U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Mark One

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

For the quarterly period ended September 30, 2021

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

For the transition period from _______ to _______

Commission File No. 000-55167

PetVivo Holdings Inc.

(Name of small business issuer in its charter)

Nevada

99-0363559

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5251 Edina Industrial Blvd.

Edina, Minnesota 55439

(Address of principal executive offices)

(952) 405-6216

(Issuer’s telephone number)

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section

229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

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

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

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

Class		Outstanding as of November 12, 2021
Common Stock, $0.001		9,731,343

PETVIVO HOLDINGS, INC.

FORM 10-Q

FOR THE PERIOD ENDED September 30, 2021

INDEX

		Page

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		3

PART I. FINANCIAL INFORMATION		4

Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30

PART II. OTHER INFORMATION		30

Item 1.	Legal Proceedings	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosure	31
Item 5.	Other information	31
Item 6.	Exhibits	32

SIGNATURES		33

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

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of PetVivo Holdings Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors, including those risk factors contained in the Company’s Form 10-K filed with the SEC on June 29, 2021 and risks discussed in other SEC filings. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I.

ITEM 1. FINANCIAL STATEMENTS

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	September 30, 2021 (Unaudited)			March 31, 2021
Assets:
Current Assets
Cash and cash equivalents	$	8,817,472		$	23,578
Inventory, net		74,637			-
Prepaid expenses and other assets		618,813			123,575
Total Current Assets		9,510,922			147,153

Property and Equipment, net		207,400			214,038

Other Assets:
Deferred offering costs		-			280,163
Operating lease right-of-use asset		144,577			157,760
Trademark and patents, net		43,024			27,932
Security deposit		8,201			8,201
Total Other Assets		195,802			474,056
Total Assets	$	9,914,124		$	835,247

Liabilities and Stockholders’ Equity (Deficit)
Current Liabilities
Accounts payable and accrued expenses	$	1,178,526		$	962,885
Convertible notes and accrued interest		-			235,671
Accrued expenses – related parties		-			36,808
Operating lease liability – current portion		26,882			26,582
PPP Loan and accrued interest		5,967			39,020
Notes payable and accrued interest - directors		-			20,000
Notes payable and accrued interest – related party		-			44,554
Note payable and accrued interest (current portion)		6,358			39,528
Total Current Liabilities		1,217,733			1,405,048
Other Liabilities
Note payable and accrued interest (net of current portion)		30,442			-
Operating lease liability (net of current portion)		117,695			131,178
Share-settled debt obligation – related party, net of debt discount		-			196,000
Total Other Liabilities		148,137			327,178
Total Liabilities	$	1,365,870		$	1,732,226
Commitments and Contingencies (see Note 13)		-			-
Stockholders’ Equity (Deficit):
Preferred stock, par value $0.001, 20,000,000 shares authorized, issued 0 and 0 shares outstanding at September 30, 2021 and March 31, 2021
Common stock, par value $0.001, 250,000,000 shares authorized, issued 9,731,343 and 6,799,113 shares outstanding at September 30, 2021 and March 31, 2021, respectively		9,731			6,799
Additional Paid-In Capital		68,246,052			57,207,648
Accumulated Deficit		(59,707,529	)		(58,111,426	)
Total Stockholders’ Equity (Deficit)		8,548,254			(896,979	)
Total Liabilities and Stockholders’ Equity (Deficit)	$	9,914,124		$	835,247

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 September 30,						Six Months Ended September 30,
	2021			2020			2021			2020
Revenues	$	4,977		$	4,790		$	9,122		$	6,797

Cost of Sales		-			350			5,051			350
Gross Profit (Loss)		4,977			4,440			4,071			6,447

Operating Expenses:

Sales and Marketing		235,767			35,580			285,498			82,262
Research and Development		116,380			-			253,317			-
General and Administrative		756,186			787,427			1,087,131			1,184,820

Total Operating Expenses		1,108,333			823,007			1,625,946			1,267,082

Operating Loss		(1,103,356	)		(818,567	)		(1,621,875	)		(1,260,635	)

Other Income (Expense)
Gain on Sale of Asset		-			-			-			482
Gain on Debt Restructuring		-			516			-			516
Forgiveness of PPP loan and accrued interest		-			-			31,680			-
Derivative Expense		-			(389,300	)		-			(731,500	)
Interest Expense		(2,118	)		(140,651	)		(5,908	)		(170,873	)
Total Other Income (Expense)		(2,118	)		(529,435	)		25,772			(901,375	)

Net Loss before taxes		(1,105,474	)		(1,348,002	)		(1,596,103	)		(2,162,010	)

Income Tax Provision		-			-			-			-

Net Loss	$	(1,105,474	)	$	(1,348,002	)	$	(1,596,103	)	$	(2,162,010	)

Net Loss Per Share:
Basic and Diluted	$	(0.13	)	$	(0.23	)	$	(0.21	)	$	(0.37	)

Weighted Average Common Shares Outstanding:
Basic and Diluted		8,749,233			5,839,086			7,757,099			5,787,107

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

Shares retroactively restated for 1-for-4 reverse stock split in December of 2020

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Six Months Ended September 30, 2021


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

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

Six Months Ended June 30, 2020

	Shares		Amount		Capital			Deficit			Issued			Total
	Common Stock				Additional Paid-in			Accumulated			Common Stock to be
	Shares		Amount		Capital			Deficit			Issued			Total
Balance at March 31, 2020		5,727,965	$	5,728	$	53,494,748		$	(5,488,645	)	$	52,000		$	(1,036,170	)
Common stock and warrants sold		20,000		20		51,980			-			(54,000	)		-
Warrants issued with convertible debt		-		-		91,500			-			-			91,500
Stock-based compensation		40,000		30		183,214			-			-			183,244
Net loss		-		-		-			(814,008	)		-			(814,008	)
Balance at June 30, 2020		5,777,965	$	5,788	$	53,821,442		$	(55,402,653	)		-		$	(1,575,433	)

Common stock sold		226,072		226		316,274			-			-			316,500
Stock-based Compensation		174,752		175		653,688			-			-			653,863
Stock granted for debt conversion		25,002		25		25,357			-			-			25,382
Cashless warrant exercises		15,257		15		(15	)		-			-			-
Net loss		-		-		-			(1,348,002	)		-			(1,348,002	)
Balance at September 30, 2020		6,219,048	$	6,219	$	54,816,746		$	(56,750,655	)	$	-		$	(1,927,690	)

PETVIVO HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Six Months Ended
	September 30, 2021			September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss For The Period	$	(1,596,103	)	$	(2,162,010	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Derivative expense		-			731,500
Stock-based compensation		159,766			837,107
Depreciation and amortization		27,689			60,665
Amortization of debt discount		-			148,284
Forgiveness of PPP loan and accrued interest		(31,680	)		-
Intangible impairment		-			15,577
Gain on debt restructuring		-			(516	)
Gain on sale of asset		-			(482	)
Changes in Operating Assets and Liabilities
Increase in prepaid expenses and other assets		(285,238	)		(45,184	)
Increase in accounts receivable		-			(1,250	)
Increase in inventories		(74,637	)		-
Decrease in deferred offering costs		280,163			-
Interest accrued on convertible notes payable		192			15,876
Interest accrued on notes payable - related party		4,013			5,603
Interest accrued on notes payable		-			636
Increase (decrease) in accounts payable and accrued expense		212,506			(42,292	)
Increase (decrease) in accrued expenses - related party		(36,808	)		(35,821	)
Net Cash Used In Operating Activities		(1,340,137	)		(472,307	)

CASH FLOWS FROM INVESTING ACTIVITIES
Sale of equipment		-			482
Purchase of equipment		(17,059	)		(81,874	)
Disbursements for patents and trademarks		(19,154	)		(26,599	)
Net Cash Used in Investing Activities		(36,213	)		(107,991

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock and warrants sold		10,200,881			368,500
Proceeds from exercise of warrants		42,031			-
Proceeds from PPP loan		-			38,665
Proceeds from notes payable		-			27,500
Proceeds from convertible notes		-			322,500
Repayments of convertible notes		-			(13,962
Repayments of notes payable		(2,728	)		(244	)
Repayments of PPP loan		(1,373	)		-
Repayments of notes payable - related party		(48,267	)		(7,500	)
Repayments of notes payable - directors		(20,300	)		-
Net Cash Provided by Financing Activities		10,170,244			735,459

Net Increase in Cash		8,793,894			155,161
Cash at Beginning of Period		23,578			10,582
Cash at End of Period	$	8,817,472		$	165,743

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During The Period For:
Interest	$	8,468		$	26,623

SUPPLEMENTAL DISCLOSURE ON NON-CASH FINANCING AND INVESTING ACTIVITIES
Derivative treated as debt discount	$	-		$	352,941
Stock granted for debt conversion	$	232,658		$	25,383
Stock granted for share-settled debt obligation conversion	$	196,000		$	-
Stock granted for investor relations services	$	210,000		$	-
Note payable – related party granted for release of claim to accrued salary	$	-		$	195,000
Note payable – related party converted into common stock	$	-		$	25,382

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

PetVivo Holdings, Inc.

Notes to Financial Statements

September 30, 2021

(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 was effectuated on December 29, 2020; concurrently, the Company increased its authorized shares of common stock from 225,000,000 to 250,000,000; all share and per share data has been retroactively adjusted for this reverse split for all periods presented.

(C) Principles of Consolidation

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

(D) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include 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.

(E) Cash and Cash Equivalents

The Company considers all highly-liquid, temporary cash investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at September 30, 2021 and March 31, 2021.

(F) Concentration-Risk

The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. As of September 30, 2021, the Company did have cash balances in excess of the federally insured limits. At March 31, 2021, the Company did not have any cash balances in excess of the federally insured limits.

(H) Property & Equipment

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

(I) 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 considering events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

(J) 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 3,764,798 warrants outstanding as of September 30, 2021, with varying exercise prices ranging from $1.20 to $6.67 per share. The weighted average exercise price for these warrants is $4.95 per share. These warrants are excluded from the weighted average number of shares because they are considered antidilutive.

The Company has 1,431,903 warrants outstanding as of September 30, 2020, with varying exercise prices ranging from $1.20 to $8.88 per share. The weighted average exercise price for these warrants is $2.00 per share. These warrants are excluded from the weighted average number of shares because they are considered antidilutive.

The Company uses the guidance in Accounting Standards Codification 260 (“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.

(K) Revenue Recognition

The Company recognizes revenue on arrangements in accordance with FASB ASC No. 606, “Revenue From Contracts With Customers”. Revenue is recognized upon shipment of our pet care products to our customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

(L) Research and Development

The Company expenses research and development costs as incurred.

(M) Fair Value of Financial Instruments

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

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

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

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

●

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

The Company’s financial instruments consist of accounts receivable, accounts payable, accrued expenses, accrued expenses – related parties, notes payable and accrued interest, and notes payable and accrued interest - related party, notes payable – directors and others. The carrying amount of the Company’s financial instruments approximates their fair value as of September 30, 2021 and March 31, 2021, 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 had no assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and March 31, 2021.

(N) Stock-Based Compensation - Non-Employees

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

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

Pursuant to ASC Section 505-50-30, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur. If the Company is a newly formed corporation or shares of the Company are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as 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.

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

● Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB 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.

● 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.

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

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

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

(O) 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.

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

(P) Inventory

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

(Q) Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this ASU supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use (“ROU”) asset representing its right to use the underlying asset for the lease term. The Company adopted Topic 842 on April 1, 2019 and resulted in a right of use asset and liability of $154,917.

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

NOTE 2 – INVENTORY

As of September 30, 2021 and March 31, 2021, the Company had inventory of $116,105 and $47,068 of inventory, respectively, however, reserves of $41,468 and $47,068 for each respective period were taken because of the substantial doubt in the Company’s ability to utilize this inventory to obtain material sales.

The inventory components are as follows:

SCHEDULE OF INVENTORY

	September 30, 2021			March 31, 2021
Finished Goods	$	34,123		$	36,973
Raw Materials		80,910			8,773
Manufacturing Supplies		1,072			1,322
Inventory, Gross		116,105			47,068
Reserve for Obsolete Inventory		(41,468	)		(47,068	)
Total Net	$	74,637		$	-

The Company recognized income of $3,289 related to the change in the reserve of obsolete inventory for the year ended March 31, 2021.

NOTE 3 – PREPAID EXPENSES AND DEFERRED OFFERING COSTS

As of September 30, 2021, the Company had $618,813 in prepaid expenses and other assets consisting primarily of $334,000 in insurance costs, $224,000 in investor relations services, $28,000 in tradeshows and $25,000 in Nasdaq fees.

As of March 31, 2021, the Company had $123,575 in prepaid expenses and other assets consisting primarily of $78,000 in marketing services, $9,000 in annual OTC listing license and $9,000 in insurance costs. The Company also had deferred offering costs of $280,163 consisting of legal and accounting costs incurred related to our S-1 and S-1/A filings with the Securities and Exchange Commission on October 13, 2020, December 31, 2020 and March 29, 2021, respectively, which was recorded as a reduction of proceeds as a result of the Company raising capital in its registered offering.

NOTE 4 –PROPERTY AND EQUIPMENT

The components of property and equipment were as follows:

SCHEDULE OF PROPERTY AND EQUIPMENT

	September 30, 2021			March 31, 2021
Leasehold improvements	$	198,015		$	198,015
Production equipment		145,907			128,849
R&D equipment		25,184			25,184
Furniture		10,130			10,130
Total, at cost		379,236			362,178
Accumulated depreciation		(171,836	)		(148,140	)
Total Net	$	207,400		$	214,038

During the three months ended September 30, 2021 and 2020, depreciation expense was $11,756 and $7,474, respectively. During the six months ended September 30, 2021 and 2020, depreciation expense was $ 23,627 and $13,963, respectively.

NOTE 5 – INTANGIBLE ASSETS

The components of intangible assets, all of which are finite-lived, were as follows:

SCHEDULE OF INTANGIBLE ASSETS

	September 30, 2021			March 31, 2021
Patents	$	3,860,057		$	3,840,903
Trademarks		26,142			26,142
Total at cost		3,886,199			3,867,045
Accumulated Amortization		(3,843,175	)		(3,839,113	)
Total net	$	43,024		$	27,932

During the three-month periods ended September 30, 2021 and 2020, amortization expense was $2,333 and $1,385, respectively. During the six-month periods ended September 30, 2021 and 2020, amortization expense was $4,062 and $46,702, respectively.

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The components of accounts payable and accrued expenses were as follows:

	September 30, 2021		March 31, 2021
Accounts payable	$	785,650	$	741,111
Accrued payroll and related taxes		392,876		221,774

Total	$	1,178,526	$	962,885

NOTE 7 - RELATED PARTY NOTES PAYABLE

At September 30, 2021 and March 31, 2021, the Company is obligated for a related party note payable and accrued interest in the total amount of $0 and $44,554, respectively; the maturity date of this note was April 30, 2020. The related party note payable terms are accrual of interest at eight percent annually with payments of $3,100 per month, which are applied to interest first, then principal. The terms also include a stipulation that if the Company receives additional financing during any 24-month period from the date of the note in the amount greater than $3,500,000, the Company will immediately pay the officer the principal amount of the note along with all interest due. Please see Note 10 to these financial statements for more information on this note. The Company repaid this related party note with net proceeds from its Public Offering. See Note 15 – Common Stock and Warrants – Units sold in Public Offering.

The Company entered into notes payable with four directors in March 2021 which accrue interest at a rate of 6% annually and are due in September 2021. At September 30, 2021 and March 31, 2021, the principal and accrued interest outstanding on these notes is $0 and $20,000, respectively. The Company repaid these director notes with net proceeds from its Public Offering.

NOTE 8 – NOTES PAYABLE AND CONVERTIBLE NOTES

In January 2020, the Company entered into a lease amendment for our corporate office facility whereby the lease term was extended through November of 2026 in exchange for a loan of $42,500. The note payable accrues interest at a rate of 6% per annum. At September 30, 2021 and March 31, 2021, the amount outstanding on the note was $36,800 and $39,528, respectively. At March 31, 2021, the note is classified as a current liability as the Company has not been current on its loan payments. At September 30, 2021, the Company is current on its loan payments and classified $6,358 as a current liability and $30,442 in other liabilities.

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 March 31, 2021, the Company was obligated for the outstanding balance of $39,020. 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. In June 2021, the Company received forgiveness of principal and accrued interest of $31,680. The remaining principal balance of $5,967 will be paid in monthly payments of $738 ending May 1, 2022.

At March 31, 2021, the Company is obligated for several convertible notes payable in the total amount of $235,671 made up of $230,000 in principal and $5,671 in interest. These convertible notes accrue interest at a rate of 10%. Accrued interest is due and payable each calendar quarter in cash. In April 2021, these notes and accrued interest of $2,658 were converted into 80,522 shares of common stock at a conversion price of $2.89 per share. The remaining accrued interest was paid in cash. At September 30, 2021, there is no outstanding principal or accrued interest outstanding on these notes.

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 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 $137,255. 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 15 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. For the year ended March 31, 2021, the Company amortized a pro-rata portion of the discount on the debt on a straight-line basis to interest expense in the amount of $173,174. At October 26, 2020, the Company entered into a note conversion agreement that converted the then outstanding balance of $368,995 made up of $352,941 in principal and $16,054 in accrued interest into 263,568 shares of common stock at a rate of $1.40 per share when the market price of the stock was $6.56. The settlement relieved a derivative liability in the amount of $1,908,100, outstanding principal and interest of $368,995, and debt discount in the amount of $181,187 in exchange for stock valued on the date of the settlement in the total amount of $1,729,005; this triggered a gain on debt extinguishment of $366,903. Please see Note 11 to these financial statements for more information on this conversion. As of March 31, 2021, the Company had $-0- in unamortized debt discount remaining and owed $-0- in principal and interest pursuant to the RDCN.

NOTE 9 – SHARE-SETTLED DEBT OBLIGATION – RELATED PARTY

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 required 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).

On October 15, 2020, the Company entered into a note conversion agreement with David Masters whereby the Company and Dr. Masters both agreed to convert his note payable in the then outstanding balance of $193,158 made up of $192,500 in principal and $658 in accrued interest into units, consisting of common stock and warrants, as of the date of the closing of the Company’s Public Offering. Pursuant to this conversion agreement the Company agreed to convert $196,000 made up of $192,500 in principal and a conversion fee of $3,500 and Dr. Masters agreed to forego the interest accrued in the amount of $658. The conversion fee of $3,500 was treated as a discount on the debt and the $658 was treated as a reduction of the discount on debt. As of March 31, 2021, the outstanding balance of $196,000 for this share-settled debt obligation had not yet been converted and is recorded as a liability due to the fact the Company had not yet been converted and is recorded as a liability as the Company had not agreed to terms of our S-1 offering currently being conducted. At the closing of the Company’s Public Offering on August 13, 2021, the outstanding balance of this debt obligation converted into 43,556 units, which consists of 43,556 shares of common stock and warrants to purchase 43,556 shares of the Company’s common stock.

At September 30, 2021 and March 31, 2021, the Company was obligated for principal and accrued interest in the amounts of $-0- and $-0-, respectively, related to the Promissory Note and $0 and $44,554 respectively, related to the Amendment to Promissory Note.

NOTE 10 – DERIVATIVE LIABILITY AND EXPENSE

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 instruments, 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 June 30, 2020, and September 30, 2020, the issuance and balance sheet dates, respectively:

	June 15, 2020			June 30, 2020			September 30, 2020
Stock price on valuation date	$	.42		$	.44		$	.80
Conversion price	$	.28		$	.28		$	.28
Days to maturity		273			258			166
Weighted-average volatility*		367	%		367	%		327	%
Risk-free rate		.18	%		.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 June 30, 2020, the Company revalued the derivative liability at $548,200 and recognized $21,400 to derivative expense and derivative liability. At September 30, 2020, the Company revalued the derivative liability at $937,500 and recognized $389,300 to derivative expense and derivative liability. On October 26, 2020, the Company entered into a conversion agreement whereby the RDCN was converted into 263,568 shares of common stock at a rate of $1.40 per share; this triggered a gain on extinguishment of debt in the amount of $366,903 as described in Note 8. There was no remaining derivative liability at December 31, 2020.

NOTE 11–ACCRUED EXPENSES – RELATED PARTY

At March 31, 2021, the Company was obligated to pay $36,808 in accrued expenses due to a related party. Of the total, $28,965 was made up of accounts payable, while $7,843 was made up of accrued salaries.

In August 2021, the total amount due to the related party was paid from the proceeds of its Public Offering and there is no remaining liability at September 30, 2021.

NOTE 12–RETIREMENT PLAN

In February 2021, the Company established a 401(k)-retirement plan for its employees in which eligible employees can contribute a percentage of their compensation. The Company may also make discretionary contributions. The Company did not make any contributions to the plan for the three months ended September 30, 2021.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

The Company entered into an eighty-four-month lease for 3,577 square feet of newly constructed office, laboratory and warehouse space located in Edina, Minnesota in May 2017. The base rent has annual increases of 2% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. This lease is terminable by the landlord if damage causes the property to no longer be utilized as an integrated whole and by the Company if damage causes the facility to be unusable for a period of 45 days. In January 2020, the Company entered into a lease amendment whereby agreed to extend the lease term through November of 2026 in exchange for receipt of a loan of $42,500 recorded to notes payable and a grant of $7,500, which has been recorded to accrued expenses and will be amortized over the remainder of the lease term. The base rent as of September 30 and March 31, 2021 is $2,205.

Rent expense for the three-month periods ended September 30, 2021 and September 30, 2020 were $22,892 and $13,568, respectively. Rent expense for the six-month periods ended September 30, 2021 and September 30, 2020 were $ 34,403 and $27,136, respectively.

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2021:


2022	$	13,405
2023		27,167
2024		27,710
2025		28,265
2026		28,830
2027		19,474
Total		144,852
Less: amount representing interest		(275	)
Total	$	144,577

In compliance with ASC 842, the Company recognized, based on the extended lease term to November 2026 and a treasury rate of 0.12%, an operating lease right-to-use assets for approximately $189,600 and corresponding and equal operating lease liabilities for the lease. As of September 30, 2021, the present value of future base rent lease payments based on the remaining lease term and weighted average discount rate are approximately 6 years and 0.12%, respectively, are as follows:

SCHEDULE OF BASE RENT LEASE PAYMENTS

Present value of future base rent lease payments		$	144,577
Present value of future base rent lease payments – net		$	144,577

As of September 30, 2021, the present value of future base rent lease payments – net is classified between current and non-current assets and liabilities as follows:

SEC Form 10-Q filed by PetVivo Holdings Inc.