entered into a month lease for
On
January 10, 2023, the Company entered into a new lease agreement for approximately
Vehicles
We
leased vehicles for certain members of our field sales organization in the six months ended September 30, 2023, under a vehicle fleet
program whereby the noncancelable lease is for a term of
Operating
lease expense for the three months ended September 30, 2023 and 2022, was $
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2023:
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Less: amount representing interest | ( | ) | ||
| Total | $ |
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 September 30, 2023, 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 non-current liability | ||||
| Total operating lease liabilities | $ |
| 15 |
Employment Agreements
The Company has employment agreements with its executive officers. As of September 30, 2023, these agreements contain severance benefits ranging from one month to six months if terminated without cause.
Legal Proceedings
David
Masters, a former employee, board member, and consultant to the Company, has threatened to file suit against the Company to recover in
excess of $
In
September 2023, Masters executed the long-term agreement and the Company recorded a settlement expense of $
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 $
The
Company raised an aggregate of $
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 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 to . 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 Plan was at September 30, 2023.
| 16 |
Employees, consultants, 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.
The aggregate number of shares of PetVivo common stock available and reserved to be issued under the Amended 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 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.
Convertible Debentures
On
July 27, 2023, the Company issued convertible promissory notes (“Convertible Debentures”) in the aggregate amount of $
On
August 11, 2023, the Company entered into Convertible Debenture Conversion Agreements (“Conversion Agreements”) with the
three debenture holders (“Debenture Holders”). Pursuant to the Conversion Agreements, each Debenture Holder agreed to voluntarily
and immediately convert the outstanding balance on their Convertible Debenture into shares of the Company’s common stock prior
to
| 17 |
As
a result of the inducement to the Debenture Holders to voluntarily convert the outstanding balance of their Convertible Debentures prior
to their maturity date, the Company recognized a loss on extinguishment of debt of $
Sale of Common Stock
On
August 4, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two accredited investors
(the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a registered direct offering
(the “Registered Offering”) shares (“Registered Shares”) of the Company’s common stock (the “Common
Stock”) at a price of $ per share. Under the Purchase Agreements, the Company also agreed to issue and sell to the Investors
in a concurrent private placement (the “Private Placement,” and together with the Registered Offering, the “Offering”)
warrants to purchase an aggregate of
Common Stock
For the six months ended September 30, 2023, the Company issued shares of common stock as follows:
| i) |
shares in connection with the sale of stock in a registered direct offering which closed in April 2023 in exchange for proceeds of
$ |
| ii) | shares related to vesting of restricted stock units (“RSUs”), vesting in June 2023; |
| iii) |
shares related to vesting of RSUs to John Lai, the Company’s Chief Executive Officer, in lieu of compensation valued as of
$ |
| iv) |
shares in April 2023 to service providers for consulting services valued at market on the date of grant of $ |
| v) |
shares in May 2023 to service providers for consulting services valued at market on the date of grant of $ |
| vi) |
shares in June 2023 to service providers for consulting services valued at market on the date of grant of $ |
| vii) |
shares in July 2023 to service providers for consulting services valued at market on the date of grant of $ |
| viii) |
shares in July 2023 to a service provider for consulting services valued at market on the date of grant of $ |
| ix) |
shares in connection with the sale of stock in August 2023 in exchange for proceeds of $ |
| x) |
shares in connection with the conversion of the Convertible Debentures in August 2023 totaling $ |
| xi) |
shares in August 2023 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of |
| xii) |
shares in August 2023 to service providers for consulting services valued at market on the date of grant of $ |
| 18 |
| xiii) |
shares in August 2023 to a service provider for consulting services valued at market on the date of grant of $ |
| xiv) | shares related to vesting of RSUs in August 2023; |
xv)
xvi) |
shares related to vesting of RSUs to John Lai, the Company’s Chief Executive Officer, in lieu of compensation valued at $
shares in September 2023 to service providers for consulting services valued at market on the date of grant of $ |
| xvii) |
shares in September 2023 to a service provider for consulting services valued at market on the date of grant of $ |
| xviii) |
shares in September 2023 pursuant to a warrant holder’s cashless exercise of warrants for purchase of |
For the six months ended September 30, 2022, the Company issued shares of common stock as follows:
| i) |
shares in July 2022 pursuant to a warrant holder’s exercise of warrants for purchase with a weighted average strike price of
$ per share for cash proceeds of $ |
| ii) |
shares in August 2022 pursuant to a warrant holder’s exercise of warrants for purchase with a weighted average strike price
of $ per share for cash proceeds of $ |
| iii) |
shares in August 2022 to service providers for consulting services valued at $ |
| iv) | shares related to vesting of RSUs. |
The
Company has issued shares of common stock to providers of investor relations services which are reported in the Condensed Consolidated
Statements of Changes in 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 Condensed Consolidated Statements of Operations and Cash Flows was $
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
Condensed Consolidated Statements of Operations for time-based restricted stock units was $
Our time-based restricted stock unit activity for the year ended March 31, 2023 and the six months ended September 30, 2023 was as follows:
| Units Outstanding | Weighted Average Grant Date Fair Value Per Unit | Aggregate Intrinsic Value (1) | ||||||||||
| Balance at March 31, 2022 | $ | $ | ||||||||||
| Granted | - | |||||||||||
| Vested | ( | ) | - | |||||||||
| Balance at March 31, 2023 | ||||||||||||
| Vested | ( | ) | - | |||||||||
| Balance at September 30, 2023 | $ | $ | ||||||||||
| (1) |
| 19 |
Stock Options
Stock options issued to employees and directors typically vest over (one year for directors) and have a contractual term of . Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $ and $ for the three months ended September 30, 2023 and 2022, respectively, and $ and $ for the six months ended September 30, 2023 and 2022, respectively. At September 30, 2023, 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.
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.
| Six Months Ended | Year Ended | |||||||
| September 30, 2023 | March 31, 2023 | |||||||
| 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, 2022 | $ | years | $ | |||||||||||
| Granted | ||||||||||||||
| Cancelled | ( | ) | ||||||||||||
| Balance at March 31, 2023 | years | |||||||||||||
| Granted | ||||||||||||||
| Balance at September 30, 2023 | $ | years | $ | |||||||||||
| Options exercisable at September 30, 2023 | ||||||||||||||
| (1) | |
| (2) |
Stock options granted for the year ended March 31, 2023 and the six months ended September 30, 2023 were to employees and directors. The fair value of these options on the date of grant was $ and $ for the year ended March 31, 2023 and the six months ended September 30, 2023, respectively.
Options exercisable at September 30, 2023 had exercise prices ranging from $ to $.
| 20 |
| Six Months Ended | Year Ended | |||||||
| September 30, 2023 | Mar 31, 2023 | |||||||
| Number of: | ||||||||
| Non-vested options, beginning of period | ||||||||
| Non-vested options, end of period | ||||||||
| Vested options, end of period | ||||||||
| Six Months Ended | Year Ended | |||||||
| September 30, 2023 | Mar 31, 2023 | |||||||
| 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 | $ | $ | ||||||
Warrants
During
the six months ended September 30, 2023 the Company issued warrants to purchase an aggregate of
| i) | |
| ii) |
warrants in August 2023 in connection with the conversion of convertible debentures to common stock valued at $ |
| iii) |
warrants in August 2023 to service providers valued at $ |
| iv) |
warrants in August 2023 to service providers valued at $ |
| Six Months Ended | ||||
| September 30, 2023 | ||||
| Stock price on valuation date | $ | - $ | ||
| Exercise price | $ | -$ | ||
| Term (years) | – | |||
| Volatility | % - | % | ||
| Risk-free rate | % - | % | ||
| 21 |
A summary of warrant activity for the year ended March 31, 2023 and the six months ended September 30, 2023 is as follows:
| Number of Warrants | Weighted- Average Exercise Price | Warrants Exercisable | Weighted- Average Exercisable Price | |||||||||||||
| Outstanding, March 31, 2022 | $ | $ | ||||||||||||||
| Exercised for cash | ( | ) | ( | ) | ||||||||||||
| Expired | ( | ) | ( | ) | ||||||||||||
| Outstanding, March 31, 2023 | ||||||||||||||||
| Granted and issued | ||||||||||||||||
| Cashless warrant exercises | ( | ) | ( | ) | ||||||||||||
| Expired | ( | ) | ( | ) | ||||||||||||
| Outstanding, September 30, 2023 | $ | $ | ||||||||||||||
| 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 | $ | $ | ||||||||||||||||||
Stock-based compensation expense included in the Consolidated Statements of Operations for warrants was $ and $ for the three months ended September 30, 2023 and 2022, respectively, and $ and $ for the six months ended September 30, 2023 and 2022, respectively.
It is expected that the Company will recognize expense after September 30, 2023 related to warrants issued, outstanding, and valued using the Black Scholes pricing model as of September 30, 2023 of approximately $ over the next nine months.
For the three months ended September 30, 2023 and 2022, the total stock-based compensation on all instruments was $ and $, respectively. For the six months ended September 30, 2023 and 2022, the total stock-based compensation on all instruments was $ and $, respectively.
NOTE 12 – SUBSEQUENT EVENTS
The
Company raised an aggregate of $
| 22 |
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 products for the treatment of animals. A portfolio of twenty 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.
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 cats, 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 horses and companion animals in a capital and time-efficient way.
The Company’s initial product, Spryng™, and its pipeline 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 proteoglycans such as 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), polyacrylamides, and other “natural” biomaterials that may lack the multiple building-block proteins incorporated into our biomaterials. These proprietary protein-based biomaterials are similar to the body’s tissue thus allowing integration and tissue repair in long-term implantation in certain applications.
Spryng™, is a veterinary medical device designed to integrate with the synovial fluid before adsorbing onto the synovial membrane and subsequently being integrated into the subsynovial tissue. Such action assists in the management of lameness and other joint related afflictions, such as osteoarthritis, in horses and 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 promote restoration of proper joint mechanics. 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 in promoting restoration of proper joint mechanics by incorporating with the joint’s synovial fluid and ultimately adsorbing onto the synovial lining wherein they integrate with the subsynovial tissue.
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 21 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 of our knowledge, has elicited minimal adverse side effects in dogs and horses. Spryng™ administered 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.
| 23 |
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 biocompatible lubricious, viscosolid microparticles to the joint, which adsorbs onto the synovial membrane and subsequently integrates into the subsynovial tissue to promote restoration of proper joint mechanics. | |
| ● | 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™. | |
| ● | 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 syringe of Spryng™ is approximately $600 to $900 and typically lasts for at least 12 months when injected into a joint. |
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.
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 SpryngTM.
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, SpryngTM 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 SpryngTM 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.
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. The Company completed a safety and efficacy study in rabbits in 2007 and tolerance studies in dogs and cats in 2023. Since 2007, more than 3,000 horses, dogs and cats 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 began two canine clinical studies with Ethos Veterinary Health, the first beginning in May of 2022 with completion in October 2023, and the second beginning in June of 2023 with an expected completion in October 2024. 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.
| 24 |
We manufacture our products in an ISO 7 certified clean room manufacturing 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 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 continued scaling of our production capacity, and expand our research and development facilities.
We also have a pipeline of therapeutic devices for both veterinary and human clinical applications. Some such devices may be regulated by the FDA or other equivalent regulatory agencies, including but not limited to the Center for Veterinary Medicine (“CVM”). We anticipate growing our product pipeline through the acquisition or in-licensing of additional proprietary products from human medical device companies specifically for use in pets. In addition to commercializing our own products in strategic market sectors and in view of the Company’s vast proprietary product pipeline, the Company may establish strategic out-licensing partnerships to provide secondary revenues.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our 2023 10-K Report and the condensed 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 2023 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 incurred substantial losses in connection with our operations. We will need substantial capital to pursue our current plans to commercialize our initial product, Spryng™.
RESULTS OF OPERATIONS
| For the Three Months Ended September 30, | For the Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 207,366 | $ | 223,280 | $ | 324,549 | $ | 281,454 | ||||||||
| Cost of Sales | 140,913 | 148,159 | 223,182 | 201,179 | ||||||||||||
| Operating Expenses | 3,010,796 | 2,194,689 | 5,939,287 | 4,165,936 | ||||||||||||
| Other (Expense) Income | (716,810 | ) | 7,979 | (716,810 | ) | 8,644 | ||||||||||
| Net Loss | $ | (3,661,153 | ) | $ | (2,111,589 | ) | $ | (6,554,730 | ) | $ | (4,077,017 | ) | ||||
| Net loss per share - basic and diluted | $ | (0.28 | ) | $ | (0.21 | ) | $ | (0.53 | ) | $ | (0.41 | ) | ||||
For The Three Months Ended September 30, 2023 Compared to The Three Months Ended September 30, 2022
Total Revenues. Revenues were $207,366 and $223,280 for three months ended September 30, 2023 and 2022, respectively. Revenues in the three months ended September 30, 2023 consist of sales of our Spryng™ product to our Distributor of $143,606 and to veterinary clinics in the amount of $63,760. In the three months ended September 30, 2022, our revenues of $223,280 consisted of sales of our Spryng™ product to our Distributor of $118,264 and to veterinary clinics in the amount of $105,016 of sales to veterinary clinics.
| 25 |
Cost of Sales. Cost of sales were $140,913 and $148,149 for the three months ended September 30, 2023 and 2022, respectively. Cost of sales includes product costs related to the sale of our Spryng™ products and labor and overhead costs.
Operating Expenses. Operating expenses were $3,010,796 and $2,194,689 for the three months ended September 30, 2023 and 2022, respectively. The increase is primarily due to increased general and administrative expenses and sales and marketing expenses related to the sale of our Spryng™ product.
General and administrative expenses were $1,691,790 and $1,186,320 for the three months ended September 30, 2023 and 2022, respectively. General and administrative expenses include compensation and benefits, contracted services, legal and consulting fees, stock issued for services and stock compensation expenses.
Sales and marketing expenses were $1,078,725 and $867,985 for the three months ended September 30, 2023 and 2022, respectively. Sales and marketing expenses include compensation, consulting, tradeshows, and stock compensation costs to support the launch of our Spryng™ product.
Research and development expenses were $240,281 and $140,384 for the three months ended September 30, 2023 and 2022, respectively. The increase was related to clinical studies and compensation.
Operating Loss. As a result of the foregoing, our operating loss was $2,944,343 and $2,119,568 for the three months ended September 30, 2023 and 2022, respectively. The increase was related to the costs to support the launch of Spryng™.
Other (Expense) Income. Other expense was $716,810 for the three months ended September 30, 2023 as compared to other income of $7,979 for the three months ended September 30, 2022. Other expense in 2023 consisted of a loss on extinguishment of debt of $534,366, the settlement payment to David Masters and interest expense. Other income in 2022 consisted of net interest income.
Net Loss. Our net loss for the three months ended September 30, 2023 was $3,661,153 or ($0.28) per share as compared to a net loss of $2,111,589 or ($0.21) per share for the three months ended September 30, 2022. The increase was related to the costs to support the launch of Spryng™, stock compensation expense and loss on extinguishment of debt. The weighted average number of shares outstanding was 12,987,641 compared to 10,053,463 for the three months ended September 30, 2023 and 2022, respectively.
For The Six Months Ended September 30, 2023 Compared to The Six Months Ended September 30, 2022
Revenues. Revenues were $324,549 for six the months ended September 30, 2023 compared to revenues of $281,454 in the six months ended September 30, 2022. Revenues in the six months ended September 30, 2023 consisted of sales of our Spryng™ product to our Distributor of $177,395 and to veterinary clinics in the amount of $147,154. In the six months ended September 30, 2022, our revenues of $281,454 consisted of sales of our Spryng™ product to our Distributor of $118,264 and to veterinary clinics in the amount of $163,190 of sales to veterinary clinics.
Cost of Sales. Cost of sales was $223,183 and $201,179 for the six months ended September 30, 2023 and 2022, respectively. Cost of sales includes product costs related to the sale of products and labor and overhead costs.
Operating Expenses. Operating expenses were $5,939,287 and $4,165,936 for the six months ended September 30, 2023 and 2022, respectively. Operating expenses consisted of general and administrative, sales and marketing, and research and development expenses.
General and administrative expenses were $3,454,588 and $2,429,342 for the six months ended September 30, 2023 and 2022, 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 issued for services and stock compensation.
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Sales and marketing expenses were $2,020,611 and $1,524,554 for the six months ended September 30, 2023 and 2022, 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 launch and commercialization of Spryng™.
Research and development expenses were $464,088 and $212,040 for the six months ended September 30, 2023 and 2022, respectively. The increase in R&D expenses was costs related to clinical studies and compensation.
Operating Loss. As a result of the foregoing, our operating loss was $5,837,920 and $4,085,661 for the six months ended September 30, 2023 and 2022, respectively. The increase in our operating loss, was related to the costs to support the launch of Spryng™, stock issued for services and stock compensation.
Other (Expense) Income. Other expense was $716,810 for the six months ended September 30, 2023 as compared to other income of $8,644 for the six months ended September 30, 2022, respectively. Other expense in 2023 consisted of a loss on extinguishment of debt of $534,366, the settlement to David Masters and interest expense. Other income in 2022 consisted of interest income.
Net Loss. Our net loss for the six months ended September 30, 2023 was $6,554,730 or ($0.53) per share as compared to a net loss of $4,077,017 or ($0.41) per share for the six months ended September 30, 2022. The weighted average number of shares outstanding was 12,325,973 compared to 10,021,090 for the six months ended September 30, 2023 and 2022, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2023, our current assets were $2,015,826, including $55,254 in cash and cash equivalents. In comparison, our current liabilities as of that date were $1,915,309 including $1,730,397 of accounts payable and accrued expenses. Our working capital as of September 30, 2023 was $100,517.
The Company has continued to realize losses from operations. As a result of the proceeds of $1,070,000 from the sale of common stock [pursuant to our ATM Sales Agreement and from a private offering, we believe we will have sufficient cash to meet our anticipated operating costs and capital expenditure requirements for at least the next two 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 $4,604,962 of net cash in operating activities for the six months ended September 30, 2023. This cash used in operating activities was primarily attributable to our net loss of $6,554,730, partially offset by stock-based compensation expense of $1,020,047, loss on extinguishment of debt of $534,366, consulting services paid in stock of $237,516 and stock issued for investor relations services of $165,810.
Net Cash Used in Investing Activities – We used $93,618 of net cash in investing activities for the six months ended September 30, 2023, consisting of costs capitalized for manufacturing and computer equipment.
Net Cash Provided by Financing Activities – We provided net cash in financing activities of $4,278,520 for the six months ended September 30, 2023, consisting of $3,731,876 from the sale of common stock and warrants and $550,000 from the sale of convertible debentures partially offset by $3,356 in repayments of 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 September 30, 2023, the Company’s inventory had a carrying value of $434,080 which consisted of $17,428 of finished goods, $34,093 of work in process, and $382,559 in raw materials.
At March 31, 2023, the Company’s inventory had a carrying value of $370,283 which consisted of $13,159 of finished goods, $53,398 of work in process, and $303,726 in raw materials.
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MATERIAL COMMITMENTS
Note Payable
As of September 30, 2023, we are obligated to pay a note and accrued interest to a creditor in the amount of $23,995.
OFF-BALANCE SHEET ARRANGEMENTS
As of September 30, 2023, 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 report of independent registered public accounting firm accompanying our March 31, 2023 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. Our working capital at September 30, 2023 was $100,517.
We have continued to realize losses from operations. 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.
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.
All other newly issued but not yet effective accounting pronouncements have been deemed either immaterial or not applicable.
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ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not required
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 effective.
Changes in internal control over financial reporting.
There were no significant changes in our internal control over financial reporting in the second quarter of our fiscal year ending March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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
The following information updates, and should be read in conjunction with, the risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2023 ( “10-K”) which we filed with the Securities and Exchange Commission on June 29, 2023. Any of the risk factors contained in this Quarterly Report on Form 10-Q and the 10-K could materially affect our business, financial condition or future results, and such risk factors may not be the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. We do not undertake to update any of the “forward-looking” statements or to announce the results of any revisions to these “forward-looking” statements except as required by
The Company’s failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of its securities.
Our common stock and warrants are currently listed for trading on Nasdaq. On February 17, 2023, we received Notice from Nasdaq stating that the Company no longer complies with the minimum stockholders’ equity requirement (“Stockholders’ Equity Rule”) under Nasdaq Listing Rule 5550(b)(1) for continued listing. On August 15, 2023, the Company filed a Form 8-K with the SEC to report that, as a result of certain sales of Company securities, it had regained compliance with the Stockholders’ Equity Rule. Pursuant to Nasdaq Listing Rules, the Company must evidence compliance with the Stockholders’ Equity Rule upon the filing of this Quarterly Report on Form 10-Q for the period ended September 30, 2023. The Company does not meet the requirement of having $2.5 million in stockholders’ equity as of September 30, 2023 and it may receive a delisting notice from Nasdaq. If Nasdaq takes steps to de-list the Company’s common stock, it would likely have a negative effect on the price of the Company’s common stock and may impair a stockholder’s ability to sell or purchase shares of our common stock. In addition, delisting could impair our ability to raise additional capital.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On the first day of July, August, and September 2023, the Company issued 16,666 shares of its restricted common stock (for an aggregate of 49,998 shares) to the consultant for services rendered in these months to the Company, which shares were valued at $35,332, $32,332, and $31,999, respectively. The Company entered into a services agreement with a consultant for a 12-month period on January 1, 2023.
On the first day of July and August 2023, the Company issued 10,100 shares of its restricted common stock, for an aggregate of 20,200 shares, to its CEO in lieu of compensation for the two months valued at $41,006.
In July and September 2023, the Company granted options to purchase an aggregate of 95,000 shares of its common stock under the PetVivo Holdings, Inc. Amended and Restated 2020 Equity Plan (“Amended Plan”) to three employees. The exercise price of these options was the closing price of the Company’s common stock on the date of the grant, which ranged from $1.82 per share to $2.00 per share. The Employee options vest over a period of three years, with the first tranche vesting on the anniversary of the grant date. The employee options expire on the earlier of the date on which the employee’s service with the Company is terminated or seven years after the grant date.
In July, August and September 2023, the Company issued 299,500 shares of common stock to service providers for consulting services valued at $641,315.
In August 2023, the Company issued 22,000 shares of common stock upon the vesting of restricted stock units issued to three employees.
In August 2023, the Company issued 12,212 shares of common stock pursuant to a warrant holder’s cashless exercise of a warrant to purchase 22,500 shares of common stock at a strike price of $1.33 per share.
In September 2023, the Company issued 22,466 shares of common stock pursuant to a warrant holder’s cashless exercise of warrants to purchase 41,084 shares of common stock at a weighted average strike price of $1.35 per share.
All of the 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 consultants in these transactions represented their intention to acquire these 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
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.
| 101.INS** | Inline XBRL Instance Document | |
| 101.SCH** | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase | |
| 101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase | |
| 101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase | |
| 104** | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
** Filed 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.
| November 14, 2023 | By: | /s/ John Lai |
| John Lai | ||
| Its: | CEO, President, and Director | |
| (Principal Executive Officer) | ||
| November 14, 2023 | By: | /s/ Robert J. Folkes |
| Robert J. Folkes | ||
| Its: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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