Notes
to Financial Statements
September
30, 2020
(Unaudited)
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A)
Organization and Description
The
Company is in the business of licensing and commercializing our proprietary medical devices and biomaterials for the treatment
of afflictions and diseases in animals, initially for dogs and horses. The Company’s operations are conducted from its headquarter
facilities in suburban Minneapolis, Minnesota.
(B)
Basis of Presentation
PetVivo
Holdings, Inc. (the “Company”) was incorporated in Nevada under a former name in 2009 and entered its current business
in 2014 through a stock exchange reverse merger with PetVivo, Inc., a Minnesota corporation. This merger resulted in Minnesota
PetVivo becoming a wholly-owned subsidiary of the Company. In April 2017, the Company acquired another Minnesota corporation,
Gel-Del Technologies, Inc., through a statutory merger, which is also a wholly-owned subsidiary of the Company.
In
October 2020, the Company approved a 1-for-4 reverse split of our outstanding shares of common stock that as of the date of
this 10-Q filing has not been made effective; concurrently, the Company increased its authorized shares of common stock from
225,000,000 to 250,000,000.
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 September 30, 2020 and for the six months ended September 30, 2020 and 2019 are unaudited,
in the opinion of our management, such statements include all adjustments (consisting of normal recurring entries) necessary to
present fairly our financial position, results of operations and cash flows for the periods presented. The results for the six
months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ended March 31, 2021
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, 2020, included in our annual report on Form 10-K filed with the SEC on June 29,
2020.
(C)
Principles of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its two wholly-owned Minnesota corporations.
All intercompany accounts have been eliminated upon consolidation.
(D)
Use of Estimates
In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from
those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment and
intangible assets, estimate of fair value of share-based payments and derivative instruments and recorded debt discount, estimate
of fair value of lease liabilities and related right of use asset, valuation of deferred tax assets and valuation of in-kind
contribution of services and interest.
(E)
Cash and Cash Equivalents
The
Company considers all highly-liquid, temporary cash investments with an original maturity of three months or less to be cash equivalents.
At September 30, 2020, the Company had $165,743 in cash and no cash equivalents. At March 31, 2020, the Company had $10,582 in
cash and restricted cash and no cash equivalents.
(F)
Concentration-Risk
The
Company maintains its cash with various financial institutions, which at times may exceed limits insured by the Federal Deposit
Insurance Corporation (FDIC). At September 30, 2020, cash did not exceed the FDIC uninsured balances and management believes the
Company is not exposed to any significant credit risk on cash.
(G)
Property & Equipment
Property
and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and betterments are capitalized.
Maintenance and repairs are charged to operations as incurred. Depreciation is computed by the straight-line method (after taking
into account their respective estimated residual values) over the asset’s estimated useful life of (3) years for equipment,
(5) years for automobile, and (7) years for furniture and fixtures.
(H)
Patents and Trademarks
The
Company capitalizes direct costs for the maintenance and advancement of their patents and trademarks and amortizes these costs
over the lesser of a useful life of 60 months or the life of the patent. We evaluate the recoverability of intangible assets periodically
by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may
be impaired.
(I)
Loss Per Share
Basic
loss per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period.
Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock
equivalents and potentially dilutive securities outstanding during the period.
The
Company has 5,727,610 warrants outstanding as of September 30, 2020 with varying exercise prices ranging from $.30
to $2.22/share. The weighted average exercise price for these warrants is $.50/share. These warrants are excluded
from the weighted average number of shares because they are considered anti-dilutive.
The Company had 3,764,912 warrants
outstanding as of September 30, 2019, with varying exercise prices ranging from $3.89 to $.33/share. The weighted
average exercise price for these warrants was $.55/share. These warrants are excluded from the weighted average number
of shares because they are considered antidilutive.
The
Company uses the guidance in ASC 260 to determine if-converted loss per share. ASC 260 states that convertible securities should
be considered exercised at the later date of the first day of the reporting period’s quarter or the inception date of the
debt instrument. Also, the if-converted method shall not be applied for the purposes of computing diluted EPS if the effect would
be antidilutive.
At
September 30, 2020 and 2019, the Company had $280,000 in convertible notes principal and $-0- in interest outstanding; these notes
mature in our fiscal quarter ended June 30, 2021. If converted, the $280,000 in outstanding principal and $-0- in accrued interest
would convert into 388,889 shares of common stock at a rate of $.72 per share. Also at September 30, 2020, the Company
had a 15% OID convertible note outstanding in the principal amount of $352,941 ($-0- at September 30, 2019) that had $12,868 ($-0-
at September 30, 2019) in accrued interest to yield an outstanding balance of $365,809 that is convertible into shares at a rate
of $.28/share into 1,306,461 shares of common stock on or after December 15, 2020. See Note 8 to these financial
statements for more information on the convertible notes discussed in this paragraph.
(J)
Revenue Recognition
The
Company recognizes revenue on arrangements in accordance with FASB ASC No. 606, “Revenue From Contracts With Customers.”
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration
we expect to receive in exchange for those products or services. The Company adopted the guidance on April 1, 2018 using the cumulative
catch-up transition method. This change in accounting did not have any material effect on the Company’s financial statements.
The Company recognizes revenue related
to our sales of Kush product to veterinarians when we have received an order and shipped the Kush product.
(K)
Research and Development
The
Company expenses research and development costs as incurred.
(L)
Fair Value of Financial Instruments
The
Company applies the accounting guidance under FASB ASC 820-10, “Fair Value Measurements,” as well as certain
related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair
value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most
advantageous market in which it would transact business and considers assumptions that marketplace participants would use when
pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The
guidance also establishes a fair value hierarchy for measurements of fair value as follows:
|
●
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Level 1 - quoted
market prices in active markets for identical assets or liabilities.
|
|
|
|
|
●
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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.
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|
|
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●
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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 investments – equity securities receivable, notes payable and accrued interest,
notes payable and accrued interest - related party, and convertible notes payable. The carrying amount of the Company’s
financial instruments approximates their fair value as of September 30, 2020 and March 31, 2020, due to the short-term nature
of these instruments and the Company’s borrowing rate of interest.
In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The valuation of the Company’s 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 measured its investments – equity securities receivable at fair value at September 30, 2020, and March 31, 2020,
see Note 4 to the financial statements included in this Form 10-Q.
The
Company accounts for derivative instruments in accordance with Accounting Standards Codification 815, Derivatives and Hedging
(“ASC 815”), which establishes accounting and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. ASC 815 requires that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those instruments at fair value.
If
certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing
of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change.
(M)
Stock-Based Compensation – Employees and Non-Employees
Equity
Instruments Issued to Employees and Non-Employees for Acquiring Goods or Services
On June 20, 2018, the Financial Accounting
Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, Compensation—Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial
reporting for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.).
Under the new standard, companies will no longer be required to value non-employee awards differently from employee awards. Meaning
that companies will value all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this
date.
In June 2018, the FASB issued ASU 2018-07,
which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies
to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's
own operations by issuing share-based payment awards.
The
Company accounts for employee stock-based compensation the same as non-employee stock-based compensation.
The
fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation
model. The ranges of assumptions for inputs are as follows:
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●
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Expected term of
share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification
the expected term of share options and similar instruments represents the period of time the options and similar instruments
are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected
exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate
holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly
traded the contractual term of the share options and similar instruments is used as the expected term of share options and
similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which
to estimate expected term.
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|
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●
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Expected volatility
of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded
or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company
to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons
for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the
average historical volatility of the comparable companies over the expected contractual life of the share options or similar
instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations
would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations
for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent
trading in the market.
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●
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Expected annual
rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term
shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield
is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within
the expected term of the share options and similar instruments.
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|
|
|
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●
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Risk-free rate(s).
An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The
risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected
term of the share options and similar instruments.
|
(N)
Income Taxes
The
Company accounts for income taxes under Accounting Standards Codification (ASC) Topic 740. Deferred tax assets and liabilities
are determined based upon differences between financial reporting and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided
when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The
Company accounts for income taxes under Accounting Standards Codification (ASC) Topic 740.
As
required by ASC Topic 740, the Company recognizes the financial statement benefit of a tax position only after determining that
the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood
of being realized upon ultimate settlement with the relevant tax authority. The Company applied ASC Topic 740 to all tax positions
for which the statute of limitations remained open. As a result of the implementation of ASC Topic 740, the Company did not recognize
any change in the liability for unrecognized tax benefits.
The
Company is not currently under examination by any federal or state jurisdiction.
The
Company’s policy is to record tax-related interest and penalties as a component of operating expenses.
(O)
Inventory
Inventories
are recorded in accordance with ASC 330 and are stated at the lower of cost and net realizable value. We account for inventories
using the first in first out (FIFO) methodology and capitalize costs on a project basis as they occur. The current marketed shelf
life of our Kush inventory is 3 years. However, management reserves the right to review and adjust this as appropriate.
(P)
Recently Issued and Adopted Accounting Pronouncements
In
January 2017, the FASB issued ASU No. 2017-04, “Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment”,
which eliminates the requirement to calculate the implied fair value of goodwill, but rather requires an entity to record an impairment
charge based on the excess of a reporting unit’s carrying value over its fair value. This amendment is effective for annual
or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We adopted this ASU on April 1, 2020 and
it did not have a material effect on our consolidated financial statements.
In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework Changes to the Disclosure
Requirements for Fair Value Measurement. The amendments in this update modify the disclosure requirements on fair value measurements
in Topic 820. The ASU is effective for the Registrants for fiscal years beginning after December 15, 2019, and interim periods
therein. The Company adopted this ASU on April 1, 2020 and it did not have a material impact on the financial statements.
All
other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
NOTE
2 - GOING CONCERN
The
accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United
States of America, which contemplate continuation of the Company as a going concern.
The
Company incurred net losses of $2,162,010 for the six-month period ended September 30, 2020 and had net cash used in operating
activities of $472,307 for the same period. Additionally, the Company has an accumulated deficit of $56,750,655, working
capital deficit of $1,970,330, and a stockholders’ deficit of $1,927,691 at September 30, 2020. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern for a period of at least twelve months
after the date of issuance on these consolidated financial statements. In view of these matters, the Company’s ability
to continue as a going concern is dependent upon the Company’s ability to achieve a level of profitability and/or to obtain
adequate financing through the issuance of debt or equity in order to finance its operations.
Management
intends to raise additional funds through a private placement or public offering of its equity securities; this is evidenced by
the filing of Form S-1 with the Securities and Exchange Commission as identified in this Form 10-Q’s Note 15. Management
believes that the actions presently being taken to further implement its business plan will enable the Company to continue as
a going concern. While the Company believes in its 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 raise additional funds.
COVID-19
has had an impact on the global economy, which directly or indirectly may have an impact on our ability to continue as a going
concern.
These
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 – LEASE AND COMMITMENTS
Rent
expense for the three-month periods ended September 30, 2020 and September 30, 2019 were $13,568 and $13,434, respectively. Rent
expense for the six-month periods ended September 30, 2020 and September 30, 2019 were $27,136 and $24,245, respectively.
The
Company entered into an eighty-four-month lease for 3,577 square feet of newly constructed office, laboratory and warehouse space
located in Edina, Minnesota on May 3, 2017. The Company resided in the facility starting in November of 2017. The base rent started
as $2,078 per month with 2% increases annually and the Company is responsible for its proportional share of common space expenses,
property taxes, and building insurance. The base rent as of September 30, 2020 is $2,162. This lease is terminable by the landlord
if damage causes the property to no longer be utilized as an integrated whole and by the Company if damage causes the facility
to be unusable for a period of 45 days. The Company entered into a lease amendment whereby the lease term was extended through
November of 2026 in exchange for a loan of $42,500 and a grant of $7,500 as a tenant improvement allowance, which has been recorded
to accrued expenses and will be amortized over the remainder of the lease term. Through the balance sheet date, the Company has
received $42,500 in loan proceeds and the full tenant improvement allowance amount of $7,500.
The
following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30,
2020:
Year Ended March 31,
|
|
|
|
2021
|
|
$
|
13,142
|
|
2022
|
|
|
26,634
|
|
2023
|
|
|
27,167
|
|
2024
|
|
|
27,710
|
|
2025
|
|
|
28,265
|
|
Thereafter
|
|
|
48,304
|
|
|
|
$
|
171,223
|
|
Less: Amount representing interest
|
|
|
(327
|
)
|
Present value of lease liabilities
|
|
$
|
170,896
|
|
In
compliance with ASC 842 the Company adopted new guidance in relation to lease accounting on April 1, 2019 whereby we recognized
operating lease right-to-use assets and corresponding and equal operating lease liabilities for the lease of our facility in Edina,
MN. As of September 30, 2020, planned future base rent lease payments total $171,223, which has been discounted to $170,896 using
the 52-week treasury bill coupon equivalent discount rate of 0.12% and a present value model. As of September 30, 2020, the Company
only had one operating lease so that the remaining lease term and weighted average discount rate are approximately 6 years and
0.12%, respectively.
|
|
September 30, 2020
|
|
Present value of future base rent lease payments
|
|
$
|
170,896
|
|
Base rent payments included in prepaid expenses
|
|
|
-
|
|
Present value of future base rent lease payments – net
|
|
$
|
170,896
|
|
As
of September 30, 2020, the present value of future base rent lease payments – net is classified between current and non-current
assets and liabilities as follows:
|
|
September 30, 2020
|
|
Operating lease right-of-use asset
|
|
$
|
170,896
|
|
Total operating lease assets
|
|
|
170,896
|
|
|
|
|
|
|
Operating lease current liability
|
|
|
26,363
|
|
Operating lease other liability
|
|
|
144,533
|
|
Total operating lease liabilities
|
|
$
|
170,896
|
|
Pursuant
to a lease wherein our subsidiary, Gel-Del Technologies, Inc., was the lessee until the lease’s termination in 2017, the
Company has recorded approximately $330,000 as a potential payable to the lessor as of September 30, 2020; this amount is included
in accounts payable.
NOTE
4 – INVESTMENTS – EQUITY SECURITIES
On
June 28, 2019, the Company entered into a purchase agreement with a third-party to purchase 1,500,000 shares of Emerald Organic
Products, Inc. (OTC Pink: “EMOR”) common stock for consideration of $1,500. The Company applied guidance from ASU
No. 2016-01 Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities
and ASC 820 to arrive at a fair value at September 30, 2019 of $1,500. The Company took into account many factors when determining
the stock’s fair value including, but not limited to, the nature and duration of the restriction on the stock, the extent
to which potential buyers would be limited by the restriction, and qualitative and quantitative factors specific to both the instrument
and the issuer and risk of non-performance.
NOTE
5 – PREPAID EXPENSES
At
September 30, 2020 and March 31, 2020, the Company had $177,207 and $132,023 in prepaid expenses, respectively. At September 30,
2020 the total prepaids amount of $177,207 was made up primarily of $132,403 in prepaid expenses – short term and $44,804
in prepaid expenses (net of current). Of the $132,403 classified as prepaid expenses – short term, approximately $80,000
is made up of advertising and marketing services yet to be performed. The $44,804 classified as prepaid expenses (net
of current) is entirely made up of costs incurred related to our S-1 filing with the Securities and Exchange Commission and
will be recorded as a reduction of proceeds should we be successful in raising capital through this S-1 offering.
NOTE
6 – PROPERTY AND EQUIPMENT
The
components of property and equipment were as follows:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Leasehold improvements
|
|
$
|
152,392
|
|
|
$
|
98,706
|
|
Furniture and office equipment
|
|
|
10,130
|
|
|
|
10,130
|
|
Production equipment
|
|
|
115,661
|
|
|
|
87,473
|
|
R&D equipment
|
|
|
25,184
|
|
|
|
25,184
|
|
Total, at cost
|
|
|
303,367
|
|
|
|
221,493
|
|
Accumulated depreciation
|
|
|
(125,548
|
)
|
|
|
(111,586
|
)
|
Total, net
|
|
$
|
177,819
|
|
|
$
|
109,907
|
|
During
the three months ended September 30, 2020 and 2019, depreciation expense was $7,474 and $3,442, respectively. During the six months
ended September 30, 2020 and 2019, depreciation expense was $13,963 and $10,423, respectively.
NOTE
7 – INTANGIBLE ASSETS
The
components of intangible assets, all of which are finite-lived, were as follows:
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
Patents
|
|
$
|
3,832,661
|
|
|
$
|
3,822,542
|
|
Trademarks
|
|
|
25,527
|
|
|
|
25,023
|
|
Total, at cost
|
|
|
3,858,188
|
|
|
|
3,847,565
|
|
Accumulated Amortization
|
|
|
(3,835,656
|
)
|
|
|
(3,788,954
|
)
|
Total, net
|
|
$
|
22,532
|
|
|
$
|
58,611
|
|
During
the three-month periods ended September 30, 2020 and 2019, amortization expense was $1,385 and $137,598, respectively. During
the six-month periods ended September 30, 2020 and 2019, amortization expense was $46,702 and $274,707, respectively.
NOTE
8 – CONVERTIBLE NOTES AND NOTES PAYABLE
At
September 30, 2020, the Company is obligated for $296,801 in notes payable and notes payable – related parties and
$437,180 in convertible notes payable and accrued interest, net of debt discount.
At
March 31, 2020, the Company is obligated for $76,350 in notes payable and $286,981 in convertible notes payable.
|
|
|
|
September 30, 2020
|
|
|
March 31, 2020
|
|
|
|
|
|
Notes Payable
|
|
|
Convertible Notes Payable
|
|
|
Notes Payable
|
|
|
Convertible Notes Payable
|
|
1.
|
|
Third Parties – Principal
|
|
$
|
42,500
|
|
|
$
|
632,941
|
|
|
$
|
15,000
|
|
|
$
|
280,000
|
|
|
|
Third Parties – Unamortized Debt Discount
|
|
|
-
|
|
|
|
(215,686
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
Third Parties – Interest
|
|
|
325
|
|
|
|
19,925
|
|
|
|
95
|
|
|
|
6,981
|
|
|
|
Third Parties – Total
|
|
|
42,825
|
|
|
|
437,180
|
|
|
|
15,095
|
|
|
|
286,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
|
Related Parties – Principal
|
|
|
252,142
|
|
|
|
-
|
|
|
|
59,642
|
|
|
|
-
|
|
|
|
Related Parties – Interest
|
|
|
1,834
|
|
|
|
-
|
|
|
|
1,613
|
|
|
|
-
|
|
|
|
Related Parties – Total
|
|
|
253,976
|
|
|
|
-
|
|
|
|
61,255
|
|
|
|
-
|
|
|
|
Total
|
|
$
|
296,801
|
|
|
$
|
437,180
|
|
|
$
|
76,350
|
|
|
$
|
286,981
|
|
At
September 30, 2020, the Company is obligated for one convertible note payable held by RedDiamond Partners, LLC (“RDCN”);
the Company entered into the RDCN on June 15, 2020, whereby the note is convertible on or after January 15, 2021 and before maturity
on March 15, 2021 at a rate of $.28/share. The RDCN was issued in the principal amount of $352,941 with $52,941 being made
up of a 15% Original Issue Discount (“OID”) and includes a conversion feature. However, this conversion
feature’s exercise contingency can only be utilized if triggered by the occurrence of an Event of Default, which
includes events that are outside the control of the Company (i.e. not based solely on the market for the Company’s stock
or the Company’s own operations). Additionally, the RDCN accrues interest at a rate of 12.5% per annum, calculated on a
360-day-per-year-basis. At September 30, 2020, the Company owed $365,808 in outstanding balance whereby $352,941 was made up of
principal and $12,867 was made up of accrued interest. This RDCN was issued alongside a warrant for purchase of 557,143
shares of Company common stock (“RDCN Warrants”) with a relative value of $91,500; see Note 14 for more information
on these RDCN Warrants. Upon inception, the outstanding principal balance of the RDCN was reduced to $-0- by various discounts
on the debt totaling ($352,941) as follows: i) the RDCN Warrants generated a discount on the debt of ($91,500) based on the relative
value of the same; ii) $2,500 in investor legal costs was treated as a discount on the debt of ($2,500) since this was paid by
the Company; iii) $52,941 of OID was treated as a discount on the debt of ($52,941); iv) a discount of ($206,000) was taken due
to the conversion option being treated as a derivative. As of September 30, 2020, the Company had ($215,686) ($-0- at March 31,
2020) in unamortized debt discount remaining. In evaluating the various instruments and their components within this transaction
(including issuance of the RDCN and RDCN Warrants) for treatment as a derivative and the respective accounting treatment of the
same, the Company referenced ASC 470 and ASC 815 in conjunction with interpretive guidance. For the three and six months ended
September 30, 2020, the Company amortized a pro-rata portion of the discount on the debt on a straight-line basis to interest
expense in the amounts of $117,647 and $137,255, respectively. In conjunction with the RDCN and RDCN Warrants issuances, the Company
also paid $30,000 and issued 75,000 warrants (“Think Warrants”) valued at $31,500 using the Black-Scholes model
to Think Equity for soliciting the RedDiamond Partners, LLC transaction; see Note 14 for more information on these warrants. The
total issuance costs paid to Think Equity of $61,500 of cash and warrants, which the Company recorded the relative value (as noted
in Note 14) of $52,399 to expense since no further discount was available to be taken on the debt.
At
September 30, 2020 and March 31, 2020, the Company is/was obligated for several convertible notes payable held by accredited investors
(“Accredited Investor Convertible Notes” or “AICN” or “AICNs”). At September 30, 2020 the
total outstanding balance of these AICNs of $287,058 was made up of $280,000 in principal and $7,058 in accrued interest. At March
31, 2020, the total outstanding balance of these AICNs of $286,981 was made up of $280,000 in principal and $6,981 in accrued
interest. The Company entered into these AICNs during the quarter ended June 30, 2019. All of these AICNs mature during the quarter
ended June 30, 2021, two years from their inception dates. These AICNs accrue interest at a rate of 10% annually. Accrued interest
is due and payable each calendar quarter in cash.
During
the three and six months ended September 30, 2020, the Company paid out $-0- and $13,962, respectively, in accrued interest to
these convertible note holders. During the three and six months ended September 30, 2019, the Company paid out $6,118 and $11,479,
respectively, in accrued interest to these convertible note holders.
These
AICNs automatically convert into shares of common stock at a rate of $.72 per share at the earlier of the maturity date
or an uplist to a national securities exchange (e.g. NASDAQ or New York Stock Exchange) provided that the Company’s stock
price is at least $.87 at the time of the uplist. The AICN note holders have the right to convert their outstanding principal
and interest into shares of the Company’s common stock at any time during their note’s term at $.72 per share.
No AICN note holders have converted their notes through the date of this report. As of September 30, 2020 and March 31, 2020,
these AICNs included a beneficial conversion feature with an aggregate value of $30,154.
NOTE
9 – DERIVATIVE LIABILITY
The
Company evaluates its convertible instruments, options, warrants or other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and
Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance
sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value
is recorded in the statement of operation as other income (expense). Upon conversion or exercise of a derivative instrument, the
instrument is marked to fair value at the conversion date then that fair value is reclassified to equity. Equity instruments that
are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities
at the fair value of the instrument on the reclassification date.
The
Company used the following assumptions for determining the fair value of the conversion feature in the RDCN referenced in Note
8 to these financial statements, under the binomial pricing model with Monte Carlo simulations at June 15, 2020 and September
30, 2020, the issuance and balance sheet dates, respectively:
|
|
June 15, 2020
|
|
|
September 30, 2020
|
|
Stock price on valuation date
|
|
$
|
.42
|
|
|
$
|
.80
|
|
Conversion price
|
|
$
|
.28
|
|
|
$
|
.28
|
|
Days to maturity
|
|
|
273
|
|
|
|
166
|
|
Weighted-average volatility*
|
|
|
367
|
%
|
|
|
327
|
%
|
Risk-free rate
|
|
|
.18
|
%
|
|
|
.12
|
%
|
The
initial valuation of $526,800 at June 15, 2020, generated a discount on the debt of $206,000, which net the convertible note liability
to $-0- and forced a recognition of derivative expense of $320,800 and a corresponding offset to derivative liability of $526,800.
At September 30, 2020, the Company revalued the derivative liability to $937,500. For the three months ended September 30, 2020
and 2019, the Company recognized $389,300 and $-0- to derivative expense, respectively. For the six months ended September 30,
2020 and 2019, the Company recognized $731,500 and $-0- to derivative expense and derivative liability, respectively.
The
Company recorded derivative liability transactions during the six-month period ended September 30, 2020 as follows:
|
|
Six Months Ended September 30, 2020
|
|
Convertible note embedded derivative liability
|
|
|
|
|
Balance at March 31, 2020
|
|
$
|
-0-
|
|
|
|
|
|
|
Initial recognition of derivative liability
|
|
|
526,800
|
|
|
|
|
|
|
Change in fair value
|
|
|
21,400
|
|
|
|
|
|
|
Balance at June 30, 2020
|
|
$
|
548,200
|
|
|
|
|
|
|
Change in fair value
|
|
|
389,300
|
|
|
|
|
|
|
Balance at September 30, 2020
|
|
$
|
937,500
|
|
NOTE
10 – CONVERTIBLE NOTES AND NOTES PAYABLE – RELATED PARTY
At
September 30, 2020 and March 31, 2020, the Company was obligated for related party notes payable and accrued interest in the total
amount of $253,976 and $61,255, respectively.
Effective
September 1, 2020, the Company entered into two debt settlement agreements with David B. Masters, a director of the Company, pursuant
to an Amendment to Promissory Note and a Promissory Note. The Amendment to Promissory Note extends, for up to an additional two
years and under the same terms as originally entered into, the original promissory notes which were issued by Gel-Del Technologies,
Inc., a wholly owned subsidiary of the Company, to Dr. Masters. Because this Amendment to Promissory Note simply extended the
term over which the Company is required to pay back the outstanding balance this change has been treated as a debt modification.
The outstanding principal of $59,642 and interest balance of $6,058 of the original promissory notes was $65,700 at the time
of execution of the Amendment to Promissory Note; the terms of this Amendment to Promissory Note are interest accrual at a rate
of 8% on an annual basis or 20% if the note is in default. The Amendment to Promissory Note requires monthly payments of $3,100
and a maturity date of June 30, 2022 provided however that if the Company shall achieve $1,500,000 in equity sales or achieve
gross product sales of $1,500,000, the Company must pay the outstanding balance at that time.
The
Promissory Note was entered into with an effective date of September 1, 2020 in a principal amount of $195,000, which represented
David Masters’ release of any claim to the $195,000 in past accrued salary he was owed, it accrues interest at a rate of
3% per annum, has a maturity date of August 31, 2022, and requires payments of $4,000 per month beginning when the Company’s
sale of products reach $3,500,000. The reclassification of the $195,000 was treated as a debt modification.
A
Settlement and General Release (“Settlement Agreement”) was also executed by Dr. Masters to the benefit of
the Company as a settlement and general release of any and all past claims, demands, damages, judgements, causes of action and
liabilities that Dr. Masters ever had, may have or may acquire against the Company and its subsidiaries, including, but not limited
to any claims related to (a) the ownership, operation, business, or financial condition of the Company or its business, (b) any
promissory note, loan, contract, agreement or other arrangement, whether verbal or written, including all unpaid interest charges,
late fees, penalties or any other charges thereon, entered into or established between Dr. Masters’ and his affiliates and
the Company on or prior to the Effective Date, or (c) the employment of Dr. Masters by the Company (except for claims directly
relating to the breach of the Amendment to Promissory Note, the Promissory Note or the Consulting Agreement).
At
September 30, 2020, the Company was obligated for principal and accrued interest in the amounts of $192,500 and $417, respectively,
related to the Promissory Note and $59,642 and $1,417, respectively, related to the Amendment to Promissory Note.
At
September 30, 2020 and March 31, 2020, the Company was not obligated for any related party convertible notes payable principal
and accrued interest. However, the Company entered into notes payable with three directors on May 14, 2020, in the aggregate principal
amount of $25,000. The notes with these three directors accrued interest at a rate of 6% annually, yielding a total amount of
accrued interest of $382 at August 14, 2020, the maturity date, and on that date the total outstanding balance of $25,382 was
converted at $.2538 per share into 100,010 shares of common stock valued at $25,383 as identified in Note
14.
NOTE
11 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
At
September 30, 2020 and March 31, 2020, the Company is obligated to pay $751,366 and $794,057, respectively, in accounts payable
and accrued expenses. Of the total at September 30, 2020, $517,278 is made up of accounts payable, while the $234,088 in accrued
expenses is made up of a tenant improvement allowance of $7,500 and $226,588 is made up of past employee’s accrued salaries
and related payroll taxes payable. Of the total at March 31, 2020 of $794,057, $556,653 is made up of accounts payable, while
the $237,404 in accrued expenses is made up of past employee’s accrued salaries and related payroll taxes payable. The potential
payroll taxes owed are not due until the accrued compensation has been paid. Since the Company has not paid these accrued wages,
the Company has appropriately left the potential payroll taxes associated with these accrued wages unpaid. The Company has established
an accrued liability for the potential taxes of approximately $15,209 and $22,025 at September 30, 2020 and March 31, 2020, respectively.
NOTE
12 – PPP LOAN
On
May 1, 2020, the Company received $38,665 in loan proceeds pursuant to the Paycheck Protection Program enacted by the 2020 US
Federal government Coronavirus Aid, Relief, and Economic Security Act. At September 30, 2020, the Company was obligated for the
outstanding balance of $38,827, made up of $38,665 in principal and $162 in accrued interest. The principal and accrued interest
may be forgivable and the Company has applied for forgiveness. The loan accrues interest at a rate of 1% per annum and matures
on May 1, 2022; if not forgiven prior to December 1, 2020, the Company is required to pay monthly installments toward principal
and interest until the note is paid in full.
NOTE
13 – ACCRUED EXPENSES – RELATED PARTY
At
September 30, 2020, the Company is obligated to pay $21,270 in accrued expenses due to related parties. The total amount is made
up of accounts payable to related parties. During the quarter ended September 30, 2020, David Masters signed a settlement and
general release giving up any right to his $195,000 in accrued salary – related party. In exchange for this settlement and
general release, the Company granted David Masters a note with a principal amount of $195,000, which is described further in this
Form 10-Q’s Note 10.
At
March 31, 2020, the Company was obligated to pay $252,607 in accrued expenses due to related parties. Of the total, $38,954 was
made up of accounts payable, while $213,653 is made up of accrued salaries and potential payroll taxes payable.
NOTE
14 - COMMON STOCK AND WARRANTS
On
October 23, 2020, the Company approved and declared a reverse stock split of all its outstanding common stock at a ratio of 1-for-4
shares; this reverse stock split has not yet been made effective.
Equity
Incentive Plan
On
July 10, 2020, our Board of Directors unanimously approved the PetVivo Holdings, Inc “2020 Equity Incentive Plan”
(the “2020 Plan”), subject to approval by our stockholders at the Regular Meeting of Stockholders held on September
22, 2020, when it was approved by our stockholders and became effective. The number of shares of our common stock available and
that may be issued as awards under the 2020 Plan is 4,000,000 shares. Unless sooner terminated by the Board, the 2020 Plan
will terminate at midnight on July 10, 2030.
Eligible
Participants – Employees, consultants and advisors of the Company (or any subsidiary), and non-employee directors of
the Company will be eligible to receive awards under the 2020 Plan. In the case of consultants and advisors, however, their services
cannot be in connection with the offer and sale of securities in a capital-raising transaction nor directly or indirectly promote
or maintain a market for PetVivo securities.
Administration
– The 2020 Plan will be administered by the Compensation Committee of our Board of Directors (the “Committee”),
which has full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment,
any deferral payment, and other terms and conditions of each award. Subject to provisions of the 2020 Plan, the Committee may
amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Committee also has the
authority to interpret and establish rules and regulations for the administration of the 2020 Plan. In addition, the Board of
Directors may also exercise the powers of the Committee.
Shares
Available for Awards – The aggregate number of shares of Petvivo common stock available and reserved to be issued under
the 2020 Plan is 4,000,000 shares, but includes the following limits:
●
the maximum aggregate number of shares of Common Stock granted as an Award to any Non-Employee Director in any one Plan Year will
be 100,000 shares; provided that such limit will not apply to any election of a Non-Employee Director to receive shares
of Common Stock in lieu of all or a portion of any annual Board, committee, chair or other retainer, or any meeting fees otherwise
payable in cash.
Types
of Awards – Awards can be granted for no cash consideration or for any cash and other consideration as determined by
the Committee. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of PetVivo common
stock, other securities or property, or any combination of these in a single payment, installments or on a deferred basis. The
exercise price per share of any stock option and the grant price of any stock appreciation right may not be less than the fair
market value of PetVivo common stock on the date of grant. The term of any award cannot be longer than ten years from the date
of grant. Awards will be adjusted in the event of a stock dividend or other distribution, recapitalization, forward or reverse
stock split, reorganization, merger or other business combination, or similar corporate transaction, in order to prevent dilution
or enlargement of the benefits or potential benefits provided under the 2020 Plan.
The
2020 Plan permits the following types of awards: stock options, stock appreciation rights, restricted stock awards, restricted
stock units, deferred stock units, performance awards, non-employee director awards, other stock-based awards, and dividend equivalents.
As
of September 30, 2020, the Company has not awarded any shares pursuant to the 2020 Plan.
Common
Stock
During
the six-month period ended September 30, 2020 the Company issued 466,086 shares of common stock as follows:
i)
120,000 shares valued at $40,680 and recorded in Stock-based compensation to a service provider for video marketing services
over a 6-month term;
ii)
80,000 shares with a relative value of $34,709 pursuant to a purchase of 80,000 units whereby a unit is made up
of 1 share of common stock and ½ warrant. The value of $34,709 along with the relative value of the warrants associated
with this transaction of $17,291 ($52,000 total) was recorded during the quarter ended March 31, 2020 to Common Stock Subscribed
and moved to Additional Paid in Capital and Capital Stock upon receipt of funds and issuance of shares of common stock during
the quarter ended June 30, 2020;
iii)
50,000 shares valued at $22,000 on July 1, 2020 to two service providers as follows: a) 40,000 to a marketing and
investor relations service provider valued at $17,600; and b) 10,000 to a legal service provider valued at $4,400;
iv)
61,027 shares valued at $12,053 on July 24, 2020 to one warrant holder whereby this warrant holder converted on a cashless
basis 100,000 warrants into 61,027 shares of common stock and the warrant had an exercise price of $.30 per
share;
v)
904,288 shares during August and September of 2020 in exchange for $316,500 in cash to four accredited investors;
vi)
649,007 shares valued at $486,755 to directors and officers on September 14, 2020 as bonuses for work over the past two
years as follows:
|
a.
|
134,479
to John Lai
|
|
b.
|
104,867
to John Carruth
|
|
c.
|
91,976
to John Dolan
|
|
d.
|
43,157
to Gregory Cash
|
|
e.
|
42,848
to David Deming
|
|
f.
|
42,509
to Robert Rudelius
|
|
g.
|
42,197
to Randy Meyer
|
|
h.
|
37,205
to Jim Martin
|
|
i.
|
37,197
to Scott Johnson
|
|
j.
|
36,835
to Joseph Jasper
|
|
k.
|
35,737
to David Masters
|
vii) 100,010 shares valued at
$25,383 to three directors on August 14, 2020, pursuant to their conversions of notes in the total outstanding balance amount
of $25,382 made up of $25,000 in principal and $382 in accrued interest; these notes had a set conversion price of $.2538 per
share.
During
the six months ended September 30, 2019, the Company issued 1,763,872 shares of common stock as follows:
i)
348,000 shares to John Lai pursuant to a Settlement Agreement whereby Mr. Lai agreed to release the Company of all claims
through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $116,000
and hold the shares for a period of at least 3 years;
ii)
575,808 shares to Randall Meyer pursuant to a Settlement Agreement whereby Mr. Meyer agreed to release the Company of all
claims through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $191,936
and hold the shares for a period of at least 3 years;
iii)
204,000 shares to John Dolan pursuant to a Settlement Agreement whereby Mr. Dolan agreed to release the Company of all claims
through the date of the agreement, September 11, 2019, including accrued compensation he had earned in the amount of $68,000 and
hold the shares for a period of at least 3 years; and
iv)
168,060 shares to a former employee pursuant to a Settlement Agreement dated August 29, 2019, whereby this individual agreed
to release the Company of all claims, including compensation earned in the amount of $80,029; and
v)
108,000 shares valued at $120,000 to a service provider for production services provided during the one-year period ended
July 13, 2019 and recognized over that period on a pro-rata basis; and
vi)
360,000 shares on September 13, 2019, to one shareholder that the Company sold in exchange for $100,000;
vii)
270,000 shares valued at $102,000 to a service provider on September 18, 2019, in exchange for 12 months of video production
and marketing services.
John
Lai (CEO, President & Director), Randall Meyer (Director), and John Dolan (Secretary & Director) are all related parties,
and the reduction of $375,936 was included in Accrued Expenses – Related Party. The settlement of $80,029 for a former employee’s
accrued salary was accounted for as a reduction of Accounts Payable and Accrued Expenses. A loss on extinguishment of debt was
recorded in the amount of $81,738 related to these transactions as indicated in Roman numerals i-iv above.
Warrants
During
the six-month period ended September 30, 2020, the Company granted warrants to purchase a total of 240,627 shares of common stock
valued at $443,108, including:
i)
warrants for 40,000 shares, valued at $17,291 using the Black-Scholes model, to one investor, whereby the value was recorded
during the quarter ended March 31, 2020 to Common Stock Subscribed and moved to Additional Paid in Capital upon receipt of funds
and issuance of warrants on April 6, 2020, and further whereas the warrants vested immediately upon issuance and are exercisable
at $4.00 per share for 3 years from the grant date of April 6, 2020;
ii)
warrants for 90,000 shares, valued at $28,964 using the Black-Scholes model, to John Lai, whereby the value was recorded
to Stock-based compensation and the warrants vest upon the Company raising $10,000,000 or more through an S-1 offering as long
as that occurs prior to October 31, 2020; if these warrants vest they will be exercisable for a period of 5-years at $.35
per share;
iii)
warrants for 557,143 shares (RDCN Warrants), valued at $234,000 using the Black-Scholes model, to RedDiamond Partners,
LLC, whereby the relative value of $91,500 was recorded to Warrants issued in conjunction with convertible debt on the statement
of equity; the warrants have a cashless warrant exercise feature, are exercisable at $.35 per share for a term of
five years from the date of the grant of June 15, 2020 when the Company entered into a securities purchase agreement and issued
a convertible note as outlined in Note 8 and vested immediately;
iv)
warrants for 75,000 shares (Think Warrants), valued at $31,500 using the Black-Scholes model, whereby the relative value
of the warrants was recorded to Stock-based compensation, whereas the warrants are exercisable for 5 years from the date of the
grant of June 15, 2020 at an exercise price of $.35 per share. The Think Warrants were issued to Think Equity as a placement
fee for soliciting the RedDiamond transaction as described in Roman numeral iii above and Note 8 to these financial statements
and vested immediately;
v)
warrants for 27,237 shares on June 30, 2020, valued at $11,984 using the Black-Scholes model, whereby the value of the
warrants was recorded to Stock-based compensation, whereas the warrants are exercisable for 5 years from the date of the grant
at $.40 per share to various directors of the Company for services on various committees and vested immediately;
vi)
warrants for 29,762 shares on June 30, 2020, valued at $13,095 using the Black-Scholes model, whereby the value of the
warrants was recorded to Stock-based compensation on the statement of equity, whereas the warrants are exercisable for 5 years
from the date of the grant at $.40 per share to John Lai and vested immediately;
vii)
warrants for 8,349 shares on June 30, 2020, valued at $3,674 using the Black-Scholes model, whereby the value of the warrants
was recorded to Stock-based compensation on the statement of equity, whereas the warrants are exercisable for 5 years from the
date of the grant at $.40 per share to a service provider for various production and manufacturing consulting services
and vested immediately;
viii)
warrants for 7,500 shares on July 1, 2020, valued at $3,300 using the Black-Scholes model, whereby the value of the warrants
was recorded to Stock-based compensation on the statement of equity and whereas the warrants vest monthly in equal installments
for two months from the date of the grant and are exercisable for 5 years from the date of the grant at $.40 per share to Joseph
Jasper for board service;
ix) warrants for 7,500 shares
on July 1, 2020, valued at $3,300 using the Black-Scholes model, whereby the value of the warrants was recorded to Stock-based
compensation on the statement of equity and whereas the warrants vest monthly in equal installments for two months from the date
of the grant and are exercisable for 5 years from the date of the grant at $.40 per share to Robert Rudelius for
board service;
x)
warrants for 120,000 shares on September 1, 2020, valued at $96,000 using the Black-Scholes model, whereby the value of
the warrants is recorded to Stock-based compensation on the statement of equity in equal monthly installments as they vest in
equal monthly installments for four months from the date of the grant and are exercisable for 5 years from the date of the grant
at $.35 per share to David Masters for production and manufacturing consulting services.
These
warrants’ values were arrived at by using the Black-Scholes valuation model with the following assumptions:
i)
an expected volatility of the Company’s shares on the date of the grants of between approximately 350% and 433%, which were
arrived at by taking the number of trading days during the year ended on the date of the grant multiplied by the standard deviation
of the percentage change in the closing market price on a day-by-day basis; and
ii)
risk-free rates identical to the U.S. Treasury 3-year and 5-year treasury bill rates on the date of the grants between 0.29% and
1.16%.
During
the six months ended September 30, 2019, the Company granted warrants to purchase a total of 270,000 shares of common stock
including:
i)
warrants for 270,000 shares, valued at $119,954, to three new Directors, Messrs. Scott Johnson, Gregory Cash, and James
Martin, with 135,000 vested immediately and 135,000 vesting quarterly between August 2020 and May 2021, and exercisable
over a five-year term at $.33/share.
These
warrants’ values were arrived at by using the Black-Scholes valuation model with the following assumptions:
i)
an expected volatility of the Company’s shares on the date of the grants of approximately 313%, which was arrived at by
taking the number of trading days during the year ended on the date of the grant multiplied by the standard deviation of the percentage
change in the closing market price on a day-by-day basis; and
ii)
a risk-free rate identical to the U.S. Treasury 13-week treasury bill rate on the date of the grants of 2.30%
During
the six months ended September 30, 2019, the Company cancelled 324,000 warrants to purchase a total of 324,000 shares
of common stock including:
i)
warrants for 270,000 shares, valued at $300,770 using the Black-Scholes model, $117,144 in expense of which had yet to
be taken at the time of cancellation were cancelled pursuant to the terms of such warrants dictating cancellation upon the two-month
anniversary of a cease of service; and
ii)
warrants for 54,000 shares that were never originally valued, were to be vested upon billing from service providers, and
were cancelled due to termination of these relationships.
A
summary of warrant activity for the year ending March 31, 2020 and six-month period ending September 30, 2020 is as follows:
|
|
Number of
Warrants
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Warrants
Exercisable
|
|
|
Weighted-
Average
Exercisable
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2019
|
|
|
3,818,919
|
|
|
|
2.20
|
|
|
|
3,035,035
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,905,700
|
|
|
|
2.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless warrant exercises
|
|
|
(337,500
|
)
|
|
|
1.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(90,000
|
)
|
|
|
2.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(396,000
|
)
|
|
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, March 31, 2020
|
|
|
4,901,119
|
|
|
|
2.12
|
|
|
|
4,072,369
|
|
|
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued in conjunction with convertible debt
|
|
|
632,143
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
40,000
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
290,348
|
|
|
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(36,000
|
)
|
|
|
3.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashless warrant exercises
|
|
|
(100,000
|
)
|
|
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2020
|
|
|
5,727,610
|
|
|
|
0.50
|
|
|
|
5,073,860
|
|
|
|
0.48
|
|
At
September 30, 2020, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life
is as follows:
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Range of Warrant
Exercise Price
|
|
Number of
Warrants
|
|
|
Weighted-
Average Exercise
Price
|
|
|
Weighted- Average
Remaining
Contractual Life
(Years)
|
|
|
Number of
Warrants
|
|
|
Weighted-
Average
Exercise
Price
|
|
1.20-2.00
|
|
|
3,122,192
|
|
|
|
0.34
|
|
|
|
4.35
|
|
|
|
3,278,442
|
|
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.01-4.00
|
|
|
2,145,739
|
|
|
|
0.58
|
|
|
|
2.42
|
|
|
|
1,335,739
|
|
|
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.01-10.00
|
|
|
459,679
|
|
|
|
1.23
|
|
|
|
2.01
|
|
|
|
459,679
|
|
|
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,727,610
|
|
|
|
0.50
|
|
|
|
3.44
|
|
|
|
5,073,860
|
|
|
|
0.48
|
|
For
the six-month periods ended September 30, 2020 and 2019, the total stock-based compensation on all instruments was $837,107 and
$326,078, respectively. It is expected that the Company will recognize expense after September 30, 2020 related to warrants issued,
outstanding, and valued using the Black Scholes pricing model as of September 30, 2020 in the amount of approximately $412,000.
NOTE
15 – SUBSEQUENT EVENTS
On
October 15, 2020, the Company entered into a Note Conversion Agreement with David Masters whereby the parties have agreed to convert
the principal amount of the Promissory Note as described in Note 10 of $192,500 and a $3,500 conversion fee into units with terms
to be determined by a public offering facilitated by ThinkEquity, a division of Fordham Financial Management, Inc.
On
October 13, 2020, the Company filed its S-1 Registration Statement with the SEC to attempt to raise $10,000,000.
On October 25, 2020, one warrant holder
exercised their warrant for 54,000 shares of common stock in exchange for $30,000.
On
October 26, 2020, the Company entered into a note conversion agreement to convert the RDCN (as referenced in this Form 10-Q’s
Note 8) in the total outstanding balance amount of $368,995 made up of $352,941 in principal and $16,054 in accrued interest into
1,054,271 shares of common stock at a rate of $.35 per share.
On October 26, 2020, one warrant holder
exercised their warrant for 13,500 shares of common stock in exchange for $7,500.
On October 28, 2020, one warrant holder
exercised their warrant for 51,429 shares of common stock in exchange for $28,571.
On October 28, 2020, one warrant holder
converted 27,000 warrants for common stock into 3,172 shares of common stock on a cashless basis based on an exercise and conversion
price of $1.11 per share and a 10-day variable weighted average price of $1.259 per share.
On
October 30, 2020, John Lai converted 168,750 warrants for common stock into 129,387 shares of common stock on a
cashless basis based on an exercise and conversion price of $.33 per share and a 10-day variable weighted average price
of $1.429 per share.
On
November 4, 2020, one warrant holder exercised their
warrant for 27,000 shares of common stock in exchange for $15,000.
On
November 5, 2020, one warrant holder exercised their warrant for 27,000 shares of common stock in exchange for $15,000.
On
November 5, 2020, the Company entered into an agreement with Colorado State University to conduct a study of PetVivo’s Kush
product in a minimum of 16 dogs; the study is titled “Evaluation of the effect of intra-articular injection of a proprietary
extracellular matrix for osteoarthritis-associated pain in dogs.”