U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2022

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

For the transition period from _______ to _______

Commission File No. 001-40715

PetVivo Holdings, Inc.

(Name of small business issuer in its charter)

Nevada

99-0363559

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5251 Edina Industrial Blvd, Edina, Minnesota 55439

(Address of principal executive offices) (Zip Code)

(952) 405-6216

(Issuer’s telephone number)

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

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

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

Common Stock, $0.001

(Title of Class)

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

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

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

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

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

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

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

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

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED December 31, 2022

INDEX

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		i

PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION		26

Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosure	26
Item 5.	Other information	26
Item 6.	Exhibits	27

SIGNATURES		28

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

Information included in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of PetVivo Holdings, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies, and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for our fiscal year ended March 31, 2022 (“2022 10-K Report”) and risks described in other SEC filings. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I.

ITEM 1. FINANCIAL STATEMENTS

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2022 (Unaudited)			March 31, 2022
Assets:
Current Assets
Cash and cash equivalents	$	374,533		$	6,106,827
Accounts receivable		506,844			2,596
Inventory, net		374,882			98,313
Prepaid expenses and other assets		479,670			547,664
Total Current Assets		1,735,929			6,755,400

Property and Equipment, net		520,321			311,549

Other Assets:
Operating lease right-of-use		257,469			299,101
Patents and trademarks, net		41,746			48,452
Security deposit		12,830			12,830
Total Other Assets		312,045			360,383
Total Assets	$	2,568,295		$	7,427,332

Liabilities and Stockholders’ Equity:

Current Liabilities
Accounts payable	$	456,052		$	323,384
Accrued expenses		1,041,628			784,375
Operating lease liability – short term		60,061			59,178
Note payable and accrued interest		6,841			6,549
Total Current Liabilities		1,564,582			1,173,486
Other Liabilities
Note payable and accrued interest (net of current portion)		22,155			27,201
Operating lease liability (net of current portion)		197,408			239,923
Total Other Liabilities		219,563			267,124
Total Liabilities		1,784,145			1,440,610
Commitments and Contingencies (see Note 9)		-			-
Stockholders’ Equity:
Preferred stock, par value $0.001, 20,000,000 shares authorized, 0 and 0 shares issued and outstanding at December 31, 2022 and March 31, 2022		-			-
Common stock, par value $0.001, 250,000,000 shares authorized, 10,106,525 and 9,988,361 shares issued and outstanding at December 31, 2022 and March 31, 2022, respectively		10,106			9,988
Additional Paid-In Capital		70,289,100			69,103,155
Accumulated Deficit		(69,515,056	)		(63,126,421	)
Total Stockholders’ Equity		784,150			5,986,722
Total Liabilities and Stockholders’ Equity	$	2,568,295		$	7,427,332

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

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2022			2021			2022			2021
	Three Months Ended December 31,						Nine Months Ended December 31,
	2022			2021			2022			2021
Revenues	$	510,109		$	51,004		$	791,563		$	60,126

Cost of Sales		223,687			98,997			424,866			104,048
Gross Profit		286,422			(47,993	)		366,697			(43,922	)

Operating Expenses:

Sales and Marketing		1,047,549			404,462			2,572,103			689,960
Research and Development		248,157			34,326			460,197			287,643
General and Administrative		1,309,534			1,170,870			3,738,876			2,258,001

Total Operating Expenses		2,605,240			1,609,658			6,771,176			3,235,604

Operating Loss		(2,318,818	)		(1,657,651	)		(6,404,479	)		(3,279,526	)

Other Income
Forgiveness of PPP loan and accrued interest		-			-			-			31,680
Interest Income		7,200			15,522			15,844			9,614
Total Other Income		7,200			15,522			15,844			41,294

Loss before taxes		(2,311,618	)		(1,642,129	)		(6,388,635	)		(3,238,232	)

Income Tax Provision		-			-			-			-

Net Loss	$	(2,311,618	)	$	(1,642,129	)	$	(6,388,635	)	$	(3,238,232	)

Net Loss Per Share:
Basic and Diluted	$	(0.23	)	$	(0.17	)	$	(0.64	)	$	(0.38	)

Weighted Average Common Shares Outstanding:
Basic and Diluted		10,098,658			9,756,945			10,047,040			8,426,135

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

PETVIVO HOLDINGS, INC.

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

Nine Months Ended December 31, 2022

		Shares		Amount		Capital			Deficit			Total
	Common Stock				Additional Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance at March 31, 2022		9,988,361	$	9,988	$	69,103,155		$	(63,126,421	)	$	5,986,722
Stock-based compensation		-		-		231,231			-			231,231
Net loss		-		-		-			(1,965,428	)		(1,965,428	)
Balance at June 30, 2022		9,988,361	$	9,988	$	69,334,386		$	(65,091,849	)	$	4,252,525

Cash paid to exercise warrants		48,664		49		66,509			-			66,558
Vesting of restricted stock units		33,250		33		(33	)		-			-
Stock issues for services		25,000		25		49,895			-			49,920
Stock based compensation		-		-		305,971			-			305,971
Net loss		-		-		-			(2,111,589	)		(2,111,589	)
Balance at September 30, 2022		10,095,275	$	10,095	$	69,756,728		$	(67,203,438	)	$	2,563,385

Vesting of restricted stock units		11,250		11		(11	)		-			-
Stock-based compensation		-		-		532,383			-			532,383
Net Loss		-		-		-			(2,311,618	)		(2,311,618	)
Balance at December 31, 2022		10,106,525	$	10,106	$	70,289,100		$	(69,515,056	)	$	784,150

Nine Months Ended December 31, 2021

		Shares		Amount		Capital			Deficit			Total
						Additional
	Common Stock				Paid-in			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance at March 31, 2021		6,799,113	$	6,799	$	57,207,648		$	(58,111,426	)	$	(896,979	)
Common stock sold		49,014		50		343,048			-			343,098
Cash paid to exercise warrants		4,500		4		39,996			-			40,000
Stock issued for debt conversion		80,522		80		232,578			-			232,658
Cashless warrant exercises		160,006		160		(160	)		-			-
Stock-based compensation		-		-		55,674			-			55,674
Net loss		-		-		-			(490,629	)		(490,629	)
Balance at June 30, 2021		7,093,155	$	7,093	$	57,878,784		$	(58,602,055	)	$	(716,178	)

Common stock sold		2,511,000		2,511		4,966,020			-			4,968,531
Warrants sold		-		-		4,889,252			-			4,889,252
Cash paid to exercise warrants		1,594		1		2,030			-			2,031
Cashless warrant exercise		40,038		40		(40	)		-			-
Stock issued for services		42,000		42		209,958			-			210,000
Stock-based compensation		-		-		104,092			-			104,092
Stock and warrants granted for debt conversion		43,556		44		195,956			-			196,000
Net loss		-		-		-			(1,105,474	)		(1,105,474	)
Balance at September 30, 2021		9,731,343	$	9,731	$	68,246,052		$	(59,707,529	)	$	8,548,254


Stock issued for services		26,085		27		71,053			-			71,080
Vesting of restricted stock units		300		-		-			-			-
Stock-based compensation		-		-		272,717			-			272,717
Net loss		-		-		-			(1,642,129	)		(1,642,129	)
Balance at December 31, 2021		9,757,728	$	9,758	$	68,589,822		$	(61,349,658	)	$	7,249,922

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

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	December 31,2022			December 31,2021
	For the Nine Months Ended
	December 31,2022			December 31,2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss For The Period	$	(6,388,635	)	$	(3,238,232	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Stock-based compensation		1,069,585			432,483
Amortization of prepaid stock issued for services		258,844			71,080
Depreciation and amortization		91,785			43,168
Forgiveness of PPP loan and accrued interest		-			(31,680	)
Changes in Operating Assets and Liabilities
Increase in prepaid expenses and other assets		(140,930	)		(44,659	)
Increase in accounts receivable		(504,248	)		(3,186	)
Increase in inventory		(276,569	)		(104,965	)
Decrease in deferred offering costs		-			280,163
Interest accrued on convertible notes payable		-			(3,013	)
Interest accrued on notes payable - related party		-			4,013
Increase in accounts payable and accrued expenses		389,921			106,319
Decrease in accrued expenses - related party		-			(36,808	)
Net Cash Used In Operating Activities		(5,500,247	)		(2,525,317	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(293,851	)		(91,908	)
Disbursements for patents and trademarks		-			(19,154	)
Net Cash Used in Investing Activities		(293,851	)		(111,062	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock and warrants sold		-			10,200,881
Proceeds from exercise of warrants		66,558			42,031
Repayments of note payable		(4,754	)		(4,235	)
Repayments of PPP loan		-			(3,571	)
Repayments of notes payable - related party		-			(48,267	)
Repayments of notes payable - directors		-			(20,300	)
Net Cash Provided by Financing Activities		61,804			10,166,539
Net (Decrease) Increase in Cash		(5,732,294	)		7,530,160
Cash at Beginning of Period		6,106,827			23,578
Cash at End of Period	$	374,533		$	7,553,738

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During The Period For:
Interest	$	2,388		$	9,071
SUPPLEMENTAL DISCLOSURE ON NON-CASH FINANCING AND INVESTING ACTIVITIES
Stock issued for debt conversion		-		$	232,658
Stock and warrants granted for debt conversion		-		$	196,000
Prepaid stock issued for services	$	49,920		$	210,000

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

PetVivo Holdings, Inc.

Notes to Consolidated Financial Statements

December 31, 2022

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Organization and Description

The Company is in the business of licensing and commercializing our proprietary medical devices and biomaterials for the treatment and/or management of afflictions and diseases in animals, initially for dogs and horses. The Company began commercialization of its lead product Spryng™ with OsteoCushion™ Technology, a veterinarian-administered, intraarticular injection for the management of lameness and other joint afflictions such osteoarthritis in dogs and horses, in September 2021. The Company has a pipeline of additional products for the treatment of animals in various stages of development. A portfolio of nineteen patents protects the Company’s biomaterials, products, production processes and methods of use. The Company’s operations are conducted from its headquarter facilities in suburban Minneapolis, Minnesota.

(B) Basis of Presentation

PetVivo Holdings, Inc. (the “Company”) was incorporated in Nevada under a former name in 2009 and entered its current business in 2014 through a stock exchange reverse merger with PetVivo, Inc., a Minnesota corporation. This merger resulted in Minnesota PetVivo becoming a wholly-owned subsidiary of the Company. In April 2017, the Company acquired another Minnesota corporation, Gel-Del Technologies, Inc., through a statutory merger, which is also a wholly-owned subsidiary of the Company.

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

(C) Principles of Consolidation

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

(D) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include collectability of accounts receivable, inventory obsolescence, estimated useful lives and potential impairment of property and equipment and intangibles, estimate of fair value of share-based payments, distributor rebate payable, provision for product returns, lease assets and liabilities and valuation of deferred tax assets.

(E) Cash and Cash Equivalents

The Company considers all highly-liquid, temporary cash investments with an original maturity of three months or less to be cash equivalents.

(F) Concentration Risk

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

(G) Accounts Receivable

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

(H) Inventory

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

(I) Property & Equipment

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

(J) Patents and Trademarks

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

(K) Loss Per Share

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

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

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

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

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

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

The Company uses the guidance in Accounting Standards Codification (“ASC”) 260 to determine if-converted loss per share. ASC 260 states that convertible securities should be considered exercised on the latter of the first day of the reporting period’s quarter or the inception date of the debt instrument. Also, the if-converted method shall not be applied for the purposes of computing diluted EPS if the effect would be anti-dilutive.

(L) Revenue Recognition

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

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

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

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

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


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

(M) Research and Development

The Company expenses research and development costs as incurred.

(N) Fair Value of Financial Instruments

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

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

	●	Level 1 - quoted market prices in active markets for identical assets or liabilities.

	●	Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

	●	Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s financial instruments consist of accounts receivable, accounts payable, accrued expenses and note payable and accrued interest. The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 2022 and March 31, 2022, due to the short-term nature of these instruments and the Company’s borrowing rate of interest.

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

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

(O) Stock-Based Compensation - Non-Employees

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

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

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

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

	●	Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB ASC the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration the contractual term of the instruments and the holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate the holder’s expected exercise behavior.

	●	Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.

	●	Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

	●	Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

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

(P) Stock-Based Compensation

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

(Q) Income Taxes

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

As required by ASC Topic 450, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

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

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

(R) Recent Accounting Pronouncements

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

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

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

NOTE 2 – INVENTORY

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

The inventory components are as follows:

SCHEDULE OF INVENTORY

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

NOTE 3 – PREPAID EXPENSES AND OTHER ASSETS

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

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

NOTE 4 –PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:

SCHEDULE OF PROPERTY AND EQUIPMENT

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

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

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

NOTE 5 – PATENTS AND TRADEMARKS

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

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

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

NOTE 6 – ACCRUED EXPENSES

The components of accrued expenses were as follows:

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

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

NOTE 7 – NOTE PAYABLE

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

NOTE 8 – RETIREMENT PLAN

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

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Lease Obligations

The Company entered into an eighty-four-month lease for 3,577 square feet of newly constructed office, laboratory and warehouse space located in Edina, Minnesota in May 2017. The base rent has annual increases of 2% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. This lease is terminable by the landlord if damage causes the property to no longer be utilized as an integrated whole and by the Company if damage causes the facility to be unusable for a period of 45 days. In January 2020, the Company entered into a lease amendment to extend the lease term through November of 2026 in exchange for receipt of a loan of $42,500 recorded to note payable. The monthly base rent as of December 31, 2022 and March 31, 2022 is $2,205.

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

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

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


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

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

SCHEDULE OF BASE RENT LEASE PAYMENTS


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

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


Operating lease right-of-use asset	$	257,469
Total operating lease assets	$	257,469

Operating lease current liability	$	60,061
Operating lease other liability	$	197,408
Total operating lease liabilities	$	257,469

Employment Agreements

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

Legal Proceedings

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

Purchase Commitment

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

NOTE 10 - GOING CONCERN

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

The Company incurred net losses of $6,388,635 for the nine months ended December 31, 2022, had net cash used in operating activities of $5,500,247 for the same period and has an accumulated deficit of $69,515,056 at December 31, 2022. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months after the date of issuance of these financial statements. In view of these matters, the Company’s ability to continue as a going concern is dependent upon the Company’s ability to achieve a level of profitability and/or to obtain adequate financing through the issuance of debt or equity in order to finance its operations.

The Company sold shares of its common stock in January 2023 (see Note 12) and management intends to raise additional funds through the offering of its equity securities. Management believes that the actions presently being taken to further implement its business plan will enable the Company to continue as a going concern. While the Company believes in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and raise additional funds.

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

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

NOTE 11 – STOCKHOLDERS’ EQUITY

Equity Incentive Plan

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

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

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

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

●

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

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

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

Common Stock

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

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

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

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

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

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

Time-Based Restricted Stock Units

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

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

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

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

Stock Options

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

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

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

	Nine Months Ended December 31, 2022			Year Ended March 31, 2022
Expected term		7 years			7 years
Expected volatility		173.2% - 207.8	%		205.0% - 210.5	%
Risk-free interest rate		2.96% - 4.35	%		1.47% – 2.14	%
Expected dividend yield		0	%		0	%
Fair value on the date of grant		$ 1.87 - $2.79			$ 1.39 - $1.99

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

SCHEDULE OF STOCK OPTION ACTIVITY

Options

Outstanding

SEC Form 10-Q filed by PetVivo Holdings Inc.