10-Q 1 form10-q.htm
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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

Mark One

 

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

 

For the quarterly period ended December 31, 2023

 

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

 

For the transition period from _______ to _______

 

Commission File No. 001-40715

 

PetVivo Holdings, Inc.

(Name of small business issuer in its charter)

 

Nevada   99-0363559

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

5251 Edina Industrial Blvd.

Edina, Minnesota 55439

(Address of principal executive offices)

 

(952) 405-6216

(Issuer’s telephone number)

 

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

 

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

 

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

 

Common Stock, $0.001

(Title of Class)

 

Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☒ No ☐

 

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

 

  Large accelerated filer Accelerated filer
  Non-accelerated filer Smaller reporting company
      Emerging Growth Company

 

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

 

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

 

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

 

Class   Outstanding as of February 9, 2024
Common Stock, $0.001   16,770,018

 

 

 

 
 

 

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED DECEMBER 31, 2023

 

INDEX

 

  Page
   
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 2
     
PART I. FINANCIAL INFORMATION 3 
     
Item 1. Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Qualitative and Quantitative Disclosures About Market Risk 29
Item 4. Controls and Procedures 30
   
PART II. OTHER INFORMATION 30
   
Item 1. Legal Proceedings 30
Item 1A. Risk Factors 30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Mine Safety Disclosure 31
Item 5. Other information 31
Item 6. Exhibits 32
     
SIGNATURES 33

 

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.

 

2
 

 

PART I.

 

ITEM 1. FINANCIAL STATEMENTS

 

PETVIVO HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

   December 31, 2023   March 31, 2023 
   (Unaudited)     
Assets:          
Current Assets          
Cash and cash equivalents  $80,085   $475,314 
Accounts receivable   518,686    86,689 
Inventory   467,467    370,283 
Prepaid expenses and other assets   426,646    491,694 
Total Current Assets   1,492,884    1,423,980 
           
Property and Equipment, net   823,280    630,852 
           
Other Assets:          
Operating lease right-of-use asset   1,253,815    317,981 
Patents and trademarks, net   32,333    38,649 
Security deposit   27,490    27,490 
Total Other Assets   1,313,638    384,120 
Total Assets  $3,629,802   $2,438,952 
           
Liabilities and Stockholders’ Equity:          
Current Liabilities          
Accounts payable  $1,094,152   $588,713 
Accrued expenses   241,959    779,882 
Operating lease liability – short term   196,263    78,149 
Notes payables and accrued interest   129,746    6,936 
Total Current Liabilities   1,662,120    1,453,680 
Non-Current Liabilities          
Note payable and accrued interest (net of current portion)   15,030    20,415 
Operating lease liability (net of current portion)   1,057,552    239,832 
Total Non-Current Liabilities   1,072,582    260,247 
Total Liabilities   2,734,702    1,713,927 
Commitments and Contingencies (see Note 9)   -    - 
Stockholders’ Equity:          
Preferred Stock, par value $0.001, 20,000,000 shares authorized, no shares issued and outstanding at December 31, 2023 and March 31, 2023   -    - 
Common Stock, par value $0.001, 250,000,000 shares authorized, 14,921,209 and 10,950,220 issued and outstanding at December 31, 2023 and March 31, 2023, respectively   14,921    10,950 
Common Stock to be Issued   -    137,500 
Common Stock Receivable   (27,000)   - 
Additional Paid-In Capital   81,055,786    72,420,604 
Accumulated Deficit   (80,148,607)   (71,844,029)
Total Stockholders’ Equity   895,100    725,025 
Total Liabilities and Stockholders’ Equity  $3,629,802   $2,438,952 

 

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

 

3
 

 

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

                 
  

Three Months Ended

December 31,

   Nine Months Ended
December 31,
 
   2023   2022   2023   2022 
Revenues  $595,891   $510,109   $920,440   $791,563 
                     
Cost of Sales   183,087    223,687    406,270    424,866 
Gross Profit   412,804    286,422    514,170    366,697 
                     
Operating Expenses:                    
                     
Sales and Marketing   1,032,575    1,047,549    3,053,184    2,572,103 
Research and Development   231,066    248,157    695,156    460,197 
General and Administrative   1,282,787    1,309,534    4,737,374    3,738,876 
                     
Total Operating Expenses   2,546,428    2,605,240    8,485,714    6,771,176 
                     
Operating Loss   (2,133,624)   (2,318,818)   (7,971,544)   (6,404,479)
                     
Other (Expense) Income                    
Loss on Extinguishment of Debt   -    -    (534,366)   - 
Settlement Expense   -    -    (180,000)   - 
Extinguishment of payables   385,874    -    385,874    - 
Interest (Expense) Income   (2,098)   7,200    (4,542)   15,844 
                     
Total Other Income (Expense)   383,776    7,200    (333,034)   15,844 
         -         - 
Loss before taxes   (1,749,848)   (2,311,618)   (8,304,578)   (6,388,635)
                     
Income Tax Provision   -    -    -    - 
                     
Net Loss  $(1,749,848)  $(2,311,618)  $(8,304,578)  $(6,388,635)
                     
Net Loss Per Share:                    
Basic and Diluted  $(0.12)  $(0.23)  $(0.64)  $(0.64)
                     
Weighted Average Common Shares Outstanding:                    
Basic and Diluted   14,271,530    10,098,658    12,976,851    10,047,040 

 

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

 

4
 

 

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

For The Three And Nine Months Ended December 31, 2023

 

                             
   Common Stock   Additional Paid-in   Accumulated   Common Stock   Common Stock to be     
   Shares   Amount   Capital   Deficit   Receivable   Issued   Total 
Balance at March 31, 2023   10,950,220   $10,950   $72,420,604   $(71,844,029)   -   $137,500   $725,025 
Common stock sold   793,585    794    2,092,800    -    -    (137,500)   1,956,094 
Stock issued for services   49,998    50    123,028    -    -    -    123,078 
Stock-based compensation   -    -    413,030    -    -    -    413,030 
Vesting of restricted stock units in lieu of compensation   30,300    31    74,558    -    -    -    74,589 
Vesting of restricted stock units   6,250    6    (6)   -    -    -    - 
Net loss   -    -    -    (2,893,577)   -    -    (2,893,577)
Balance at June 30, 2023   11,830,353   $11,831   $75,124,014   $(74,737,606)   -   $-   $398,239 
Common stock and warrants sold   1,200,002    1,200    1,774,582    -    -    -    1,775,782 
Stock issued for services   349,498    350    740,628    -    -    -    740,978 
Conversion of debt and interest to common stock   385,000    385    577,115    -    -    -    577,500 
Value of stock and warrants issued on extinguishment of debt   -    -    509,310    -    -    -    509,310 
Cashless warrant exercise   34,678    34    (34)   -    -    -    - 
Vesting of restricted stock units in lieu of compensation   20,200    20    40,986    -    -    -    41,006 
Vesting of restricted stock units   22,000    22    (22)   -    -    -    - 
Stock-based compensation   -    -    607,017    -    -    -    607,017 
Net loss   -    -    -    (3,661,153)   -    -    (3,661,153)
Balance at September 30, 2023   13,841,731   $13,842   $79,373,596   $(78,398,759)   -   $-   $988,679 
Common stock and warrants sold   1,151,224    1,151    1,409,103         (27,000)   -    1,383,254 
Stock issued for services   167,004    167    292,958         -    -    293,125 
Return of stock issued for services   (250,000)   (250)   (537,250)        -    -    (537,500)
Vesting of restricted stock units   11,250    11    (11)        -    -    - 
Stock-based compensation             517,390         -    -    517,390 
Net loss                  (1,749,848)   -    -    (1,749,848)
Balance at December 31, 2023   14,921,209   $14,921   $81,055,786   $(80,148,607)   (27,000)   -   $895,100 

 

5
 

 

For The Three And Nine Months Ended December 31, 2022

 

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

 

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 Nine Months Ended 
   December 31, 2023   December 31, 2022 
CASH FLOWS FROM OPERATING ACTIVITIES:          
           
Net Loss For The Period  $(8,304,578)  $(6,388,635)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:          
Stock-based compensation   1,537,437    1,069,585 
Depreciation and amortization   93,691    91,785 
Investor relations services paid in stock   289,913    258,844 
Consulting services paid in stock   339,641    - 
Stock issued in lieu of compensation   115,595    - 
Loss on extinguishment of debt   534,366    - 
Interest on convertible debentures   2,444    - 
Extinguishment of payables   (385,874)   - 
Changes in Operating Assets and Liabilities          
Decrease (increase) in prepaid expenses and other current assets   55,174    (140,930)
Increase in accounts receivable   (431,997)   (504,248)
Increase in inventory   (97,184)   (276,569)
Increase in accounts payable and accrued expenses   353,390    389,921 
Accrued interest on note payable   2,498    - 
Net Cash Used In Operating Activities   (5,895,484)   (5,500,247)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
Purchase of equipment   (279,802)   (293,851)
Net Cash Used in Investing Activities   (279,802)   (293,851)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from the sale of common stock and warrants   5,115,130    - 
Proceeds from issuance of convertible debentures   550,000    - 
Proceeds from issuance of note payable   120,000    - 
Proceeds from exercise of warrants   -    66,558 
Repayments of notes payable   (5,073)   (4,754)
Net Cash Provided by Financing Activities   5,780,057    61,804 
           
Net Decrease in Cash   (395,229)   (5,732,294)
Cash at Beginning of Period   475,314    6,106,827 
Cash at End of Period  $80,085   $374,533 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash Paid During The Period For:          
Interest  $1,224   $2,388 
Taxes  $-   $- 
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES          
Convertible debentures and accrued interest converted to common stock  $577,500   $- 
Prepaid stock issued for services  $280,040   $49,920 
Increase to operating lease right of use asset and operating lease  $1,081,204   $- 

 

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

 

7
 

 

PETVIVO HOLDINGS, INC.

Condensed Notes to Financial Statements

December 31, 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 nine months ended December 31, 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 original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2023.

 

8
 

 

(F) Concentration Risk

 

The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. At December 31, 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 December 31, 2023 and March 31, 2023, our allowance for credit losses was zero.

 

(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 no provisions for obsolescence for the three and nine months ended December 31, 2023 and 2022, respectively.

 

(I) Property & Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after considering their respective estimated residual values) over the assets estimated useful life of 3 to 5 years for production and computer equipment and furniture and 5 to 7 years for leasehold improvements.

 

(J) Patents and Trademarks

 

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

 

(K) Loss Per Share

 

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

 

The Company had 5,799,709 warrants outstanding as of December 31, 2023, with varying exercise prices ranging from $1.20 to $5.63 per share. The weighted average exercise price for these warrants is $3.89 per share. These warrants are excluded from the weighted average number of shares because they were considered anti-dilutive.

 

The Company had 166,084 restricted stock units outstanding as of December 31, 2023, which are excluded from the weighted average number of shares because they were considered anti-dilutive.

 

9
 

 

The Company had 1,529,788 stock options outstanding as of December 31, 2023, with varying exercise prices ranging from $1.03 to $2.79 per share. The weighted average exercise price for these options is $2.06 per share. These stock options are excluded from the weighted average number of shares because they were considered anti-dilutive.

 

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

 

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

 

The Company had 755,849 options outstanding as of December 31, 2022, with varying exercise prices ranging from $1.39 to $2.79 per share. The weighted average exercise price for these options was $2.17 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 5% of gross monthly sales payable in 45 days; the distribution fee is netted against revenue. The Agreement provides for a rebate payable to the Distributor based on annual sales volume that is retroactively applied. The rebate is estimated under the expected value method and is netted against revenue. Sales are subject to various right of return provisions; the Company uses an expected value method to estimate returns and has determined that any returns would be immaterial as of December 31, 2023. As a result, there is no return liability recorded. Shipping and handling costs are a fulfillment activity and are reported as cost of sales.

 

For the three months ended December 31, 2023 and 2022, the Company recognized revenue from product sales under the Agreement of $439,922 and $456,502 respectively. This represents 74% and 89% of total revenues for the three months ended December 31, 2023 and 2022, respectively.

 

For the nine months ended December 31, 2023 and 2022, the Company recognized revenue from product sales under the Agreement of $595,891 and $574,766, respectively. This represents 65% and 73% of total revenues for the nine months ended December 31, 2023 and 2022, respectively.

 

10
 

 

Assets and liabilities (included in accrued expenses) under the Agreement were as follows:

 

 

   December 31, 2023   March 31, 2023 
Accounts receivable  $409,032   $81,510 
Rebate liability   57,264    28,000 
Distribution fee payable   39,026    5,187 

 

The Company entered into a Distribution Services Agreement (the “Agreement”) with Covetrus North America LLC (“Covetrus”) on December 18, 2023. Contracts with Covetrus 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 rebate payable to the Distributor based on annual sales volume that is retroactively applied. The rebate is estimated under the expected value method and is netted against revenue. Sales are subject to various right of return provisions; the Company uses an expected value method to estimate returns and has determined that any returns would be immaterial as of December 31, 2023. As a result, there is no return liability recorded. Shipping and handling costs are a fulfillment activity and are reported as cost of sales.

 

For the three and nine months ended December 31, 2023 the Company recognized revenue from product sales to Covetrus of $106,704, respectively. This represents 18% and 12% of total revenues for the three and nine months ended December 31, 2023, respectively. Accounts receivable from Covetrus was $106,074 at December 31, 2023.

 

(M) Research and Development

 

The Company expenses research and development costs as incurred.

 

(N) Fair Value of Financial Instruments

 

The Company applies the accounting guidance under 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 December 31, 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.

 

11
 

 

The Company had no assets and liabilities measured at fair value on a recurring basis on December 31, 2023 and March 31, 2023.

 

(O) Stock-Based Compensation

 

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.

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 nine months ended December 31, 2023. The change had no impact on the Company’s financial statements.

 

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

 

NOTE 2 – INVENTORY

 

As of December 31, 2023 and March 31, 2023, the Company had inventory of $467,467 and $370,283, respectively.

 

The inventory components are as follows:

   December 31, 2023   March 31, 2023 
Finished Goods  $102,177   $13,159 
Work in process   20,289    53,398 
Raw materials   345,001    303,726 
Total  $467,467   $370,283 

 

NOTE 3 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

As of December 31, 2023, the Company had $426,646 in prepaid expenses and other current assets consisting primarily of $111,000 in investor relations costs, $193,000 in insurance costs, $41,000 in tradeshows, $19,000 in Nasdaq and FINRA fees, and $30,000 in software subscription fees.

 

As of March 31, 2023, the Company had $491,694 in prepaid expenses and other current assets consisting primarily of $115,000 in investor relations services, $130,000 in insurance costs, $63,000 in Nasdaq and FINRA fees, $56,000 in board compensation, $42,000 in tradeshows, $42,000 in supplier advance, and $19,000 in software subscription fees.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

The components of property and equipment were as follows:

 

   December 31, 2023   March 31, 2023 
Leasehold improvements  $393,886   $216,159 
Production equipment   656,057    577,067 
R&D equipment   25,184    25,184 
Computer equipment and furniture   144,817    121,732 
Total, at cost   1,219,944    940,142 
Accumulated depreciation   (396,664)   (309,290)
Total Net  $823,280   $630,852 

 

Depreciation expense was $28,286 and $28,719 for the three months ended December 31, 2023 and 2022, respectively. Depreciation expense was $87,374 and $54,044 for the nine months ended December 31, 2023 and 2022, respectively.

 

NOTE 5 – PATENTS AND TRADEMARKS

 

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

 

    December 31, 2023     March 31, 2023  
Patents   $ 3,870,057     $ 3,870,057  
Trademarks     26,142       26,142  
Total at cost     3,896,199       3,896,199  
Accumulated Amortization     (3,863,866 )     (3,857,550 )
Total net   $ 32,333     $ 38,649  

 

Amortization expense was $2,041 and $2,227 for the three months ended December 31, 2023 and 2022, respectively. Amortization expense was $6,316 and $4,466 for the nine months ended December 31, 2023 and 2022, respectively.

 

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NOTE 6 – ACCRUED EXPENSES

 

The components of accrued expenses were as follows:

   December 31, 2023   March 31, 2023 
Accrued expenses  $241,959   $188,666 
Accrued payroll and related taxes   -    258,978 
Accrued lease termination expense   -    332,238 
           
Total  $241,959   $779,882 

 

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 $332,238 as a potential payable to the lessor. During the three months ended December 31, 2023, the Company determined that this potential payable along with other vendor payables of $53,636 that were included in accounts payable have exceeded the statute of limitations for payments despite the Company’s best efforts to pay, and was unable to do so. As a result, a total of $385,874 of these payables were extinguished from the Company’s balance sheet at December 31, 2023 and included in other income on the Consolidated Statement of Operations.

 

NOTE 7 – NOTES PAYABLE

 

In January 2020, the Company entered into a lease amendment for our corporate office facility whereby the lease term was extended through November of 2026 in exchange for a loan of $42,500. The note payable accrues interest at a rate of 6% per annum. At December 31, 2023 and March 31, 2023, the amount outstanding on the note was $22,278 and $27,351, respectively. At December 31, 2023, the Company classified $7,248 as a current liability and $15,030 in other liabilities. At March 31, 2023, the Company classified $6,936 as a current liability and $20,415 in other liabilities.

 

In October 2023 and amended in November 2023, the Company entered into a promissory note for $120,000. The note accrues interest at a rate of 10% per annum. The principal and accrued interest are due in February 2024. Interest accrued on the note at December 31, 2023 was $2,498. The holder of the note has the option to convert the principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.75 per share. On February 5, 2024, the note and accrued interest of $123,255 was converted into 164,340 shares of common stock.

 

NOTE 8 – RETIREMENT PLAN

 

In February 2021, the Company established a 401(k) retirement plan for its employees in which eligible employees can contribute a percentage of their compensation. The Company may also make discretionary contributions. For the three months ended December 31, 2023 and 2022, the Company made contributions to the plan of $12,014 and $8,183, respectively. For the nine months ended December 31, 2023 and 2022, the Company made contributions to the plan of $37,422 and $14,341, respectively.

 

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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.

 

Buildings

 

The Company entered into an eighty-four month lease for 3,577 square feet of newly constructed office, laboratory, and warehouse space located in Edina, Minnesota in May 2017. The base rent has annual increases of 2% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. This lease is terminable by the landlord if damage causes the property to no longer be utilized as an integrated whole and by the Company if damage causes the facility to be unusable for a period of 45 days. In January 2020, the Company entered into a lease amendment to extend the lease term through November of 2026 in exchange for receipt of a loan of $42,500 recorded to note payable. The monthly base rent was $2,340 and $2,294 as of December 31, 2023 and March 31, 2023, respectively.

 

The Company entered into a sixty-three month lease for 2,400 square feet of office space located in Edina, Minnesota in January 2022. This lease will expire in March 2027. The base rent has annual increases of 2.5% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. The monthly base rent as of December 31, 2023 and March 31, 2023 was $2,740 and $2,673, respectively.

 

On January 10, 2023, the Company entered into a new lease agreement for approximately 14,000 square feet of production and warehouse space with a commencement date of April 1, 2023, which is when the control and right of use for this asset took place. The initial monthly base rent is $8,420 and has annual increases of 2.5%. The Company is also responsible for its proportional share of common space expenses, property taxes, and building insurance. The lease will terminate on June 30, 2033 and the Company has a renewal option for a period of five years. The monthly base rent as of December 31, 2023 was $8,420.

 

Vehicles

 

We leased vehicles for certain members of our field sales organization in the nine months ended December 31, 2023, under a vehicle fleet program whereby the noncancelable lease is for a term of 48 months. The Company recognized an operating lease right-of-use asset for approximately $150,000 and corresponding and equal operating lease liability for the lessee. As of December 31, 2023, in addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities. The nonlease components are not significant.

 

Operating lease expense for the three months ended December 31, 2023 and 2022, was $91,647 and $51,994, respectively. Operating lease expense for the nine months ended December 31, 2023 and 2022 was $266,912 and $101,954, respectively.

 

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The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of December 31, 2023:

 

      
2024  $49,104 
2025   199,956 
2026   203,898 
2027   181,434 
2028   114,410 
2029   114,273 
Thereafter   518,517 
Total   1,381,592 
Less: amount representing interest   (127,777)
Total  $1,253,815 

 

In compliance with ASC 842, the Company recognized, based on the extended lease terms to June 2026, November 2026, March 2027, and June 2033, a treasury rate of 0.12%, 0.40%, 7.6%, and 4.39%, respectively, an operating lease right-of-use assets for approximately $1,465,000 and corresponding and equal operating lease liabilities for the leases. As of December 31, 2023, the present value of future base rent lease payments based on the remaining lease terms and weighted average discount rate are approximately 4.6 years and 4.05%, respectively, are as follows:

 

      
Present value of future base rent lease payments  $1,253,815 
Base rent payments included in prepaid expenses   - 
Present value of future base rent lease payments – net  $1,253,815 

 

As of December 31, 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  $1,253,815 
Total operating lease assets   1,253,815 
      
Operating lease current liability   196,263 
Operating lease non-current liability   1,057,552 
Total operating lease liabilities  $1,253,815 

 

Employment Agreements

 

The Company has employment agreements with its executive officers. As of December 31, 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 $2 million. Masters’ threatened litigation relates to allegations that the Company promised him additional compensation, shares, warrants, and future employment while he was associated with the Company. The Company mediated these claims with Masters in 2022 and executed a mediated settlement agreement resolving these claims for a one-time payment of $180,000, to be effective upon execution of a long form agreement containing these and other settlement terms. The parties appointed the mediator as arbitrator to resolve any disputes arising during the drafting of the long form agreement on commercially reasonable terms. In early 2023, Masters commenced arbitration to have certain terms in the long form agreement decided. The arbitrator issued an award setting the final terms of the agreement.

 

In September 2023, Masters executed the long-term agreement and the Company recorded a settlement expense of $180,000. The settlement was paid in October 2023.

 

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.

 

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The Company incurred net losses of $8,304,578 for the nine months ended December 31, 2023, had net cash used in operating activities of $5,895,484 for the same period, and has an accumulated deficit of $80,148,607 on December 31, 2023. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months after the date of issuance of these financial statements. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to achieve a level of profitability and/or to obtain adequate financing through the issuance of debt or equity in order to finance its operations.

 

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.

 

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

 

NOTE 11 – STOCKHOLDERS’ EQUITY

 

Equity Incentive Plan

 

On July 10, 2020, our Board of Directors unanimously approved the PetVivo Holdings, Inc. 2020 Equity Incentive Plan (the “2020 Plan”), which authorized the issuance of up to 1,000,000 shares of our common stock as awards under the 2020 Plan, subject to approval by our stockholders at the Annual Meeting of Stockholders held on September 22, 2020, when it was approved by our stockholders and became effective. On October 14, 2022, the stockholders of the Company approved the PetVivo Holdings, Inc. Amended and Restated 2020 Equity Incentive Plan (the “Amended Plan”), which increased the number of shares of the Company’s common stock which may be granted under the Amended Plan from 1,000,000 to 3,000,000. Unless sooner terminated by the Board, the Amended Plan will terminate at midnight on July 10, 2030. The number of shares available to grant under the Plan was 843,535 at December 31, 2023.

 

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 3,000,000 shares, but includes the following limits:

 

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

 

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

 

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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 $550,000 to three accredited investors pursuant to debenture subscription agreements (“Debenture Subscription Agreement”). The Convertible Debentures mature on January 26, 2024 (the “Maturity Date”), bear interest at a rate of 10% per annum and automatically convert into shares of the Company’s common stock on the earlier of (i) the Maturity Date or (ii) upon the occurrence of certain events prior to the Maturity Date, including, without limitation, the sale of common stock of at least $2 million.

 

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 January 26, 2024, the maturity date of the Convertible Debentures, provided that the Company adjust the original conversion rate to one share of the Company’s common stock for each $1.50 of principal (reduced from $1.60 in the Convertible Debenture) and pay an amount equal to six months of interest (the “New Conversion Rate”) and grant warrants to the Debenture Holders providing each Debenture Holder with the right to purchase the number of shares of the Company’s common stock issued to the Debenture Holder in the conversion. The Debenture Holders converted $550,000 in Convertible Debentures and accrued interest of $27,500 into 385,000 shares of the Company’s common stock and warrants (“Warrants”) to purchase an aggregate of 385,000 shares of the Company’s common stock. The Warrants are exercisable any time on or after February 5, 2024 and prior to August 10, 2026 at an exercise price of $2.00 per share.

 

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 $534,366. The loss is comprised of the value of the warrants issued of $463,476, as determined by the Black Scholes model; the value of additional shares issued of $45,834 as a result of the lower conversion rate to one share of the Company’s common stock issued and the additional interest of $25,056 which is the amount of interest credited to the Debenture Holders over the actual interest earned of $2,444. The value of the warrants and additional shares issued of $509,310 is reflected in the Consolidated Statements of Changes In Stockholders’ Equity.

 

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”) 1,200,002 shares (“Registered Shares”) of the Company’s common stock (the “Common Stock”) at a price of $1.50 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 1,200,002 shares of Common Stock (the “Warrants”). Net proceeds from the Registered Offering were $1,775,782, after deducting offering expenses of $24,218. The net proceeds were allocated between the common stock and warrants based on the relative fair values which were $502,417 and $1,273,365, respectively. The Warrants are exercisable any time on or after February 5, 2024 and prior to August 10, 2026 at an exercise price of $2.00 per share.

 

On December 6, 2023, the Company entered into a Private Offering (the “Purchase Agreement”) with five accredited investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a direct offering 352,224 shares of the Company’s common stock (the “Common Stock”) at a price of $0.90 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 Offering, the “Offering”) warrants to purchase an aggregate of 352,224 shares of Common Stock (the “Warrants”). Net proceeds from the Offering were $317,000 offset by a stock receivable of $27,000 which was received in January 2024. The proceeds were allocated between the common stock and warrants based on the relative fair values which were $145,820 and $171,180, respectively. The Warrants are exercisable any time from the issue date and prior to December 9, 2026 at an exercise price of $1.50 per share.

 

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Common Stock

 

For the nine months ended December 31, 2023, the Company issued 3,970,989 shares of common stock as follows:

 

i) 793,585 shares in connection with the sale of stock in a registered direct offering which closed in April 2023 in exchange for proceeds of $2,182,359 net of offering costs of $88,765, at a price of $2.75 per share. The Company received $137,500 of those proceeds on March 31, 2023. The Company recorded this in common stock to be issued at March 31, 2023, and moved it to common stock and additional paid-in capital upon the issuance of shares of common stock in April 2023.
ii) 6,250 shares related to vesting of restricted stock units (“RSUs”), vesting in June 2023;
iii) 30,300 shares related to vesting of RSUs to John Lai, the Company’s Chief Executive Officer, in lieu of compensation valued as of $74,589, based on the closing stock prices on the vesting date with 10,100 shares vesting in April 2023, 10,100 shares vesting in May 2023, and 10,100 shares vesting in June 2023;
iv) 16,666 shares in April 2023 to service providers for consulting services valued at market on the date of grant of $48,581;
v) 16,666 shares in May 2023 to service providers for consulting services valued at market on the date of grant of $40,332;
vi) 16,666 shares in June 2023 to service providers for consulting services valued at market on the date of grant of $34,165;
vii) 16,666 shares in July 2023 to service providers for consulting services valued at market on the date of grant of $35,332;
viii) 42,000 shares in July 2023 to a service provider for consulting services valued at market on the date of grant of $89,040;
ix) 1,200,002 shares in connection with the sale of stock in August 2023 in exchange for proceeds of $1,775,782 net of offering costs of $24,218, at a price of $1.50 per share;
x) 385,000 shares in connection with the conversion of the Convertible Debentures in August 2023 totaling $577,500 including $27,500 of accrued interest at a price of $1.50 per share;
xi) 12,212 shares in August 2023 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 22,500 shares of common stock at a strike price of $1.33 per share;
xii) 16,666 shares in August 2023 to service providers for consulting services valued at market on the date of grant of $32,332;
xiii) 250,000 shares in August 2023 to a service provider for consulting services valued at market on the date of grant of $537,500;
xiv) 22,000 shares related to vesting of RSUs in August 2023;

xv)

 

 

xvi)

20,200 shares related to vesting of RSUs to John Lai, the Company’s Chief Executive Officer, in lieu of compensation valued at $41,006, based on the closing stock prices on the vesting date with 10,100 shares vesting in July 2023 and 10,100 shares vesting in August 2023;

16,666 shares in September 2023 to service providers for consulting services valued at market on the date of grant of $31,999;

xvii) 7,500 shares in September 2023 to a service provider for consulting services valued at market on the date of grant of $14,775;
xviii) 22,466 shares in September 2023 pursuant to a warrant holder’s cashless exercise of warrants for purchase of 41,084 shares of common stock at a weighted average strike price of $1.35 per share;
xix) 125,000 shares in connection with the sale of stock in October 2023 in exchange for proceeds of $200,000;
xx) (250,000) shares returned in October 2023 from a service provider for cancellation of consulting agreement valued at $537,500;
xxi) 600,000 shares in November 2023 sold pursuant to the At The Market (ATM) agreement. Proceeds from the sale was $870,000 less offering expenses of $63,107 to arrive at net proceeds of $806,893;
xxii) 133,666 shares in October 2023 to service providers for consulting services valued at market on the date of grant of $255,305;
xxiii) 1,250 shares related to vesting of RSUs in October 2023;
xxiv) 16,666 shares in November 2023 to service providers for consulting services valued at market on the date of grant of $23,747;
xxv) 16,672 shares in December 2023 to service providers for consulting services valued at market on the date of grant of $14,071;
xxvi) 352,224 shares in connection with the sale of stock in December 2023 in exchange for proceeds of $290,000.
xxvii) 74,000 shares in December 2023 pursuant to the ATM. Proceeds from the sale was $89,033 less offering expenses of $2,672 to arrive at net proceeds of $86,361; and
xxviii) 10,000 shares related to vesting of RSUs in December 2023.

 

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

 

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

 

In August 2023, the Company granted 250,000 shares of common stock to a service provider for consulting services valued at $537,500. In October 2023, the consulting agreement was terminated and all the common stock that was issued was returned to the Company.

 

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 $124,103 and $108,794 for the three months ended December 31, 2023 and 2022, respectively, and $289,913 and $258,844 for the nine months ended December 31, 2023 and 2022, respectively.

 

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 $182,377 for the three months ended December 31, 2023 and 2022, respectively, and $662,726 and $547,131 for the nine months ended December 31, 2023 and 2022, respectively. At December 31, 2023, there was approximately $228,000 of total unrecognized compensation expense related to time-based restricted stock units that is expected to be recognized over a weighted-average period of six months.

 

Our time-based restricted stock unit activity for the year ended March 31, 2023 and the nine months ended December 31, 2023 was as follows:

 

   Units Outstanding   Weighted Average Grant Date Fair Value Per Unit   Aggregate Intrinsic Value (1) 
Balance at March 31, 2022   372,668   $4.07   $760,243 
Granted   60,600    2.89    - 
Vested   (177,184)   3.99    - 
Balance at March 31, 2023   256,084    3.85    643,209 
Vested   (90,000)   3.50    - 
Balance at December 31, 2023   166,084   $4.04   $176,049 

 

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

 

Stock Options

 

Stock options issued to employees and directors typically vest over three years (one year for directors) and have a contractual term of seven years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $276,328 and $350,006 for the three months ended December 31, 2023 and 2022, respectively, and $785,451 and $480,792 for the nine months ended December 31, 2023 and 2022, respectively. At December 31, 2023, there was approximately $1,247,000 of total unrecognized stock option expense which is expected to be recognized on a straight-line basis over a weighted-average period of 1.5 years.

 

20
 

 

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

 

The following table sets forth the estimated fair values of our stock options granted:

 

   Nine Months Ended   Year Ended 
   December 31, 2023   March 31, 2023 
Expected term   7 years    7 years 
Expected volatility   75.9% - 95.6%   111.7% - 146.9%
Risk-free interest rate   3.46% - 4.48%   2.96% – 4.35%
Expected dividend yield   0%   0%
Fair value on the date of grant  $1.06 - $2.74   $1.87 - $2.79 

 

Our stock option activity for the year ended March 31, 2023 and the nine months ended December 31, 2023 is as follows:

 

   Options Outstanding   Weighted- Average Exercise Price Per Share (1)   Weighted-Average Remaining Contractual Life  Aggregate Intrinsic Value (2) 
Balance at March 31, 2022   195,000   $1.56   6.9 years  $100,200 
Granted   714,849    2.37         
Cancelled   (25,000)   2.46         
Balance at March 31, 2023   884,849    2.19   6.3 years   307,750 
Granted   664,939    1.88         
Cancelled   (20,000)   1.99         
Balance at December 31, 2023   1,529,788   $   2.06   5.9 years  $- 
                   
Options exercisable at December 31, 2023   466,084              

 

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

 

Stock options granted for the year ended March 31, 2023 and the nine months ended December 31, 2023 were to employees and directors. The fair value of these options on the date of grant was $1,543,087 and $984,552 for the year ended March 31, 2023 and the nine months ended December 31, 2023, respectively.

 

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Options exercisable at December 31, 2023 had exercise prices ranging from $1.39 to $2.79.

 

The following summarizes additional information about our stock options:

 

   Nine Months Ended   Year Ended 
   December 31, 2023   Mar 31, 2023 
Number of:          
Non-vested options, beginning of period   709,394    195,000 
Non-vested options, end of period   1,063,704    709,394 
Vested options, end of period   466,084    175,455 

 

   Nine Months Ended   Year Ended 
   December 31, 2023   Mar 31, 2023 
Weighted-average grant date fair value of:          
Non-vested options, beginning of period  $2.23   $1.56 
Non-vested options, end of period  $    1.95   $2.23 
Vested options, end of period  $2.31   $2.01 
Forfeited options, during the period  $-   $- 

 

Warrants

 

During the nine months ended December 31, 2023 the Company issued warrants to purchase an aggregate of 2,317,226 shares of common stock as follows:

 

i) 1,200,002 warrants in August 2023 in connection with the sale of stock in the Registered Offering valued at $1,273,365;
ii) 385,000 warrants in August 2023 in connection with the conversion of convertible debentures to common stock valued at $463,476;
iii) 300,000 warrants in August 2023 to service providers valued at $234,741;
iv)

80,000 warrants in August 2023 to service providers valued at $87,485; and

v) 352,224 warrants in December 2023 in connection with the sale of stock in a private offering

 

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

 

    Nine Months Ended  
    December 31, 2023  
Stock price on valuation date   $ 1.03 - $2.15  
Exercise price   $ 1.50 -$2.75  
Term (years)     2.03.0  
Volatility     78.0% - 83.3 %
Risk-free rate     4.33% - 4.64 %

 

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A summary of warrant activity for the year ended March 31, 2023 and the nine months ended December 31, 2023 is as follows:

 

   Number of
Warrants
   Weighted-
Average
Exercise
Price
   Warrants
Exercisable
   Weighted-
Average
Exercisable
Price
 
                 
Outstanding, March 31, 2022   3,757,484   $4.95    3,693,734   $5.00 
Exercised for cash   (48,664)   (1.36)          
Granted and issued   -    -           
Cashless warrant exercises   -   -          
                     
Expired   (146,003)   (3.70)          
Outstanding, March 31, 2023   3,562,817    5.05    3,540,317    5.07 
Granted and issued   2,317,226    2.04           
Cashless warrant exercises   (63,584)   (1.34)          
Expired   (16,750)   (4.18)          
Outstanding, December 31, 2023   5,799,709   $3.89    4,075,537   $4.67 

 

On December 31, 2023, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life is as follows:

 

   Warrants Outstanding   Warrants Exercisable 

Range of Warrant

Exercise Price

 

Number of

Warrants

  

Weighted-

Average Exercise

Price

  

Weighted-

Average

Remaining

Contractual Life

(Years)

  

Number of

Warrants

  

Weighted-

Average

Exercise

Price

 
$1.20-$2.00   2,220,715   $1.84    2.70    635,713   $1.43 
                          
2.01-4.00   535,438    2.54    1.48    396,268    2.50 
                          
4.01-5.63   3,043,556          5.63    2.61    3,043,556    5.63 
                          
Total   5,799,709   $3.89    2.54    4,075,537   $4.67 

 

Stock-based compensation expense included in the Consolidated Statements of Operations for warrants was $58,685 and $0 for the three months ended December 31, 2023 and 2022, respectively, and $204,855 and $41,662 for the nine months ended December 31, 2023 and 2022, respectively.

 

It is expected that the Company will recognize expense after December 31, 2023 related to warrants issued, outstanding, and valued using the Black Scholes pricing model as of December 31, 2023 of approximately $117,000 over the next nine months.

 

For the three months ended December 31, 2023 and 2022, the total stock-based compensation on all instruments was $517,390 and $305,971, respectively. For the nine months ended December 31, 2023 and 2022, the total stock-based compensation on all instruments was $1,653,032 and $1,069,585, respectively.

 

NOTE 12 – SUBSEQUENT EVENTS

 

On February 2, 2024, the Company sold 1,386,469 units consisting of one share and one warrant at a price of $.90 per unit. Total proceeds from the sale of the units were $1,248,000. The warrants have an exercise price of $1.50 and expire on February 1, 2027.

 

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

 

GENERAL

 

PetVivo Holdings, Inc. (the “Company,” “PetVivo,” “we” or “us) is an emerging biomedical device company focused on the manufacturing, commercialization, and licensing of innovative medical devices and therapeutics for animals. The Company has a pipeline of products for the treatment of animals. A portfolio of twenty-two 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™ with OsteCushion™ Technology, and its pipeline products are derived from proprietary biomaterials that simulate a body’s 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 and mammalian tissue. 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.

 

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.

 

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  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 sid