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 September 30, 2024

☐ 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.)

5151 Edina Industrial Blvd Suite 575

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 November 14, 2024

Common Stock, $0.001

Preferred Stock (Series A), $0.001

20,857,164

3,045,000

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED September 30, 2024

INDEX

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Qualitative and Quantitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

PART II. OTHER INFORMATION		33

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosure	35
Item 5.	Other information	35
Item 6.	Exhibits	36

SIGNATURES		37

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, 2024, (“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.

PART I.

ITEM 1. FINANCIAL STATEMENTS

PETVIVO HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	September 30 2024			March 31, 2024
	(Unaudited)
Assets:
Current Assets
Cash and cash equivalents	$	126,239		$	87,403
Accounts receivable		133,680			18,669
Inventory, net (Note 3)		372,115			390,076
Prepaid expenses and other assets (Note 4)		614,350			545,512
Total Current Assets		1,246,384			1,041,660

Property and Equipment, net (Note 5)		777,330			821,656

Other Assets:
Operating lease right-of-use		1,101,557			1,194,348
Trademark and patents, net (Note 6)		26,483			30,099
Security deposit		34,990			27,490
Total Other Assets		1,163,030			1,251,937
Total Assets	$	3,186,744		$	3,115,253

Liabilities and Stockholders’ Equity:

Current Liabilities
Accounts payable	$	762,103		$	821,230
Accrued expenses and other payables		395,625			243,030
Operating lease liability – short term		191,373			190,589
Note payable and accrued interest		508,916			157,521
Total Current Liabilities		1,858,017			1,412,370
Other Liabilities
Operating lease liability (net of current portion)		910,184			1,003,759
Note payable and accrued interest (net of current portion)		9,372			13,171
Total Other Liabilities		919,556			1,016,930
Total Liabilities		2,777,573			2,429,300
Commitments and Contingencies (see Note 10)		-			-
Stockholders’ Equity:
Series A Preferred Stock, par value $0.001, 20,000,000 shares authorized, 3,045,000 and zero issued and outstanding at September 30, 2024 and March 31, 2024, respectively		3,045			-
Common Stock, par value $0.001, 250,000,000 shares authorized, 20,067,164 and 17,058,620 issued and outstanding at September 30, 2024 and March 31, 2024, respectively		20,067			17,059
Common Stock to be Issued		132,000			-
Additional Paid-In Capital		87,275,939			83,468,218
Accumulated Deficit		(87,021,880	)		(82,799,324	)
Total Stockholders’ Equity		409,171			685,953
Total Liabilities and Stockholders’ Equity	$	3,186,744		$	3,115,253

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

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,						Six Months Ended September 30,
	2024			2023			2024			2023
Revenues	$	200,720		$	207,366		$	324,470		$	324,549

Cost of Sales		21,162			21,862			34,156			34,167
Gross Profit		179,558			185,504			290,314			290,382

Operating Expenses:

Sales and Marketing		620,307			1,078,725			1,154,720			2,020,611
Research and Development		465,174			359,332			852,689			653,103
General and Administrative		1,267,117			1,691,790			2,500,378			3,454,588

Total Operating Expenses		2,352,598			3,129,847			4,507,787			6,128,302

Operating Loss		(2,173,040	)		(2,944,343	)		(4,217,473	)		(5,837,920	)

Other (Expense) Income
Loss on Extinguishment of Debt		-			(534,366	)		-			(534,366	)
Settlement Expense		-			(180,000	)		-			(180,000	)
Interest (Expense) Income		(2,453	)		(2,444	)		(5,083	)		(2,444	)

Total Other (Expense) Income		(2,453	)		(716,810	)		(5,083	)		(716,810	)
					-						-
Loss before taxes		(2,175,493	)		(3,661,153	)		(4,222,556	)		(6,554,730	)

Income Tax Provision		-			-			-			-

Net Loss	$	(2,175,493	)	$	(3,661,153	)	$	(4,222,556	)	$	(6,554,730	)

Net Loss Per Share:
Basic and Diluted	$	(0.11	)	$	(0.28	)	$	(0.22	)	$	(0.53	)

Weighted Average Common Shares Outstanding:
Basic and Diluted		20,099,095			12,987,641			19,395,401			12,325,973

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

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Three and Six Months Ended September 30, 2024

																-
	Common Stock				Preferred Stock				Additional Paid-in			Accumulated			Common Stock to be
	Shares		Amount		Shares		Amount		Capital			Deficit			Issued		Total
Balance at March 31, 2024		17,058,620	$	17,059		-		-	$	83,468,218		$	(82,799,324	)		-	$	685,953
Common stock sold		1,889,434		1,889		-		-		1,320,711			-			-		1,322,600
Conversion of debt and interest to common stock		430,798		431		-		-		301,127			-			-		301,558
Stock issued for services		376,000		376		-		-		213,784			-			-		214,160
Stock-based compensation		-		-		-		-		352,295			-			-		352,295
Vesting of restricted stock units		150,000		150		-		-		(150	)		-			-		-
Net loss		-		-		-		-		-			(2,047,063	)		-		(2,047,063	)
Balance at June 30, 2024		19,904,852	$	19,905		-	$	-	$	85,655,985		$	(84,846,387	)		-	$	829,503
Preferred stock sold		-		-		3,045,000		3,045		1,214,955			-			-		1,218,000
Stock issued for services		120,000		120		-		-		55,900			-			-		56,020
Common stock in lieu of compensation		-		-		-		-		-			-			132,000		132,000
Stock-based compensation		-		-		-		-		349,141			-			-		349,141
Vesting of restricted stock units		42,312		42		-		-		(42	)		-			-		-
Net loss		-		-		-		-		-			(2,175,493	)		-		(2,175,493	)
Balance at September 30, 2024		20,067,164	$	20,067		3,045,000	$	3,045	$	87,275,939		$	(87,021,880	)	$	132,000	$	409,171

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

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Three and Six Months Ended September 30, 2023


	Common Stock				Additional Paid-in			Accumulated			Common Stock to be
	Shares		Amount		Capital			Deficit			Issued			Total
Balance at March 31, 2023		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
Balance		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
Balance		13,841,731	$	13,842	$	79,373,596		$	(78,398,759	)	$	-		$	988,679

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

PETVIVO HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Six Months Ended
	September 30, 2024			September 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss For The Period	$	(4,222,556	)	$	(6,554,730	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Stock-based compensation		701,436			1,020,047
Depreciation and amortization		66,540			63,364
Consulting and investor relations services paid in stock		315,088			403,326
Stock issued in lieu of compensation		132,000			115,595
Loss on extinguishment of debt		-			534,366
Interest on convertible debentures		2,900			2,444
Changes in Operating Assets and Liabilities
Increase in prepaid expenses and other current assets		(121,247	)		(418,180	)
(Increase) in accounts receivable		(115,011	)		(69,199	)
Decrease (increase) in inventory		17,961			(63,797	)
Increase in accounts payable and accrued expenses		92,127			361,802
Net Cash Used In Operating Activities		(3,130,762	)		(4,604,962	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		(18,598	)		(93,618	)
Net Cash Used in Investing Activities		(18,598	)		(93,618	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the sale of common stock and warrants		1,322,600			3,731,876
Proceeds from the sale of preferred stock and warrants		1,218,000			-
Proceeds from issuance of convertible debentures		150,000			550,000
Proceeds from notes payable		500,000			-
Repayments of notes payable		(2,404	)		(3,356	)
Net Cash Provided by Financing Activities		3,188,196			4,278,520

Net Increase (Decrease) in Cash		38,836			(420,060	)
Cash at Beginning of Period		87,403			475,314
Cash at End of Period	$	126,239		$	55,254

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid During The Period For:
Interest	$	5,084		$	846
Taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
Convertible debentures and accrued interest converted to common stock	$	301,558		$	577,500
Stock granted for consulting services	$	210,100		$	626,540
(Decrease) increase to operating lease right of use asset and operating lease liability	$	(92,792	)	$	1,081,204

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

PetVivo Holdings, Inc.

Condensed Notes to Consolidated Financial Statements

September 30, 2024

(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 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 its 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 six months ended September 30, 2024, are not necessarily indicative of results to be expected for the year ending March 31, 2025, 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, 2024.

(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 during consolidation.

(D) Use of Estimates

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

(E) Cash and Cash Equivalents

The Company considers all highly-liquid, temporary cash investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2024.

(F) Concentration Risk

The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. At September 30, 2024, the Company did not have cash balances in excess of the federally insured limits.

(G) Accounts Receivable

Accounts receivable consist primarily of amounts due from distributors (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 is fully collectible. Accordingly, as of September 30, 2024, and March 31, 2024, our allowance for credit losses was zero.

In fiscal 2023, the Company has adopted an accounting standard: Adoption of ASC 326, Financial Instruments - Credit Losses, which amends the impairment model by requiring entities to use a forward-looking approach to estimate lifetime expected credit losses on certain types of financial instruments, including trade receivables.

(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 six months ended September 30, 2024, and 2023, 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 13,089,178 warrants outstanding as of September 30, 2024, with varying exercise prices ranging from $.90 to $5.625 per share. The weighted average exercise price for these warrants is $2.41 per share. These warrants are excluded from the weighted average number of shares because they were considered anti-dilutive.

The Company had 60,938 restricted stock units outstanding as of September 30, 2024, which are excluded from the weighted average number of shares because they were considered anti-dilutive.

The Company had 995,042 stock options outstanding as of September 30, 2024, with varying exercise prices ranging from $0.80 to $2.79 per share. The weighted average exercise price for these options is $1.79 per share. These stock options are excluded from the weighted average number of shares because they were considered anti-dilutive.

The Company had 5,447,485 warrants outstanding as of September 30, 2023, with varying exercise prices ranging from $1.20 to $5.63 per share. The weighted average exercise price for these warrants is $4.04 per share. These warrants are excluded from the weighted average number of shares because they were considered anti-dilutive.

The Company had 177,334 restricted stock units outstanding as of September 30, 2023, which are excluded from the weighted average number of shares because they were considered anti-dilutive.

The Company had 1,354,088 stock options outstanding as of September 30, 2023, with varying exercise prices ranging from $1.39 to $2.79 per share. The weighted average exercise price for these options is $2.20 per share. These stock options are excluded from the weighted average number of shares because they were 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 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 September 30, 2024. 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 September 30, 2024, and 2023, the Company recognized revenue from product sales under the Agreement of $177,840 and $151,164, respectively. This represents 84% and 66% of total revenues for the three-month period ended September 30, 2024, and 2023, respectively.

For the six months ended September 30, 2024, and 2023, the Company recognized revenue from product sales under the Agreement of $231,192 and $186,732, respectively. This represents 68% and 52% of total revenues for the six months ended September 30, 2024, and 2023, respectively.

Assets and liabilities (included in accrued expenses) under the MWI Veterinary Supply Co. Agreement were as follows:

	September 30, 2024		March 31, 2024
Accounts receivable: MWI Veterinary Supply Co.	$	133,380	$	18,669
Rebate liability		57,264		57,264
Distribution fee payable		9,250		7,583

The Company entered into a Distribution Services Agreement (the “Covetrus 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 Covetrus 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 Covetrus Agreement. Revenue is recognized upon delivery to the Distributor; payment is due within 60 days. The Covetrus 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 rights of return provisions; the Company uses an expected value method to estimate returns and has determined that any returns would be immaterial as of September 30, 2024. 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 September 30, 2024, and 2023, the Company did not recognize revenue from product sales under the Covetrus Agreement. The Company did not have any Accounts Receivable from Covetrus at September 30, 2024, and March 31, 2024.

For the six months ended September 30, 2024, and 2023, the Company recognized revenue from product sales under the Agreement of $17,784 and $0, respectively. This represents 5% and 0% of total revenues for the six months ended September 30, 2024, and 2023, respectively.

(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 September 30, 2024, and March 31, 2024, 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 on September 30, 2024, and March 31, 2024.

(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 ASC 505-50.

Pursuant to ASC 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 date of grant.

The fair value of stock 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 ASC Paragraph 718-10-50-2(f)(2)(i), the expected term of stock options and similar instruments represents the period of time the stock options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holders’ expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holders’ 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 stock 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 its average historical volatility over the expected contractual life of the stock 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 ASC 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 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 requires 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, the 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 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.

(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.

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 insurance premium finance loans held for investment, at the net amount expected to be collected. The measurement of expected credit losses is based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company adopted this standard in the consolidated financial statements for the six months ended September 30, 2024. The change had no impact on the Company’s financial statements.

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

NOTE 2 – RECLASSIFICATION OF PRIOR YEAR PRESENTATION

Reclassification. Certain prior period amounts have been reclassified to conform to current period presentation.

Certain prior year amounts have been reclassified for consistency with the current year presentation in the Consolidated Statements of Operations related to Total Cost of Sales to move certain research and development costs and added as an Operating Expense. There were no reclassifications made to the Consolidated Balance Sheets, Consolidated Statements of Changes in Stockholders’ Equity or Consolidated Statements of Cash Flows.

NOTE 3 – INVENTORY

As of September 30, 2024, and March 31, 2024, the Company had inventory of $372,115 and $390,076, respectively.

SEC Form 10-Q filed by PetVivo Holdings Inc.