ITEM 1. FINANCIAL STATEMENTS
PETVIVO HOLDINGS, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
UNAUDITED
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2016
|
|
|
2016
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
3,089
|
|
|
$
|
258
|
|
Accounts Receivable
|
|
|
163
|
|
|
|
-
|
|
Employee Advance
|
|
|
-
|
|
|
|
15,900
|
|
Prepaids
|
|
|
13,731
|
|
|
|
19,121
|
|
Total Current Assets
|
|
|
16,983
|
|
|
|
35,279
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment:
|
|
|
|
|
|
|
|
|
Property & equipment
|
|
|
103,504
|
|
|
|
103,504
|
|
Less: accumulated depreciation
|
|
|
(102,965
|
)
|
|
|
(102,694
|
)
|
Total Fixed Assets
|
|
|
539
|
|
|
|
810
|
|
|
|
|
|
|
|
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
-
|
|
|
|
13,407,693
|
|
Trademark and Patents-Net
|
|
|
2,020,458
|
|
|
|
3,245,662
|
|
Total Other Assets
|
|
|
2,020,458
|
|
|
|
16,653,355
|
|
Total Assets
|
|
$
|
2,037,980
|
|
|
$
|
16,689,444
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts Payable & Accrued Expenses
|
|
$
|
1,655,292
|
|
|
$
|
1,063,538
|
|
Note Payable and Accrued Interest-Related Party
|
|
|
203,297
|
|
|
|
193,370
|
|
Notes Payable
|
|
|
155,106
|
|
|
|
165,849
|
|
Convertible Notes Payable, net of discount of $0 and $3,311 at
|
|
|
|
|
|
|
|
|
December 31, 2016 and March 31, 2016, respectively
|
|
|
-
|
|
|
|
31,689
|
|
Derivative Liability
|
|
|
-
|
|
|
|
24,460
|
|
Total Current Liabilities
|
|
|
2,013,695
|
|
|
|
1,478,906
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common Stock, par value $0.001, 250,000,000 shares authorized, issued 9,021,306 and 7,931,639 outstanding at December 31, 2016 and March 31, 2016
|
|
|
9,022
|
|
|
|
7,931
|
|
Common Stock to be issued
|
|
|
60,200
|
|
|
|
1,576,649
|
|
Additional Paid-In Capital
|
|
|
30,418,061
|
|
|
|
28,224,376
|
|
Accumulated Deficit
|
|
|
(44,971,069
|
)
|
|
|
(29,879,283
|
)
|
Total Petvivo Stockholders' (Deficit) Equity
|
|
|
(14,483,786
|
)
|
|
|
(70,327
|
)
|
Noncontrolling interest
|
|
|
14,508,071
|
|
|
|
15,280,865
|
|
Total stockholder's equity
|
|
|
24,285
|
|
|
|
15,210,538
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
2,037,980
|
|
|
$
|
16,689,444
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
PETVIVO HOLDINGS, INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,163
|
|
|
$
|
-
|
|
|
$
|
7,079
|
|
|
$
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Revenues
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$
|
2,163
|
|
|
$
|
-
|
|
|
$
|
7,079
|
|
|
$
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development
|
|
|
42,192
|
|
|
|
40,910
|
|
|
|
117,235
|
|
|
|
145,853
|
|
General and Administration
|
|
|
458,508
|
|
|
|
280,696
|
|
|
|
15,603,313
|
|
|
|
1,447,832
|
|
Total Operating Expenses
|
|
|
500,700
|
|
|
|
321,606
|
|
|
|
15,720,548
|
|
|
|
1,593,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss
|
|
$
|
(498,537
|
)
|
|
$
|
(321,606
|
)
|
|
$
|
(15,713,469
|
)
|
|
$
|
(1,518,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Settlement of Debt
|
|
|
-
|
|
|
|
|
|
|
|
24,460
|
|
|
|
154,644
|
|
Change in Fair Value of Derivatives
|
|
|
-
|
|
|
|
63,709
|
|
|
|
-
|
|
|
|
103,853
|
|
Interest Expense
|
|
|
(8,555
|
)
|
|
|
(56,868
|
)
|
|
|
(175,571
|
)
|
|
|
(260,754
|
)
|
Amortization of Issue Costs
|
|
|
-
|
|
|
|
(168,150
|
)
|
|
|
-
|
|
|
|
(948,395
|
)
|
Total Other Expense
|
|
|
(8,555
|
)
|
|
|
(161,309
|
)
|
|
|
(151,111
|
)
|
|
|
(950,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss before taxes
|
|
$
|
(507,092
|
)
|
|
$
|
(482,915
|
)
|
|
$
|
(15,864,580
|
)
|
|
$
|
(2,469,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
(507,092
|
)
|
|
|
(482,915
|
)
|
|
|
(15,864,580
|
)
|
|
|
(2,469,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling Interest
|
|
|
225,092
|
|
|
|
90,982
|
|
|
|
772,794
|
|
|
|
266,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss attributable to Petvivo
|
|
$
|
(282,000
|
)
|
|
$
|
(391,933
|
)
|
|
$
|
(15,091,786
|
)
|
|
$
|
(2,202,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss per share- basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(1.68
|
)
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding- basic and diluted
|
|
|
9,081,482
|
|
|
|
7,819,846
|
|
|
|
9,000,488
|
|
|
|
7,838,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
PETVIVO HOLDINGS, INC.
|
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
|
FOR THE NINE MONTHS ENDED DECEMBER 31, 2016
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Non-
|
|
|
Stock
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
controlling
|
|
|
to be
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Interest
|
|
|
Issued
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2015
|
|
|
7,700,289
|
|
|
$
|
7,700
|
|
|
$
|
26,381,094
|
|
|
$
|
(26,227,539
|
)
|
|
$
|
-
|
|
|
|
|
|
$
|
161,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,683,000
|
|
|
|
|
|
$
|
16,683,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash
|
|
|
10,600
|
|
|
|
10
|
|
|
|
37,090
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
37,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
149,000
|
|
|
|
149
|
|
|
|
555,101
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
555,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued to settle liabiolities
|
|
|
70,500
|
|
|
|
71
|
|
|
|
281,929
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
282,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Gel Del Preferred stock for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,005
|
|
|
|
-
|
|
|
$
|
100,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued to extend debt
|
|
|
1,250
|
|
|
|
1
|
|
|
|
4,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write off of preacquisition liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(423,282
|
)
|
|
|
|
|
|
$
|
(423,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
Exercise of Gel Del Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
195
|
|
|
|
|
|
|
$
|
195
|
|
Settlement of Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
427,870
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
$
|
427,870
|
|
Stock to be issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
1,576,649
|
|
|
$
|
1,576,649
|
|
Inducement ot convert debt
|
|
|
|
|
|
|
|
|
|
|
536,943
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
$
|
536,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,651,744
|
)
|
|
|
(1,079,053
|
)
|
|
|
|
|
|
|
(4,730,797
|
)
|
Balance March 31, 2016
|
|
|
7,931,639
|
|
|
|
7,931
|
|
|
|
28,224,376
|
|
|
|
(29,879,283
|
)
|
|
|
15,280,865
|
|
|
|
1,576,649
|
|
|
|
15,210,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued to reduce debt
|
|
|
788,325
|
|
|
|
789
|
|
|
|
1,575,860
|
|
|
|
|
|
|
|
|
|
|
|
(1,576,649
|
)
|
|
$
|
-
|
|
Stock to be issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,200
|
|
|
$
|
60,200
|
|
Stock issued for cash
|
|
|
66,500
|
|
|
|
67
|
|
|
|
99,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,751
|
|
Stock isssued for services
|
|
|
137,500
|
|
|
|
138
|
|
|
|
232,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
232,500
|
|
Stock issued for interest
|
|
|
97,342
|
|
|
|
97
|
|
|
|
151,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
151,476
|
|
Warrants issued for services
|
|
|
|
|
|
|
|
|
|
|
134,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
134,400
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(15,091,786
|
)
|
|
|
(772,794
|
)
|
|
|
|
|
|
$
|
(15,864,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2016
|
|
|
9,021,306
|
|
|
$
|
9,022
|
|
|
$
|
30,418,061
|
|
|
$
|
(44,971,069
|
)
|
|
$
|
14,508,071
|
|
|
$
|
60,200
|
|
|
$
|
24,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
PETVIVO HOLDINGS, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(15,864,580
|
)
|
|
$
|
(2,469,337
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Non-cash consulting expense
|
|
|
134,400
|
|
|
|
-
|
|
Stock issued for services
|
|
|
232,500
|
|
|
|
474,503
|
|
Stock issued for interest
|
|
|
151,476
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
583,966
|
|
|
|
65,532
|
|
Amortization of Debt issued costs
|
|
|
-
|
|
|
|
948,395
|
|
Goodwill and patent impairment loss
|
|
|
14,081,031
|
|
|
|
-
|
|
Derivative (gain) or loss adjustment
|
|
|
-
|
|
|
|
(103,853
|
)
|
Forgiveness of debt
|
|
|
(24,460
|
)
|
|
|
(154,644
|
)
|
License
|
|
|
-
|
|
|
|
488,000
|
|
|
|
|
|
|
|
|
|
|
Changes in Operating Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) in advances and receivables
|
|
|
15,900
|
|
|
|
(15,500
|
)
|
Increase (Decrease) in prepaid expense
|
|
|
5,390
|
|
|
|
(60,221
|
)
|
Increase in accounts payable and accrued expenses
|
|
|
596,423
|
|
|
|
397,601
|
|
Net Cash Used in Operating Activities
|
|
|
(87,954
|
)
|
|
|
(429,524
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Increase in patent costs
|
|
|
(31,833
|
)
|
|
|
-
|
|
Net Cash (Used in) Provided by Investing Activities
|
|
|
(31,833
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from stock
|
|
|
99,750
|
|
|
|
100,005
|
|
Increase in notes from related parties
|
|
|
4,305
|
|
|
|
-
|
|
Proceed from convertible notes
|
|
|
-
|
|
|
|
524,750
|
|
Proceeds from loans
|
|
|
12,500
|
|
|
|
-
|
|
Cash received from common stock subscription
|
|
|
60,200
|
|
|
|
-
|
|
Repayments of convertible notes
|
|
|
(35,000
|
)
|
|
|
-
|
|
Repayments of loan
|
|
|
(19,137
|
)
|
|
|
(210,505
|
)
|
Net Cash Provided by Financing Activities
|
|
|
122,618
|
|
|
|
414,250
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
2,831
|
|
|
|
(15,274
|
)
|
Cash at Beginning of Period
|
|
|
258
|
|
|
|
39,863
|
|
Cash at End of Period
|
|
$
|
3,089
|
|
|
$
|
24,589
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Shares issued as payment of note payable
|
|
$
|
1,576,649
|
|
|
$
|
1,362,246
|
|
Shares issued as payament for acccrued salaries
|
|
$
|
-
|
|
|
$
|
282,000
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
|
PetVivo Holdings, Inc.
Notes to Financial Statements
December 31, 2016
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the SEC. Certain information and note disclosures, which are included in annual financial statements, have been omitted pursuant to these rules and regulations. We believe the disclosures made in these interim unaudited financial statements are adequate to make the information not misleading.
Although these interim financial statements at December 31, 2016 and for the three and nine months ended December 31, 2016 and 2015 are unaudited, in the opinion of our management, such statements include all adjustments (consisting of normal and normal recurring entries) necessary to present fairly our financial position, results of operations and cash flows for the periods presented. The results for the three months and nine months ended December 31, 2016 are not necessarily indicative of the results to be expected for the year ended March 31, 2017 or for any future period.
These unaudited interim financial statements should be read and considered in conjunction with our audited financial statements and the notes thereto for the year ended March 31, 2016, included in our annual report on Form 10-K filed with the SEC.
PetVivo Inc. was originally incorporated under the laws of the state of Minnesota on August 1, 2013. The financials are the result of a merger between Technologies Scan Corp., a corporation incorporated in the State of Nevada on March 31, 2009, now known as PetVivo Holdings, Inc., and PetVivo Inc. For accounting purposes the Company is treating the merger as a reverse merger whereby the financials presented are those of the surviving entity that, which is PetVivo Holdings, Inc. The merger was completed on April 10, 2017.
PetVivo is in the business of distribution of medical devices and biomaterials for the treatment of afflictions and diseases in animals.
On April 10, 2015 the Company agreed to acquire Gel-Del Technologies, Inc. On April 10, 2017, the Company finalized the acquisition of Gel-Del Technologies, Inc.
(B) Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of PetVivo Holdings, Inc. and its wholly owned operating subsidiary, PetVivo Inc. as well as its variable interest entity (VIE) Gel-Del Technologies, Inc. and its subsidiary, Cosmeta Corp. All intercompany accounts have been eliminated upon consolidation.
The consolidation including the VIE is included since PetVivo controls Gel-Del as well as the fact that an agreement for its acquisition has occurred.
The accounting for the acquisition of Gel-Del Technologies, begun with the closing of the Security Exchange Agreement on April 10, 2015 and completed with the Agreement and Plan of Merger on April 10, 2017, at which time the Company issued 5,450,000 shares valued at market at $0.40 per share, which equaled $2,180,000 on the date of completion (April 10, 2017).
(C) 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 estimated useful lives and potential impairment of property and equipment, estimate of fair value of share based payments and derivative instruments and recorded debt discount, valuation of deferred tax assets and valuation of in-kind contribution of services and interest.
(D) 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. At December 31, 2016 and March 31, 2016, the Company had no cash equivalents.
(E) Concentration-Risk
The Company maintains its cash with various financial institutions, which may exceed federally insured limits throughout the period.
(F) Machinery & Equipment
Machinery and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of furniture fixtures and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of five (3) years for equipment, (5) years for automobile, and (7) years for furniture and fixtures. Upon sale or retirement of computer equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in statements of operations.
(G) Patents and Trademarks
The company capitalizes direct costs for their maintenance and advancement of their patents and trademarks and amortizes these costs over a useful life of 60 months.
(H) Loss Per Share
In accordance with the accounting guidance now codified as FASB ASC Topic 260, "Earnings 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.
(I) Revenue Recognition
The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, "Revenue Recognition". In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. Revenues consist of Kush product sales to veterinary clinics
(J) Research and Development
The Company expenses research and development costs as incurred.
(K) Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board ("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 payable, accrued expenses, notes payable, notes payable - related party, loan payable - related party and convertible notes payable. The carrying amount of the Company's financial instruments approximates their fair value as of December 31, 2016 and March 31, 2016, due to the short-term nature of these instruments.
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 notes 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, 2016.
The following liabilities were measured on the condensed consolidated balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of the liabilities:
|
|
Fair Value
|
|
|
Change
|
|
|
New
|
|
|
|
|
|
Fair Value
|
|
|
|
April 1,
|
|
|
in fair
|
|
|
Convertible
|
|
|
|
|
|
Dec. 31,
|
|
|
|
2016
|
|
|
Value
|
|
|
Notes
|
|
|
Payment
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable at fair value
|
|
$
|
31,689
|
|
|
$
|
3,311
|
|
|
$
|
-
|
|
|
$
|
(35,000
|
)
|
|
$
|
-
|
|
(L)Recent Accounting Pronouncements
In August 2014, the FASB issued Accounting Standards Update "ASU" 2014-15 on "Presentation of Financial Statements Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern". Currently, there is no guidance in U.S. GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments, effective for fiscal years beginning after December 15, 2016, require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
NOTE 2 - DERIVATIVE LIABILITY/NOTES PAYABLE CONVERTIBLE DEBENTURES
In April of 2016 the Company’s sole convertible debenture was paid in full for $35,000.
NOTE 3 - RELATED PARTY PAYABLE
At December 31, 2016, the company is obligated for unpaid officer salaries and advances of $674,692.
NOTE 4 - NOTE PAYABLE
The Company is obligated on the following notes:
1.
|
Third Party Individuals
|
|
|
67,826
|
|
2.
|
Bank Credit Line
*
|
|
|
67,595
|
|
3.
|
Bank Loan
|
|
|
19,685
|
|
|
Total
|
|
$
|
155,106
|
|
*As of September 7, 2017, Gel-Del Technologies, Inc. was delinquent in the monthly payments of the Bank Credit Line and a Bank Credit Card through the same banking institution. The Company is in discussions with the bank regarding assuming and/or restructuring the Bank Credit Line having an outstanding balance of $50,000 and the Bank Credit Card having an outstanding balance of $10,000; both were originally incurred by Gel-Del Technologies, Inc. There are no assurances that the Company can restructure this note on favorable terms, if at all.
The Company has a bank credit line of $75,000 At December 31, 2016 there was $7,405. of unused credit. Interest is at 6.5%. As mentioned above, as of September 7, 2017, the Company is in discussions with the bank regarding assuming and/or restructuring the Bank Credit Line, which was originally incurred by Gel-Del Technologies, Inc.
The Company is indebted on a note bearing interest at prime plus 5.5% to a bank with a monthly payment of $2,786 and expiring in January, 2017. All assets of Gel-Del are pledged as collateral. On February 23, 2017, the Company paid this note in full and received a release of the collateral pledge in all assets of Gel-Del.
NOTE 5 - GOING CONCERN
As reflected in the accompanying condensed consolidated financial statements, the Company had no significant revenue and had a negative equity and material losses. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Management intends to raise additional funds either through a private placement or through the public process. 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 the viability 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 generate funds.
The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 6 - COMMON STOCK
The Company issued 95,100 shares of common stock in the quarter ended June 30, 2015, of which 14,000 shares were for services valued at market for $56,000. 70,500 shares were issued for debt reduction of $282,000 and 10,600 shares for cash of $37,100.
From July 1, 2015 to September 30, 2015 the Company issued 1,250 shares for an extension of a convertible debt consideration valued at market for an expense of $4,350.
From October 1, 2015 to December 31, 2015 the Company issued 125,000 shares of stock for services valued at market which equaled $474,500. Some of the services are recognized over a one year contract with the unearned portion shown as prepaid expense.
From January 1 to March 31, 2016 10,000 shares were issued for services of $24,750.
In March 2016, the Company agreed to settle their convertible debt with interest by issuing 788,325 shares at $2.00 per share. The actual shares issuance occurred in April 2016.
Also during this period the Company received $100,000 for stock in Gel-Del pursuant to a subscription agreement.
From April 1, 2016 to June 30, 2016 the Company issued 953,142 shares of which 788,325 were issued to satisfy debt of $1,575,860, 40,000 shares for cash of $60,000, 97,432 shares for interest for a market value of $151,476 and the remainder of 27,000 shares for services valued at market for $42,363.
From July 1, 2016 to September 30, 2016, the Company issued 136,525 shares of common stock in the quarter ended September 30, 2016, of which 110,025 shares were for services valued at market for $190,000, and 26,500 shares for cash of $39,750.
From October 1, 2016 to December 31, 2016, the Company issued -0- shares of common stock in the quarter ended December 31, 2016, of which -0- shares were for services valued at market for $-0-, and -0- shares for cash of $-0-.
NOTE 7 - AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger was completed by the Company’s wholly-owned subsidiary, PetVivo Holdings Newco Inc. (“Newco”) and Gel-Del (the “Merger Agreement”). In accordance with the terms and provisions of the Merger Agreement, the Company effected a statutory merger transaction resulting in an exchange by the shareholders of Gel-Del on a pro rata basis of 100% of all outstanding Gel-Del capital stock in exchange for 5,540,000 shares of our restricted common stock, which represented approximately 30% of the total issued and outstanding shares of our common stock post-merger.
On April 10, 2017, the Merger Agreement was consummated and the Company completed the acquisition of the total issued and outstanding shares of common stock of Gel-Del from the Gel-Del shareholders. The acquisition was completed and consummated through a statutory merger between Gel-Del and NewCo, which resulted in Gel-Del being the surviving entity and becoming our wholly-owned subsidiary. The Merger Agreement became effective upon the filing with the Secretary of State of Minnesota on April 10, 2017. Upon the effectiveness of the Merger Agreement, each share of Gel-Del common stock issued and outstanding immediately prior to the consummation of the Merger Agreement was converted into the right to receive 0.788 common share of the Company. Gel-Del did not have any outstanding options, warrants or other derivative securities or rights convertible into securities.
Through this Merger Agreement, the Company acquired 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 being jointly constructed by Gel-Del and the Company in Edina, Minnesota.
In view of the completion of the Agreement and Plan of Merger, the shares of common stock were issued on or about September 5, 2017.
NOTE 8 – SUBSEQUENT EVENTS
Effective March 8, 2017,
four officers/directors of the Company agreed to cash settlements in lieu of a total of $1,209,919 past due compensation owed to them by the Company and subsequently converted the cash settlements into a total of 2,100,128 restricted shares of common stock of the Company; these restricted shares were issued on June 8, 2017.
John Lai and John Dolan each agreed to cash settlements of $43,625 for $174,500 of their past due compensation, which was subsequently converted into a total of 1,308,750 restricted shares of PetVivo Holdings common stock. Regarding John Lai, his converted shares were offset and reduced by 500,000 shares incident to a former escrow arrangement, resulting in Mr. Lai receiving 154,375 shares through this transaction.
David Masters agreed to a cash settlement of $45,591.90 for $455,919 of his past due compensation and subsequently converted the cash settlement into 683,878 shares.
Randall Meyer agreed to a cash settlement of $40,500 for $405,000 of his past due compensation and subsequently converted the cash settlement into 607,500 shares.
All of the foregoing securities issuances were unregistered and made by the Company as non-public transactions, and accordingly exempt from registration in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
On April 10, 2017,
the Company completed the acquisition of all outstanding shares of common stock of Gel-Del Technologies, Inc., a Minnesota corporation (“Gel-Del”). This acquisition was completed and closed through a statutory merger between Gel-Del and Pet-Vivo Holdings Newco, Inc., a Minnesota corporation and wholly owned subsidiary of the Company, resulting in Gel-Del being the surviving entity and becoming a wholly owned subsidiary of PetVivo (“the Merger”). The Merger became effective upon its filing with the Secretary of State of Minnesota on April 10, 2017.
Upon the effectiveness of the Merger, each share of Gel-Del common stock outstanding immediately prior to the effective time of the Merger was converted into the right to receive 0.788 common share of the Company. Gel-Del had no outstanding options, warrants or other derivative securities or rights convertible into its securities.
As a result of the Merger, the Company issued a total of 5,450,000 shares of its unregistered common stock to the pre-merger shareholders of Gel-Del common stock. The issuance of these shares of common stock of PetVivo is unregistered in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.
Effective April 10, 2017,
the Stock Exchange Agreement dated November 21, 2014 between PetVivo and Gel-Del was terminated since that agreement became moot and superseded upon the effectiveness of the Merger.
On April 10 2017,
the Company completed the Merger with Gel-Del and in the process recognized that the Company realized a loss of $14,081,031 due to the change in the valuation of Gel-Del capital stock received by the Company pursuant to the original Securities Exchange Agreement transaction dated November 24, 2014 and the valuation of the Gel-Del capital stock received by the Company’s upon the completion of the Merger on April 10, 2017. The completion of the Merger required the transfer of all issued capital stock in Gel-Del to the Company in exchange for 5,450,000 shares of the Company’s common stock. The closing market price per share of the Company on April 10, 2017 was $0.40 for a total aggregate stock exchange amount of $2,180,000 rather than the amount originally recorded for this securities exchange which was $16,600,000.The Company has addressed this issue by recognizing an impairment of Goodwill in the amount of $13,407,693 in the September 30, 2016 financial statements. The Company further recognized a realized loss on the sale of Gel-Del to PetVivo in the amount of $14,081,031 and a reduction in Trademarks and Patents-Net in the amount of $673,340.
On June 26, 2017
, the management and Board of Directors determined that the past due compensation that was used to calculate settlement cash payments for four officers of the Company and which was subsequently converted to 2,100,128 restricted shares of common stock of the Company on March 8, 2017, was inconsistent with the accrued compensation amount recorded in the official accounting books of the Company. Therefore, the Board of Directors and four officers agreed that the cash settlements owed to each officer and corresponding number of shares issued pursuant to the Settlement Agreements be adjusted in view of the actual booked accrued compensation for the period ending December 31, 2016. The accrued compensation, settlement amounts and conversion shares granted for each of the four officers were adjusted as follows:
David Masters agreed to an adjusted cash settlement of $30,750 for $307,500 of his past due compensation and subsequently converted the adjusted cash settlement into 461,250 shares.
Randall Meyer agreed to an adjusted cash settlement of $30,750 for $307,500 of his past due compensation and subsequently converted the adjusted cash settlement into 461,250 shares.
John F. Dolan agreed to an adjusted cash settlement of $33,068.50 for $132,274 of his past due compensation and subsequently converted the adjusted cash settlement into 496,028 shares.
John Lai agreed to a cash settlement of $29,979 for $119,918 of his past due compensation and subsequently converted the adjusted cash settlement into 449,692 shares.
Effective July 17, 2017
, the Board of Directors of the Company appointed Wesley C. Hayne as Chief Executive Officer (CEO) of PetVivo Holdings, Inc. to succeed John Lai who served as CEO of the Company since 2013. Concurrently, Mr. Lai was appointed President of the Company to succeed Dr. David B. Masters. The Board of Directors also approved and agreed to an Executive Employment Agreement (“Agreement”) for Mr. Hayne with certain material terms as follows: (i) Mr. Hayne shall receive a base salary of $8,000 monthly, of which $2,500 is payable to him monthly and $5,500 is earned but deferred until the Company receives capital funding in an amount of at least $1,000,000. Upon receipt of such funding, Mr. Hayne shall be paid his deferred salary he has earned plus a monthly amount based on an annual rate of at least $96,000; (ii) the initial term of employment is until May 31, 2019, with renewal for successive terms of one year each unless the parties cannot mutually agree to any extended term provisions; (iii) Mr. Hayne was granted 200,000 shares of restricted common stock of the Company as a signing bonus; (iv) the Agreement contains standard provisions for termination “for cause” upon the occurrence of certain events such as criminal conduct or material dishonesty toward the Company or material nonperformance of duties; (v) during his employment with the Company and for one year following his termination of employment for any reason, Mr. Hayne will not, anywhere in the world, directly or indirectly engage in any commercial activity in competition with the Company, and also he will not recruit or assist in the recruitment of any of the employees of the Company to leave the Company for employment by a business with which Mr. Hayne is associated or affiliated; and (vi) as an inducement for Mr. Hayne to accept the position of CEO of the Company and to continue serving the Company for his entire initial employment term, John Lai has assigned and conveyed 1,250,000 shares of Mr. Lai’s common stock of the Company for Mr. Hayne - of these shares, 50,000 shares were acquired by Mr. Hayne upon commencement of his employment as CEO of PetVivo, and the balance of 1,200,000 shares are escrowed and will vest and be acquired by Mr. Hayne ratably over his initial employment term ending on May 31, 2019.
ITEM 2. MANAGEMENT'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 200.
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 acquired 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"). Effective April 10, 2017, the Stock Exchange Agreement was terminated based on consummation of merger between the Company and Gel-Del. Therefore, the Stock Exchange Agreement was deemed null and void and superseded by the merger agreement discussed 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 has also successfully completed a pivotal clinical trial using their novel thermoplastic biomaterial as a dermal filler for human cosmetic applications. Gel-Del’s 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.
License Agreement
On August 2, 2013, we entered into a licensing agreement with Gel-Del (the "License Agreement"), pursuant to which Gel-Del intended to engage in the manufacture and supply of products derived from technology, including protein based biomaterials and devices which management believes will be beneficial for the veterinary treatment of animals having joint afflictions. We previously paid to Gel-Del an aggregate $488,000. As of the date of this Quarterly Report, the License Agreement was cancelled based upon the execution and terms and provisions of the Stock Exchange Agreement.
AGREEMENT AND PLAN OF MERGER
On March 20, 2017, we entered into an agreement and plan of merger with our wholly-owned subsidiary, PetVivo Holdings Newco Inc. (“Newco”) and Gel-Del (the “Merger Agreement”). In accordance with the terms and provisions of the Merger Agreement, we effected a statutory merger transaction resulting in an exchange by the shareholders of Gel-Del on a pro rata basis of 100% of all outstanding Gel-Del capital stock in exchange for 5,450,000 shares of our restricted common stock, which represented approximately 30% of the total issued and outstanding shares of our common stock post-merger.
We and Gel-Del have made customary representations, warranties and covenants in the Merger Agreement, including conducting our respective businesses in the ordinary course until consummation of the merger, not to take or engage in certain material kinds of transactions prior to consummation of the merger, and obtaining all consents and approvals necessary to complete and consummate the merger. The Merger Agreement also includes certain termination rights, including us having the right to terminate the merger if Gel-Del shareholders did not approved the merger prior to April 15, 2017.
On April 10, 2017, the Merger Agreement was consummated and we completed the acquisition of the total issued and outstanding shares of common stock of Gel-Del from the Gel-Del shareholders. The acquisition was completed and consummated through a statutory merger between Gel-Del and NewCo, which resulted in Gel-Del being the surviving entity and becoming our wholly-owned subsidiary. The Merger Agreement became effective upon the filing with the Secretary of State of Minnesota on April 10, 2017. Upon the effectiveness of the Merger Agreement, each share of Gel-Del common stock issued and outstanding immediately prior to the consummation of the Merger Agreement was converted into the right to receive 0.798 common share of the Company. Gel-Del did not have any outstanding options, warrants or other derivative securities or rights convertible into securities.
In accordance with this merger transaction, 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 being jointly constructed in Edina, Minnesota.
Company Overview
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.
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 Q4 2017. 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. See Johnston, Spencer A. "Osteoarthritis. Joint anatomy, physiology, and pathobiology." The Veterinary clinics of North (1997): 699-723; http://www.humanesociety.org/issues/petoverpopulation/facts/pet_ownership_statistics.html; and http://www.americanpetproducts.org/press_industrytrends.asp.
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 at least two additional product releases in 2017 and 2018. Our Kush Equine device for the treatment of equine lameness related to or impacting synovial joints is scheduled for launch in Q4 2017. 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 2018.
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. See Kane, Albert J., Josie Traub-Dargatz, Willard C. Losinger, and Lindsey P. Garber; "The occurrence and causes of lameness and laminitis in the US horse population " Proc Am Assoc Equine Pract. San Antonio (2000): 277-80; Seitzinger, Ann Hillberg, J. L. Traub-Dargatz, A. J. Kane, C. A. Kopral, P. S. Morley, L. P. Garber, W. C. Losinger, and G. W. Hill. "A comparison of the economic costs of equine lameness, colic, and equine protozoal myeloencephalitis (EPM)." In Proceedings, pp. 1048-1050. 2000; and Kilby, E. R. 10 CHAPTER, The Demographics of the U.S. Equine Population, The State of the Animals IV: 2007.
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 national distributors 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 deliver 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.
Going Concern
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.
|
|
For Nine Month Period Ended Dec 31, 2016
|
|
|
For Nine Month Period Ended Dec 31, 2015
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
7,079
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
15,720,548
|
|
|
|
1,593,685
|
|
|
|
|
|
|
|
|
|
|
Total Other Income (Expense)
|
|
|
(151,111
|
)
|
|
|
(950,652
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(15,864,580
|
)
|
|
|
(2,469,337
|
)
|
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interest
|
|
$
|
772,794
|
|
|
|
266,538
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to PetVivo
|
|
$
|
(15,091,786
|
)
|
|
|
(2,202,799
|
)
|
For Nine Month Period Ended December 31, 2016 Compared to Nine Month Period Ended December 31, 2015
Total Revenues.
For the nine-month periods ended December 31, 2016 and December 31, 2015, revenues decreased from $75,000 to $7,079. For the nine-month periods ended December 31, 2016 and December 31, 2015, we did not generate any cost of sales. Revenues consist of Kush product sales to veterinary clinics.
Operating Expenses.
Operating expenses for the nine-month period ended December 31, 2016 were $15,720,548 compared to $1,593,685 for the nine-month period ended December 31, 2015, an increase of $14,126,863. For the nine-month period ended December 31, 2016, we incurred: (i) research and development of $117,235 (2015: $145,853); and (ii) general and administrative of $15,603,313 (2015: $1,447,832). The major differences in general and administrative expenses were reductions in 2016 related to reductions in Goodwill and Trademarks and Patents-Net. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs. Operating expenses increased during the nine-month period ended December 31, 2016 compared to December 31, 2015 due to the increase in general and administrative costs of $14,155,481, which was primarily related to decreases in Goodwill and Trademarks and Patents-Net. Our research and development also decreased by $28,618.
We consummated the Merger Agreement with Gel-Del and in the process recognized that we realized a loss of $14,081,031 due to the change in the valuation of Gel-Del capital stock received by us pursuant to the original Securities Exchange Agreement transaction dated November 24, 2014 and the valuation of the Gel-Del capital stock received by us upon the completion of the Merger Agreement on April 10, 2017. The completion of the Merger Agreement required the transfer of all issued capital stock in Gel-Del to us in exchange for 5,450,000 shares of our common stock. The closing market price per share of our common stock on April 10, 2017 was $0.40 for a total aggregate stock exchange amount of $2,180,000 rather than the amount originally recorded for the Stock Exchange Agreement, which was $16,600,000. We addressed this issue by recognizing an impairment of Goodwill in the amount of $13,407,693. We further recognized a realized loss on the sale of Gel-Del to PetVivo in the amount of $14,081,031 and a reduction in Trademarks and Patents-Net in the amount of $673,340.
Thus, our operating loss for the nine-month period ended December 31, 2016 was ($15,713,469) compared to an operating loss of ($1,518,685) for the nine-month period ended December 31, 2015, an increase of $14,194,784.
Other Income (Expenses).
Other income (expense) for the nine-month period ended December 31, 2016 were ($151,111) compared to other income (expenses) of ($950,652) during the nine-month period ended December 31, 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: ($103,853)); (iii) interest expense of ($175,571) (2015: ($260,754)); and (iv) amortization of issue costs of $-0- (2015: ($948,395)).
Net Loss.
Therefore, our net loss for the nine-month period ended December 31, 2016 was ($15,864,580) as compared to a net loss of ($2,469,337) for the nine-month period ended December 31, 2015. Based both on our decrease in operating expenses during the nine-month period ended December 31, 2016, our net loss increased also based on the increase of other expenses primarily due to the reduction of Goodwill in the amount of $13,407,693.
During the nine-month period ended December 31, 2016, the loss attributable to non-controlling interest was $772,794 (2015: $266,538). Thus, our net loss attributable to PetVivo during the nine-month period ended December 31, 2016 was ($15,091,786) or ($1.68) per share compared to net loss attributable to PetVivo during the nine-month period ended December 31, 2015 of ($2,202,799) or ($0.28) per share. The weighted average number of shares outstanding during the nine-month period ended December 31, 2016 was 9,000,488 compared to 7,838,685 for the nine-month period ended December 31, 2015.
For Three Month Period Ended December 31, 2016 Compared to Three Month Period Ended December 31, 2015
Total Revenues.
For the three-month periods ended December 31, 2016 and December 31, 2015, revenues increased from $-0- to $2,163. For the three-month periods ended December 31, 2016 and December 31, 2015, we did not generate any cost of sales.
Operating Expenses.
Operating expenses for the three-month period ended December 31, 2016 were $500,700 compared to $321,606 for the three-month period ended December 31, 2015, an increase of $179,094. For the three-month period ended December 31, 2016, we incurred: (i) research and development of $42,192 (2015: $40,910); and (ii) general and administrative of $458,508 (2015: $280,696). The major differences in general and administrative expenses were increases in 2016 related to the recognition of a derivative value for warrants granted for consulting services on August 5, 2015. General and administrative expenses generally include corporate overhead, financial and administrative contracted services, marketing, and consulting costs. Operating expenses increased during the three-month period ended December 31, 2016 compared to December 31, 2015 due to the increase in general and administrative costs of $177,812, which was primarily related to increases in consulting services costs, salaries and depreciation. Our research and development also increased by $1,282.
Our operating loss for the three-month period ended December 31, 2016 was ($498,537) compared to an operating loss of ($321,606) for the three-month period ended December 31, 2015, an increase of $176,931.
Other Income (Expenses).
Other expenses for the three-month period ended December 31, 2016 were ($8,555) compared to other expenses of ($161,309) during the three-month period ended December 31, 2015. Other expenses consisted of: (i) change in fair value of derivatives of $-0- (2015: $63,709); (ii) interest expense of ($8,555) (2015: ($56,868)); and (iii) amortization of issue costs of $-0- (2015: ($168,150)).
Net Loss.
Therefore, our net loss for the three-month period ended December 31, 2016 was ($507,092) as compared to a net loss of ($482,915) for the three-month period ended December 31, 2015. Based on our decrease in other income expenses during the three-month period ended December 31, 2016, our net loss decreased also based on the decrease of General and Administration in the amount of $177,812.
During the three-month period ended December 31, 2016, the loss attributable to non-controlling interest was $225,092 (2015: $90,982). Thus, our net loss attributable to PetVivo during the three-month period ended December 31, 2016 was ($282,000) or ($0.03) per share compared to net loss attributable to PetVivo during the three-month period ended December 31, 2015 of ($391,933) or ($0.05) per share. The weighted average number of shares outstanding during the three-month period ended December 31, 2016 was 9,081,482 compared to 7,819,846 for the three-month period ended December 31, 2015.
LIQUIDITY AND CAPITAL RESOURCES
Nine Month Period Ended December 31, 2016
As of December 31, 2016, our current assets were $16,983 and our current liabilities were $2,013,695, which resulted in a working capital deficit of $1,996,712.
As of December 31, 2016, our current assets were comprised of: (i) $3,089 in cash and cash equivalents; (ii) $163 in accounts receivable; (iii) $-0- in employee advance; and (iv) $13,731 in prepaids. As of December 31, 2016, our total assets were $2,037,980 comprised of: (i) current assets of $16,983; (ii) fixed assets of $539, which consisted of property and equipment of $103,504 less accumulated depreciation of $102,965); and (iii) other assets of $2,020,458, which consisted of goodwill of $-0- and trademark and patents – net of $2,020,458. Our total assets for year ended March 31, 2016 decreased from fiscal year ended March 31, 2015 by $14,651,444 predominantly due to a decrease in recognition of goodwill in the amount of $13,407,693 and decrease in valuation of trademark and patents – net of $1,225,204.
As of December 31, 2016, our current liabilities were comprised of: (i) $1,655,292 in accounts payable and accrued expenses; (ii) $203,297 in notes payable and accrued interest – related party; and (iii) $155,106 in notes payable. 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 predominantly due to increase in: (i) accounts payable and accrued expenses of $591,754; and (ii) note payable and accrued interest to related party of $9,927.
Stockholders' equity (deficit) increased from a deficit of ($70,327) at March 31, 2016 to a deficit of ($14,483,786) at December 31, 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 nine-month period ended December 31, 2016, net cash flows used in operating activities was ($87,954). Net cash flows used in operating activities during the nine-month period ended December 31, 2016 consisted primarily of a net loss of ($15,864,580), which was adjusted by $134,400 in non-cash consulting expense, $232,500 in common stock issued for services, $151,476 in stock issued for interest, $583,966 in depreciation and amortization, $-0- in amortization of debt issued costs, 14,081,031 Goodwill and patent impairment loss, and ($24,460) in forgiveness of debt. Net cash flows used in operating activities was further changed by an increase in advances/receivables of $15,900, and in prepaid expenses of $5,390 and an increase in accounts payable and accrued expenses of $596,423.
For the nine-month period ended December 31, 2015, net cash flows used in operating activities was ($429,524). Net cash flows used in operating activities during the nine-month period ended December 31, 2015 consisted primarily of a net loss of ($2,469,337), which was adjusted by $474,503 in common stock issued for services, $65,532 in depreciation and amortization, $948,395 in amortization of debt issued costs, ($103,853) in derivative (gain) loss adjustment, ($154,644) in forgiveness of debt, and $488,000 in license. Net cash flows used in operating activities was further changed by a decrease in advances and receivables of (15,500), a decrease in prepaid expenses of ($60,221) and an increase in accounts payable and accrued expenses of $397,601.
Cash Flows from Financing Activities
.
We have financed our operations primarily from debt or the issuance of equity instruments. For the nine-month period ended December 31, 2016, net cash flows provided from financing activities was $122,618. Net cash flows provided by financing activities consisted of: (i) $99,750 in proceeds from issuance of stock, (ii) $4305 increase in notes from related parties, (iii) $12,500 in proceeds from loans and (iii) $60,200 from cash received from common stock subscription, which was offset by repayments of ($35,000) and ($19,137) in repayment of loans. For the nine-month period ended December 31, 2015, net cash flows provided from financing activities was $414,250 consisting of $100,005 in proceeds from stock and $524,750 in proceeds from convertible notes, which was offset by repayments of ($210,505).
MATERIAL COMMITMENTS
Accrued Salary
We are indebted to related parties. At December 31, 2016, we are obligated for unpaid officer salaries and advances of $674,692. This amount is included in accounts payable and accrued expenses.
Notes Payable
As of December 31, 2016, we are obligated on the following notes:
1.
|
Third Party Individual
|
|
|
67,826
|
|
2.
|
Bank Credit Line
*
|
|
|
67,595
|
|
3.
|
Bank Loan
|
|
|
19,685
|
|
|
Total
|
|
$
|
155,106
|
|
*As of September 7, 2017, Gel-Del Technologies, Inc. was delinquent in the monthly payments of the Bank Credit Line and a Bank Credit Card through the same banking institution. The Company is in discussions with the bank regarding assuming and/or restructuring the Bank Credit Line having an outstanding balance of $50,000 and the Bank Credit Card having an outstanding balance of $10,000; both were originally incurred by Gel-Del Technologies, Inc. There are no assurances that the Company can restructure this note on favorable terms, if at all.
Bank Credit Line
We have a bank credit line available up to $75,000. As of December 31, 2016, there was $7,405 of unused credit. As mentioned above, as of September 7, 2017, the Company is in discussions with the bank regarding assuming and/or restructuring the Bank Credit Line, which was originally incurred by Gel-Del Technologies, Inc.
Interest Bearing Note
We are indebted on a note in the principal amount of $ 19,684.68 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. On February 23, 2017, the Company paid this note in full and received a release of the collateral pledge in all assets of Gel-Del.
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.