ITEM 2.
MANAGEMEN
T'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We were incorporated as Pharmascan Corp. in the State of Nevada on March 31, 2009. On September 21, 2010, we filed a Certificate of Amendment to our Articles of Incorporation and changed our name to Technologies Scan Corp. On April 1, 2014, we filed a Certificate of Amendment to our Articles of Incorporation and changed our name to "PetVivo Holdings, Inc." (the "Name Change").
We filed appropriate documents with FINRA to effect the Name Change. On April 29, 2014, our Name Change from Technologies Scan Corp to "PetVivo Holdings, Inc." was declared effective by FINRA and our common stock's trading symbol was changed to "PETV". Our cusip number is 716817 101.
SUBSIDIARIES
PetVivo, Inc.
On March 11, 2014, our Board of Directors authorized the execution of that certain securities exchange agreement dated March 11, 2014 (the "Securities Exchange Agreement") with PetVivo Inc., a Minnesota corporation ("PetVivo"), and the shareholders of PetVivo who hold of record the total issued and outstanding shares of common stock of PetVivo (the "PetVivo Shareholders"). In accordance with the terms and provisions of the Securities Exchange Agreement, we will acquire all of the issued and outstanding shares of stock of PetVivo from the PetVivo Shareholders, thus making PetVivo our wholly owned subsidiary, in exchange for the issuance to the PetVivo Shareholders of an aggregate 4,621,880 shares of our restricted common stock.
PetVivo was founded in 2013 by its current management, John Lai and John Dolan, and is based in suburban Minneapolis, Minnesota. PetVivo is a biomedical device company engaged in the business of acquiring/in-licensing and adapting human biomedical technology and products for commercial sale in the veterinary market to treat pets and other animals suffering from arthritis and other painful afflictions. PetVivo's initial product, which is now being commercialized, is a medical device featuring the injections of patented gel-like protein-based biomaterials into the afflicted body parts of pets and other animals suffering from osteoarthritis. PetVivo obtained the exclusive rights for commercialization of this product from Gel-Del for the treatment of pets and other animals.
Gel-Del Technologies Inc.
On November 21, 2014, we entered into a stock exchange agreement (the "Stock Exchange Agreement") with Gel-Del Technologies, Inc., a Minnesota corporation ("Gel-Del"). We anticipate consummating the Stock Exchange Agreement with the exchange of all outstanding capital stock of Gel-Del for 4,150,000 shares of common stock of the company by approximately September 30, 2016. Therefore, this merger transaction will result in Gel-Del becoming a wholly owned subsidiary of ours through a statutory Plan of Exchange complying with the corporate laws of both Nevada and Minnesota. This acquisition of Gel-Del by us is made pursuant to the Stock Exchange Agreement, which contains certain conditions to be performed by both parties prior to the completion of this stock exchange business combination. The merger transaction was contingent on a capital raise in early 2015. As of April 10, 2015, all the conditions to close the Stock Exchange Agreement were satisfied or waived by both parties. The shareholders of Gel-Del approved this Stock Exchange Agreement at a Gel-Del shareholder meeting duly held on March 25, 2015. The company will account for this transaction in accordance with the Section 805-10 of the FASB Accounting Standards Codification.
Although consummation of the Gel-Del acquisition has not yet occurred, we have assumed its liabilities and operations effective April 10, 2015. We therefore have accounted for the transaction by recognizing Gel-Del as a Variable Interest Entity ("VIE") and have included its accounts as part of the consolidated group.
As of the date of this Quarterly Report, we have filed a Preliminary Information Statement on Form 14(c), which is pending review and comment by the Securities and Exchange Commission. After filing the Definitive Information with the Securities and Exchange Commission, we will mail shareholders of record the Definitive Information Statement providing notice of the corporate action approved by both our Board of Directors and majority shareholders. Therefore, Gel-Del will be our wholly owned subsidiary after 20 days from the date of the mailing of the Information Statement to our shareholders of record. See " -- Merger and Security Exchange Agreement" and " --- Information Statement" below.
Gel-Del is a biomaterial and medical device development and manufacturing company with its offices and production facilities based in St. Paul, Minnesota, and was founded in 1999 by its chief executive officer, Dr. David B. Masters. Dr. Masters developed Gel-Del's proprietary biomaterials that simulate a body's cellular tissue and thus can be readily and effectively utilized to manufacture implantable therapeutic medical devices. The chief advantage of Gel-Del biomaterials is their enhanced biocompatibility with living tissues throughout the body. We are commercializing their technology in the veterinary field for the treatment of osteoarthritis. Gel-Del Technologies has also successfully completed a pivotal clinical trial using their novel thermoplastic biomaterial as a dermal filler for human cosmetic applications. Gel-Del Technologies' core competencies are developing and manufacturing medical devices containing its proprietary thermoplastic protein-based biomaterials that mimic the body's tissue to allow integration, tissue repair, and regeneration for long-term implantation. These biomaterials are produced using a patented and scalable self-assembly production process. The inherent thermoplastic properties of these biomaterials are then utilized to manufacture or coat implantable devices.
While working together relating to their licensing agreement, in early 2014 our management and the management of Gel-Del determined to combine the two companies into one business entity producing, marketing and selling medical products based on Gel-Del technology for both humans and animals.
MERGER AND SECURITY EXCHANGE AGREEMENT
On November 21, 2014, we entered into a stock exchange agreement (the "Stock Exchange Agreement") with Gel-Del Technologies, Inc., a Minnesota corporation ("Gel-Del"), having a closing date on or before March 31, 2015. We closed the Stock Exchange Agreement effective April 10, 2015. Therefore, this merger transaction will result in Gel-Del becoming a wholly owned subsidiary of ours through a statutory Plan of Exchange complying with the corporate laws of both Nevada and Minnesota. See --"Information Statement" below.
This statutory stock exchange merger, which was approved by our shareholders and the shareholders of Gel-Del, will result in an exchange by Gel-Del shareholders on a pro rata basis of all outstanding capital stock of Gel-Del in consideration for four million one hundred fifty thousand (4,150,000) shares of our common stock. Since these 4,150,000 shares will not constitute a majority of our post-merger outstanding capital stock, there will be no change of control incident to this transaction. Post-merger management of the combined companies will include all four current principal officers of us and Gel-Del, and their respective management positions are set forth in the Stock Exchange Agreement.
In accordance with this merger transaction, we will acquire all Gel-Del technology and related patents and other intellectual property (IP) and production techniques, as well as Gel-Del's modern and secure biomedical product manufacturing facilities in St. Paul.
The Stock Exchange Agreement required us to provide a loan for working capital interim funding for Gel-Del until closing of the merger, consisting of an initial payment of $100,000 and monthly payments thereafter of $75,000. Upon the consummation of the Stock Exchange Agreement, the loan is deemed satisfied.
The Stock Exchange Agreement provided for certain material conditions to be satisfied or waived by closing, including: (i) we shall have secured at least $l,500,000 in equity financing through a private placement on terms governed by the Stock Exchange Agreement; (ii) we shall have maintained our status as a DTC eligible publicly traded company and filed all reports to the SEC required by our status as a registered reporting company; (iii) all outstanding preferred shares and any other convertible securities, warrants, and options of Gel-Del shall be converted, exercised or canceled prior to closing; (iv) Gel-Del must obtain audited financial statements complying with the requirements of U.S. federal securities laws; (v) completion and execution of post-merger employment contracts for our principal executive officers and those of Gel-Del; and (vi) election and designated positions of directors and principal officers for the post-merger combined companies. Additional terms of the Stock Exchange Agreement include guidelines for post-merger management salaries and related employment provisions, approval of a post-merger operations budget, numerous standard warranties and representations of both parties, and standard termination and indemnification provisions, all as detailed in the Stock Exchange Agreement. The Stock Exchange Agreement also requires our Chief Executive Officer, John Lai, to escrow 50% of our shares of common stock owned by him until we have either obtained $5 Million equity financing or has become listed on Nasdaq or the New York Stock Exchange. Upon satisfying one of these conditions, Mr. Lai must remain employed by us to recover his shares from escrow, provided that one-eighth of the escrowed shares will be released to him each quarter of a following two-year period. If Mr. Lai voluntarily terminates his employment or is terminated for cause during this two-year period, he must forfeit to us any remaining shares.
Through this stock exchange, we acquire all of Gel-Del's technology and related patents and other intellectual property (IP) and production techniques, as well as Gel-Del's modern and secure biomedical product manufacturing facilities in St. Paul, Minnesota.
Although the Stock Exchange Agreement has been closed, the shares of common stock will not be issued by us to the Gel-Del Shareholders until 20 days from the date of the mailing of the Information Statement to our shareholders of record which takes place after the filing of a definitive Information Statement with the Securities and Exchange Commission and upon the filing of the Plan of Exchange with the Nevada Secretary of State. (See "-- Information Statements").
Plan of Exchange and Effect of Stock Exchange
The Plan of Exchange for this business combination, which will be filed with the Secretary of State of Nevada, is as follows:
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(i)
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The Acquiring Entity is PetVivo Holdings, Inc., a Nevada corporation and the Acquired Entity is Gel-Del Technologies, Inc., a Minnesota corporation;
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(ii)
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The Plan of Exchange shall become effective upon its filing with the Secretary of State of Nevada pursuant to Chapter 92A of Nevada Revised Statutes;
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(iii)
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All outstanding capital stock of Gel-Del shall be exchanged on a pro rata basis by Gel-Del shareholders for 4,150,000 shares of our common stock. Gel-Del has issued both preferred and common stock, but has no issued or outstanding options, warrants or other rights capable of being exercised for or converted into its common stock (note that each Gel-Del preferred share shall automatically convert to a share of Gel-Del common stock prior to the security exchange identified above);
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(iv)
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Upon effectiveness of the Plan of Exchange, Gel-Del will become our wholly-owned subsidiary;
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(v)
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Upon effectiveness of the Plan of Exchange, our Articles of Incorporation and Bylaws will continue to be in full force and effect, and our Board of Directors and executive officers shall continue to be those persons serving immediately prior to such effectiveness; and
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(vi)
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The manner and basis of exchanging our common stock of PetVivo for all outstanding common stock of Gel-Del shall be as follows: upon the effectiveness of the Plan of Exchange, and without any action on the part of any Gel-Del shareholder, all outstanding common stock of Gel-Del shall on a pro rata basis be converted into shares of our common stock on the exchange conversion ratio of .6477 common share for each common share of Gel-Del; and
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(vii)
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No cash or other payment shall be made for any fractional shares resulting from this Plan of Exchange, but rather any fractional shares shall be rounded up or down to the nearest full share.
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Closing of Gel-Del Technologies, Inc. Stock Exchange Agreement
As a result of the closing of the Stock Exchange Agreement:
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(a)
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We will issue 4,150,000 of PetVivo Shares to the shareholders of Gel-Del on a pro rata portion of the outstanding shares of Gel-Del. As a result of the closing of the Stock Exchange Agreement, the shareholders of Gel-Del will own a total of 4,150,000 restricted shares of our common stock.
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(b)
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We acquired all Gel-Del technology and related patents and other intellectual property (IP) and production techniques, as well as Gel-Del's modern and secure biomedical product manufacturing facilities in St. Paul.
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(c)
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Our post-merger management includes all four of our current principal officers and Gel-Del and their respective management positions are set forth in the Stock Exchange Agreement.
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(d)
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We provided a loan for working capital interim funding for Gel-Del until the closing date consisting of an initial payment of $100,000 and monthly payments thereafter of $75,000, pursuant to which Gel-Del will execute a promissory note payable to us.
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(e)
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Our Chief Executive Officer, John Lai, shall escrow 50% of our common stock owned of record by him until we have either obtained $5,000,000 equity financing or have become listed on Nasdaq or the New York Stock Exchange. Upon satisfying one of these conditions, Mr. Lai must remain employed by us to recover his shares from escrow, provided that one-eighth of the escrowed shares will be released to him each quarter of a following two-year period. If Mr. Lai voluntarily terminates his employment or is terminated for cause during this two-year period, he must forfeit to us any remaining shares.
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Material relationships between Gel-Del and us include the following:
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(a)
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John Dolan is on the Board of Directors of both PetVivo and Gel-Del; and
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(b)
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In 2013, we acquired a licensing and manufacturing and supply agreement (the "Licensing Agreement") from Gel-Del pursuant to which Gel-Del licensed to us their technology and we obtained supplies of biomaterials from Gel-Del for medical devices to treat pets and other animals suffering from arthritis or other painful afflictions. As of the closing date, the Licensing Agreement is no longer necessary since we own all technology and rights, which were the subject of the License Agreement. Therefore, as of the date of this Quarterly Report, the License Agreement has been terminated.
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Reason For Stock Exchange
Gel-Del is a biomaterial and medical device development and manufacturing company with its offices and production facilities based in St. Paul, Minnesota, and was founded in 1999 by its chief executive officer, Dr. David B. Masters. Dr. Masters developed Gel-Del's proprietary biomaterials that simulate a body's cellular tissue and thus can be readily and effectively utilized to manufacture implantable therapeutic medical devices. The chief advantage of Gel-Del biomaterials is their enhanced biocompatibility with living tissues throughout the body. We are commercializing their technology in the veterinary field for the treatment of osteoarthritis. Gel-Del Technologies has also successfully completed a pivotal clinical trial using their novel thermoplastic biomaterial as a dermal filler for human cosmetic applications. Gel-Del Technologies' core competencies are developing and manufacturing medical devices containing its proprietary thermoplastic protein-based biomaterials that mimic the body's tissue to allow integration, tissue repair, and regeneration for long-term implantation. These biomaterials are produced using a patented and scalable self- assembly production process. The inherent thermoplastic properties of these biomaterials are then utilized to manufacture or coat implantable devices
We were founded in 2013 by our current management, John Lai and John Dolan, and based in suburban Minneapolis, Minnesota. We are a biomedical device company, which has been primarily engaged in the business of adapting human biomedical technology for products to be introduced for commercial sale in the veterinary market to treat pets and other animals suffering from arthritis and other painful afflictions. Our initial product, now being commercialized, is a medical device featuring injections of patented gel-like biomaterials into the afflicted body parts of pets or other animals suffering from osteoarthritis. The technology and manufacturing capability of this product was developed by Gel-Del and licensed to us for use to treat dogs and other animals, but not for treatment of human afflictions. While working together relating to this license agreement, we and Gel-Del determined to combine our two companies through a stock exchange merger for the purpose of creating one combined entity utilizing Gel-Del technology to produce, market and sell medical products based on Gel-Del technology for both animals and humans. After lengthy negotiations during 2014, the parties have entered into a definitive agreement for this merger.
Information Statement
On April 10, 2015, our Board of Directors and majority shareholders, believing it to be in our best interests and of our shareholders: (i) approved the completion of our acquisition of Gel-Del incident to a Plan of Exchange to be filed with the Secretary of State of Nevada (the "Plan of Exchange"), after which Gel-Del will become our wholly-owned subsidiary; and (ii) ratified the appointment by the Board of Directors of two new directors, Dr. David B. Masters and Randall A. Meyer ("Ratification of Appointment of New Directors").
The Information Statement will be furnished to our shareholders as of April 10, 2015 in connection with actions taken by written consent of holders of a substantial majority of our outstanding common shares. These corporate actions consist of (i) approving and adopting the acquisition of Gel-Del through a Plan of Exchange (the "Plan of Exchange"), pursuant to which Gel-Del becomes our wholly-owned subsidiary; and (ii) ratifying the appointment by our Board of Directors of two new directors (the "Ratification of New Directors").
On April 10, 2015, we obtained the approval of the Plan of Exchange and the Ratification of Appointment of New Directors by written consent of our stockholders that are the record holders of 6,672,653 shares of common stock, which represents an aggregate 88.66 % of the voting power of as of the record date of April 10, 2015. The Plan of Exchange and the Ratification of New Directors will not become effective until at least twenty (20) days after the mailing of this Information Statement to our shareholders and the filing of the Plan of Exchange with the Secretary of State of Nevada. The names of the shareholders of record who hold in the aggregate a majority of our total issued and outstanding common stock and who signed the written consent of stockholders are: (i) John Lai holding of record 3,557,939 shares of common stock (46.21%); (ii) John F. Dolan holding of record 843,894 shares of common stock (10.96 %); (iii) Dr. David B. Masters holding of record 1,460,645 shares of common stock (18.97 %); and (iv) Randall Meyer holding of record 810,175 shares of common stock (10.52 %).
As of the date of this Quarterly Report, we are responding to comment from the Securities and Exchange Commission, which pertained to inclusion of our audited financial statements for fiscal year ended March 31, 2015. Therefore, we will simultaneously be filing an amendment to the Information Statement containing our audited financial statements for fiscal years ended March 31, 2016 and March 31, 2015 and anticipate that the date on which the Definitive Information Statement will be sent to our shareholders will be on or about September 15, 2016.
All members of our Board of Directors have approved the Plan of Exchange with Gel-Del and the appointment of our two new directors and shareholders owning a substantial majority of our outstanding common stock have approved these two proposed corporate actions. No other votes or consents are required or necessary.
CURRENT BUSINESS OPERATIONS
We are an emerging biomedical device company focused on the licensing and commercialization of innovative medical devices and therapeutics for pets, based in Minneapolis, Minnesota. We operate in the $15 billion US veterinary care market that has grown at a CAGR of 6.4% over the past five years according to the American Pet Products Association. Despite the market size, veterinary clinics and hospitals have very few treatments and/or drugs for use in pets and other animals.
The role of pets in the family has greatly evolved in recent years. Many pet owners consider their pets an important member of the family. They are now willing to spend greater amounts of money on their pets to maintain their health and quality of life.
We intend to leverage investments already expended in the development of human therapeutics to commercialize treatments for pets in a capital and time efficient way. A key component of this strategy is the accelerated timeline to revenues for veterinary medical devices, which enter the market earlier than the more stringently regulated veterinary pharmaceuticals or human therapeutics.
The company is planning to aggressively launch its lead product Kush
™
Canine in Q3 2016. Kush
™
Canine is a veterinarian-administered joint injection for the treatment of osteoarthritis in dogs. The Kush Canine device is made from natural components that are lubricious and cushioning to perform like cartilage for the treatment of pain and inflammation associated with osteoarthritis.
We believe that Kush Canine is a superior treatment that safely improves joint function. The reparative Kush Canine particles are lubricious, cushioning and long lasting. The spongy protein-based particles in Kush Canine mimic the composition and protective function of cartilage (i.e., providing both a slippery cushion and healing scaffolding). The Kush Canine particles protect the joint as an artificial cartilage.
Using industry sources we estimate osteoarthritis afflicts 20 million owned dogs in the United States and the European Union, making canine osteoarthritis a $2.3 billion market opportunity.
Osteoarthritis is a condition with degenerating cartilage, creating joint stiffness from mechanical stress resulting in inflammation and pain. The lameness caused by osteoarthritis worsens with time from the ongoing loss of protective cushion and lubricity (i.e., loss of slippery padding). There is no current treatment for osteoarthritis, only palliative pain therapy or joint replacement.
Non-steroidal anti-inflammatory drugs (NSAIDS) are used to alleviate the pain and inflammation, but long-term use has been shown to cause gastric problems. NSAIDS do not treat the cartilage degeneration issue to halt or slow the progression of the osteoarthritis condition.
We believe that our Kush Canine osteoarthritis treatment is far superior to current methodology of using NSAID's. NSAID's have many side effects, especially in canines, whereas the company's injected Kush Canine treatment has been found to elicit no adverse side effects. Remarkably, Kush treated dogs show an increase in activity even after they no longer are receiving pain drugs.
No special training is required for the administration of the Kush Canine devices. The treatment is injected into synovial joint space using standard intra-articular injection technique and multiple joints can be treated simultaneously. Kush Canine immediately treats the effects of osteoarthritis and no special post treatment care is required.
Historically, drug sales represent up to 30% of revenues at a typical veterinary practice (Veterinary Practice News). Revenues and margins at veterinary practices are being eroded because online, big box and traditional pharmacies recently started filling veterinary prescriptions. Veterinary practices are looking for ways to replace the lost prescription revenues. Our treatments expand practice revenues & margins because they are veterinarian-administered. Our Kush Canine device is veterinarian-administered to expand practice revenues and margins. We believe that the increased revenues and margins provided by Kush Canine will accelerate its adoption rate and propel it forward as the standard of care for canine osteoarthritis.
Our product launch schedule includes two additional product releases in 2016. Our Kush Equine device for the treatment of equine lameness related to or impacting synovial joints is scheduled for launch in Q4 2016. The Kush Equine product has similar features and benefits as our Kush Canine device. In addition to being a treatment for osteoarthritis, the joint cushioning and lubricity effects of our devices have shown an ability to treat equine lameness that is due to navicular disease (a problem associated with misalignment of joints and bones in the hoof and digits). We anticipate launching our Kush Digital Cushion (DC) device for the treatment of navicular disease in 2017.
Based on a variety of industry sources we estimate that 1 million owned horses in the United Stated and European Union suffer from lameness and/or navicular disease each year, making the equine lameness and navicular disease market an annual opportunity worth $600 million.
Our current pipeline includes 17 therapeutic devices for both veterinary and human clinical applications. We anticipate growing our product pipeline through the acquisition or in-licensing of additional proprietary products from human medical device companies specifically for use in pets. In addition to commercializing our own products in strategic market sectors and in view of the Company's vast proprietary product pipeline, the Company anticipates establishing strategic out-licensing partnerships to provide secondary revenues.
We plan to commercialize our products in the United States through distribution relationships supported by regional and complemented by the use of social media educating and informing the pet owners, and in Europe and rest of world through commercial partners.
Most veterinarians in the United States buy a majority of their equipment and supplies from one of six veterinary products distributors. Combined these six distributors delivery more than 85%, by revenue, of the products sold to companion animal veterinarians in the U.S. Our product distribution will leverage the existing supply chain and veterinary clinic and clinician relationships already established by these large distributors. We plan to support this distribution channel with regional sales representatives. Our representatives will support our distributors and the veterinary clinics and hospitals. We will also target pet owners with product education and treatment awareness campaigns utilizing a variety of social media tools. The unique nature and the anticipated benefits provided by our products are expected to generate significant consumer response.
Gel-Del Particles have been through a human trial and have been classified as a medical device. The FDA does not require submission of a 510(k) or formal pre-market approval for medical devices used in veterinary medicine. We anticipate initial commercial production and sales in 2016. We anticipate selling through existing veterinary distributors.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report. Our reviewed financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
We are a development stage company and have not generated any significant revenue. We have incurred recurring losses since inception. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation. We expect we will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
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For Three Month Period Ended June 30, 2016
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For Three Month Period Ended June 30, 2015
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Revenues
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$
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2,009
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75,000
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Total Operating Expenses
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628,235
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1,084,602
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Total Other Income (Expense)
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15,774
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(423,759
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)
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Net (loss)
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$
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(610,452
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)
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(1,433,361
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)
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Net loss attributable to non-controlling interest
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$
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279,105
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59,296
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Net loss attributable to PetVivo
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$
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(331,347
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)
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(1,374,065
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)
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For Three Month Period Ended June 30, 2016 Compared to Three Month Period Ended June 30, 2015
Total Revenues.
For the three-month periods ended June 30, 2016 and June 30, 2015, revenues decreased from $75,000 to $2,009. For the three-month periods ended June 30, 2016 and June 30, 2015, we did not generate any cost of sales.
Operating Expenses.
Operating expenses for the three-month period ended June 30, 2016 were $628,235 compared to $1,084,602 for the three-month period ended June 30, 2015, a decrease of $456,367. For the three-month period ended June 30, 2016, we incurred: (i) research and development of $5,497 (2015: $57,436); and (ii) general and administrative of $622,738 (2015: $1,027,166). The major differences in general and administrative expenses were reductions in 2016 for amortization of deferred costs and licensing costs both of which expired in 2016. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs. Operating expenses decreased during the three-month period ended June 30, 2016 compared to June 30, 2015 due to the decrease in general and administrative costs of $404,428, which was primarily related to decreases in compensation and professional fees. Our research and development also decreased by $51,939.
Thus, our operating loss for the three-month period ended June 30, 2016 was $626,226 compared to an operating loss of $1,009,602 for the three-month period ended June 30, 2015, a decrease of $383,376.
Other Income (Expenses).
Other income for the three-month period ended June 30, 2016 were $15,774 compared to a loss of $423,759 during the three-month period ended June 30, 2015. Other expenses consisted of: (i) gain on settlement of debt of $24,460 (2015: $154,644); (ii) change in fair value of derivatives of $-0- (2015: ($21,462)); (iii) interest expense of ($8,686) (2015: ($102,470)); and (iv) amortization of issue costs of -0- (2015: ($454,471)).
Net Loss.
Therefore, our net loss for the three-month period ended June 30, 2016 was ($610,452) as compared to a net loss of ($1,433,361) for the three-month period ended June 30, 2015. Based both on our decrease in operating expenses during the three-month period ended June 30, 2016, our net loss decreased also based on the decrease of other expenses primarily due to the amortization of issue costs in the amount of $454,471.
During the three-month period ended June 30, 2016, we further incurred a loss of $279,105 (2015: $59,296) relating to a loss attributable to non-controlling interest. Thus, our net loss attributable to PetVivo during the three-month period ended June 30, 2016 was ($331,347) or ($0.04) per share compared to net loss attributable to PetVivo during the three-month period ended June 30, 2015 of ($1,374,065) or ($0.18) per share. The weighted average number of shares outstanding during the three-month period ended June 30, 2016 was 8,761,823 compared to 7,616,661 for the three-month period ended June 30, 2015.
LIQUIDITY AND CAPITAL RESOURCES
Three Month Period Ended June 30, 2016
As of June 30, 2016, our current assets were $37,053 and our current liabilities were $1,599,582, which resulted in a working capital deficit of $1,562,529.
As of June 30, 2016, our current assets were comprised of: (i) $522 in cash and cash equivalents; (ii) $1,014 in accounts receivable; (iii) $22,063 in employee advance; and (iv) $13,454 in prepaids. As of June 30, 2016, our total assets were $16,493.394 comprised of: (i) current assets of $37,053; (ii) fixed assets of $718, which consisted of property and equipment of $103,504 less accumulated depreciation of $102,786); and (iii) other assets of $16,455,623, which consisted of goodwill of $13,407,693 and trademark and patents – net of $3,047,930. Our total assets decreased slightly from fiscal year ended March 31, 2016 of $196,050, which includes a change in total assets due to the increase of $197,732 in amortization of the trademarks and patents.
As of June 30, 2016, our current liabilities were comprised of: (i) $1,248,233 in accounts payable and accrued expenses; (ii) $198,751 in notes payable and accrued interest – related party; and (iii) $152,598 in note payable, net of discount of -$0-. As of fiscal year ended March 31, 2016, our total liabilities were $1,478,906 consisting of current liabilities. Our current liabilities increased from fiscal year ended March 31, 2016 due to increase in: (i) accounts payable and accrued expenses of $184,695; and (ii) note payable and accrued interest to related party of $5,381.
Stockholders' equity (deficit) increased from a deficit of ($70,327) as at March 31, 2016 to a deficit of ($107,948) at June 30, 2016.
Cash Flows from Operating Activities.
We have not generated positive cash flows from operating activities due to a lack of a source of revenues. For the three month period ended June 30, 2016, net cash flows used in operating activities was ($51,235). Net cash flows used in operating activities during the three month period ended June 30, 2016 consisted primarily of a net loss of ($51,235), which was adjusted by $193,976 in common stock issued for services, $197,824 in depreciation and amortization, $3,311 in amortization of debt issued costs and $24,460 in derivative gain adjustment. Net cash flows used in operating activities was further changed by an increase in advances/receivables of ($7,177) and a decrease in prepaid expenses of $5,667 and an increase in accounts payable and accrued expenses of $190,076.
For the three-month period ended June 30, 2015, net cash flows used in operating activities was ($381,281).
Net cash flows used in operating activities during the three month period ended June 30, 2016 consisted primarily of a net loss of ($51,235).
Cash Flows from Financing Activities
.
We have financed our operations primarily from debt or the issuance of equity instruments. For the three-month period ended June 30, 2016, net cash flows provided from financing activities was $51,499. Net cash flows provided by financing activities consisted of: (i) $60,000 in proceeds from issuance of stock and $39,750 from cash received from common stock subscription, which was offset by repayments of ($35,000) and ($13,251) in repayment of loan. For the three-month period ended June 30, 2015, net cash flows provided from financing activities was $357,350 consisting of $37,100 in proceeds from stock and $524,750 in proceeds from loans, which was offset by repayments of ($204,500).
MATERIAL COMMITMENTS
Accrued Salary
We are indebted to related parties. At June 30, 2016, we are obligated for unpaid officer salaries and advances of $196,251. This amount is included in accounts payable and accrued expenses.
Notes Payable
As of June 30, 2016, we are obligated on the following notes:
1.
|
Third Party Individual
|
|
|
55,326
|
|
2.
|
Bank Credit Line
|
|
|
70,708
|
|
3.
|
Bank Loan
|
|
|
26,564
|
|
|
Total
|
|
$
|
152,598
|
|
Bank Line
We have a bank credit line available up to $75,000. As of June 30, 2016, there was $4,292 of unused credit.
Interest Bearing Note
We are indebted on a note in the principal amount of $ 25,412.55 bearing interest at prime plus 5.5% to a bank with a monthly payment of $2,786 expiring in January 2017. All assets of Gel-Del are pledged as collateral.
PURCHASE OF SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment during the next twelve months.
OFF-BALANCE SHEET ARRANGEMENTS
As of the date of this Quarterly Report, we do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our March 31, 2016 and March 31, 2015 financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared "assuming that we will continue as a going concern," which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. We have suffered recurring losses from operations, have a working capital deficit and are currently in default of the payment terms of certain note agreements. These factors raise substantial doubt about our ability to continue as a going concern.