GENERAL
PetVivo Holdings, Inc. (the "Company," "PetVivo," "we" or "us) is an emerging
biomedical device company focused on the manufacturing, commercialization and
licensing of innovative medical devices and therapeutics for animals. The
Company has a pipeline of seventeen products for the treatment of animals. A
portfolio of nineteen patents protects the Company's biomaterials, products,
production processes and methods of use. The Company began commercialization of
its lead product Spryng™ with OsteoCushion™ Technology, a
veterinarian-administered, intraarticular injection for the management of
lameness and other joint afflictions such as osteoarthritis in dogs and horses,
in the second quarter of its fiscal year ended March 31, 2022.
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In August 2021, we received net proceeds of approximately $9.7 million in a
registered public offering ("Public Offering") of 2.5 million units at a public
offering price of $4.50 per unit. Each unit consisted of one share of our common
stock and one warrant to purchase one share of our common stock at an exercise
price of $5.625 per share. The shares of common stock and warrants were
transferable separately immediately upon issuance. In connection with the Public
Offering, the Company's common stock and warrants were registered under Section
12(b) of the Exchange Act and began trading on The Nasdaq Capital Market, LLC
under the symbols "PETV" and "PETVW," respectively.
The Company was incorporated in March 2009 under Nevada law under a different
name. The Company operates as one segment from its corporate headquarters in
Edina, Minnesota.
CURRENT BUSINESS OPERATIONS
The Company is primarily engaged in the business of commercializing and
licensing products in the veterinary market to treat and/or manage afflictions
of companion animals such as dogs and horses. Most of our technology was
developed for human biomedical applications, and we intend to leverage the
investments already expended in their development to commercialize treatments
for pets in a capital and time-efficient way.
Many of the Company's products are derived from proprietary biomaterials that
simulate a body's cellular tissue by virtue of their reliance upon natural
protein and carbohydrate compositions which incorporate such "tissue building
blocks" as collagen, elastin and heparin. Since these are naturally-occurring in
the body, we believe they have an enhanced biocompatibility with living tissues
compared to synthetic biomaterials such as those based upon alpha-hydroxy
polymers (e.g. PLA, PLGA and the like) and other "natural" biomaterials that may
lack the multiple proteins incorporated into our biomaterials. These proprietary
protein-based biomaterials appear to mimic the body's tissue thus allowing
integration and tissue repair in long-term implantation in certain applications.
Our initial product, Spryng™ is a veterinary medical device designed to help
reinforce articular cartilage tissue for the management of lameness and other
joint related afflictions, such as osteoarthritis, in companion animals. Spryng™
is an intra-articular injectable product of biocompatible and insoluble
particles that are slippery, wet-permeable, durable, and resilient to enhance
the force cushioning function of the synovial fluid and cartilage. The particles
mimic natural cartilage in composition, structure and hydration. Multiple joints
can be treated simultaneously. Our particles are comprised of collagen, elastin
and heparin, similar components found in natural cartilage. These particles show
an effectiveness to reinforce and augment the cartilage, which enhances the
functionality of the joint (e.g. provide cushion or shock-absorbing features to
the joint and to provide joint lubricity).
Osteoarthritis, a common inflammatory joint disease in both dogs and horses, is
a chronic, progressive, degenerative joint disease that is caused by a loss of
synovial fluid and/or the deterioration of joint cartilage. Osteoarthritis
affects approximately 14 million dogs and 1 million horses in the $11 billion
companion animal veterinary care and product sales market.
Despite the market size, veterinary clinics and hospitals have very few
treatments and/or drugs for use in treating osteoarthritis in dogs, horses and
other pets. As there is no cure for osteoarthritis, current solutions treat
symptoms but do not manage the cause. The current treatment for osteoarthritis
in dogs generally consists of the use of nonsteroidal anti-inflammatory drugs
(or "NSAIDs") which are approved to alleviate pain and inflammation but present
the potential for side effects relating to gastrointestinal, kidney and liver
damage and do not halt or slow joint degeneration. The Company offers an
alternative to traditional treatments that only address the symptoms of the
affliction. Spryng™ with OsteoCushion™ technology addresses the affliction, loss
of synovial fluid and/or the deterioration of joint cartilage, rather than
treating just the symptoms and, to the best our knowledge, has elicited minimal
adverse side effects in dogs and horses. Spryng™-treated dogs and horses have
shown an increase in activity even after they no longer are receiving pain
medication or other treatments. Other treatments for osteoarthritis include
steroid and/or hyaluronic acid injections, which are used for treating pain,
inflammation and/or joint lubrication, but can be slow acting and/or short
lasting.
We believe Spryng™ is an optimal solution to safely improve joint function in
animals for several reasons:
? Spryng™ addresses the underlying problems which relate to deterioration of
cartilage causing bones to contact each other and a lack of synovial fluid.
Spryng™ provides a biocompatible lubricious cushion to the joint, which
establishes a barrier between the bones, thereby protecting the remaining
cartilage and bone.
? Spryng™ is easily administered with the standard intra-articular injection
technique. Multiple joints can be treated simultaneously.
? Case studies indicate many dogs and horses have long-lasting multi-month
improvement in lameness
after having been treated with Spryng™.
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? After receiving a Spryng™ injection, many canines are able to discontinue the
use of NSAID's, eliminating
the risk of negative side effects.
? Spryng™ is an effective and economical solution for treating osteoarthritis. A
single injection of Spryng™ is
approximately $600 to $900 per joint and typically lasts for at least 12
months.
Historically, drug sales represent up to 30% of revenues at a typical veterinary
practice (Veterinary Practice News). Revenues and margins at veterinary
practices are being eroded because online, big-box and traditional pharmacies
have recently started filling veterinary prescriptions. Veterinary practices are
looking for ways to replace lost prescription revenues with safe and effective
products. Spryng™ is a veterinarian-administered medical device that should
expand practice revenues and margins. We believe that the increased revenues and
margins provided by Spryng™ will accelerate its adoption rate and propel it
forward as the standard of care for canine and equine lameness related to or due
to synovial joint issues.
Spryng™ is classified as a veterinary medical device under the United States
Food and Drug Administration ("FDA") rules and pre-market approval is not
required by the FDA. Spryng™ completed a safety and efficacy study in rabbits in
2007. Since that time, more than 800 horses and dogs have been treated with
Spryng™. We entered into a clinical trial services agreement with Colorado State
University on November 5, 2020. We expect this university clinical study to be
completed in November 2023. Additionally, the Company successfully completed an
equine tolerance study in March 2022 and began a canine clinical study with
Ethos Veterinary Health in May 2022 with anticipated completion in fiscal 2023.
We anticipate these and other studies that we plan to initiate will be primarily
used to expand our distribution outlets since the large international and
national distributors generally require a third-party university study and other
third-party studies prior to including a product in their catalog of products.
We commenced sales of Spryng™ in the second quarter of fiscal 2022 and plan to
increase our commercialization efforts of Spryng™ in the United States through
the use of sales reps, clinical studies and market awareness to educate and
inform key opinion leaders on the benefits of Spryng™. We plan to support our
commercialization efforts with the use of social media and other methods to
educate and inform key opinion leaders and decision makers at the top
distributors and high prescriber veterinarians for companion animals of the
availability and benefits of Spryng™.
We have established an ISO 7 certified clean room manufacturing facility located
in our Minneapolis facility using a patented and scalable self-assembly
production process, which reduces the infrastructure requirements and
manufacturing risks to deliver a consistent, high-quality product while being
responsive to volume requirements. We recently began manufacturing commercial
quantities and anticipate our ISO 7 certified facility will be able to handle
projected production in units for at least the next five years.
We entered into a Distribution Services Agreement ("Agreement") with MWI
Veterinary Supply Co. on June 17, 2022. Pursuant to the Agreement, we appointed
MWI to distribute, advertise, promote, market, supply and sell the Company's
lead product, Spryng™ on an exclusive basis for two (2) years within the United
States (the "Territory"), transitioning to a non-exclusive basis thereafter;
provided however that the Company shall extend the exclusivity for an additional
one (1) year if MWI achieves certain performance targets agreed upon by the
parties. The Company can continue to sell Spryng™ within the Territory to
established accounts, which includes: (a) customers who have purchased Spryng™
from the Company prior to the date of the Agreement, (b) customers who require
that they deal directly with the Company, (c) governmental agencies, and (d)
customers that order via the internet who are not directly solicited by MWI to
purchase the Spryng™. All customers must be licensed veterinary practices.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our 2022 10-K Report
and the consolidated financial statements and related notes in Item 1, Financial
Statements appearing elsewhere in this Quarterly Report on Form 10-Q ("10-Q
Report"). The following discussion may contain forward-looking statements, and
our actual results may differ materially from the results suggested by these
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed in Part I, Item 1A of our 2022 10-K
Report under the heading "Risk Factors," as updated and supplemented by risks
described in other SEC filings. The Company assumes no obligation to revise or
update any forward-looking statements for any reason, except as required by law.
We are a smaller reporting company and have not generated any material revenues
to date and have incurred substantial losses in connection with our limited
operations. We need substantial capital to pursue our current plans to
commercialize our initial product, Spyng™.
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RESULTS OF OPERATION
For the Three Months Ended
June 30, 2022 June 30, 2021
Revenues $ 58,174 $ 4,145
Total Cost of Sales 53,020 5,051
Total Operating Expenses 1,971,247 517,613
Total Other Income 665 27,890
Net Loss $ (1,965,428 ) $ (490,629 )Net loss per share - basic and diluted $ (0.20 ) $ (0.07 )
For The Three Months Ended June 30, 2022 Compared to The Three Months Ended June
30, 2021
Total Revenues. Revenue was $58,174 and $4,145 for three months ended June 30,
2022 and 2021, respectively, and consisted of Spryng™ sales to veterinary
clinics. The Company began commercialization of its Spryng™ product in September
2021, which resulted in increased revenues in the three months ended June 30,
2022 compared to the same period in the prior year.
Total Cost of Sales. Cost of sales was $53,020 and $5,051 for the three months
ended June 30, 2022 and 2021, respectively. Cost of sales includes product costs
related to the sale of products and labor and overhead costs. The Company began
commercialization of its Spryng™ product in September 2021, which resulted in
increased cost of sales in the three months ended June 30, 2022 compared to the
same period in the prior year.
Operating Expenses. Operating expenses were $1,917,247 and $517,613 for the
three months ended June 30, 2022 and 2021, respectively. Operating expenses
consisted of general and administrative, sales and marketing, and research and
development expenses. The Company began commercialization of its Spryng™ product
in September 2021, which resulted in increased general and administrative
expenses and sales and marketing expenses related to the sale of its Spryng™
product in the three months ended June 30, 2022 compared to the same period in
the prior year.
General and administrative ("G&A") expenses were $1,243,021 and $330,945 for the
three months ended June 30, 2022 and 2021, respectively. G&A expenses include
compensation and benefits, contracted services, consulting fees, stock
compensation and incremental public company costs. The increase in G&A expenses
was related to compensation and benefits, legal and consulting fees, stock
compensation and incremental public company costs.
Sales and marketing expenses were $656,569 and $49,731 for the three months
ended June 30, 2022 and 2021, respectively. Sales and marketing expenses include
compensation, consulting, tradeshows and stock compensation costs to support the
launch of our Spryng™ product.
Research and development ("R&D") expenses were $71,656 and $136,937 for the
three months ended June 30, 2022 and 2021, respectively. The decrease in R&D
expenses was related to the timing of clinical studies in the three months ended
June 30, 2022 compared to the same period in the prior year.
Operating Loss. As a result of the foregoing, our operating loss was $1,966,093
and $518,519 for the three months ended June 30, 2022 and 2021, respectively.
The increase in our operating loss, was related to the costs to support the
launch of Spryng™ and the incremental public company costs incurred in the three
months ended June 30, 2022 compared to the same period in the prior year.
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Other Income. Other income was $665 for the three months ended June 30, 2022 as
compared to other income of $27,890 for the three months ended June 30, 2021.
Other income in 2022 consisted of net interest income. Other income in 2021
consisted of the forgiveness of PPP Loan and accrued interest of $31,680
partially offset by interest expense of $3,790.
Net Loss. Our net loss for the three months ended June 30, 2022 as $1,965,428 or
($0.20) per share as compared to a net loss of $490,629 or ($0.07) per share for
the three months ended June 30, 2021. The increase in our net loss was related
to the costs to support the launch of Spryng™ and the incremental public company
costs incurred in the three months ended June 30, 2022 compared to the same
period in the prior year. The weighted average number of shares outstanding was
9,988,361 compared to 6,946,353 for the three months ended June 30, 2022 and
2021, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On August 13, 2021, we closed an underwritten public offering of 2,500,000
units, at a price of $4.50 per unit. Net proceeds from the Public Offering were
approximately $9,781,000, net of commissions and expenses of the offering.
As of June 30, 2022, our current assets were $5,069,038, including $4,378,668 in
cash and cash equivalents. In comparison, our current liabilities as of that
date were $1,220,632 including $1,154,501 of accounts payable and accrued
expenses. Our working capital as of June 30, 2022 was $3,848,406.
The Company has continued to realize losses from operations. However, as a
result of our Public Offering, we believe we will have sufficient cash to meet
our anticipated operating costs and capital expenditure requirements for at
least the next seven months. We will need to raise additional capital in the
future to support our efforts to commercialize Spryng™ and our ongoing
operations. We expect to continue to raise additional capital through the sale
of our securities from time to time for the foreseeable future to fund our
business expansion. Our ability to obtain such additional capital will likely be
subject to various factors, including our overall business performance and
market conditions. There can be no guarantee that the Company will be successful
in its ability to raise additional capital to fund its business plan.
Net Cash Used in Operating Activities - We used $1,701,699 of net cash in
operating activities for the three months ended June 30, 2022. This cash used in
operating activities was primarily attributable to our net loss of $1,965,428,
partially offset by stock compensation expense of $231,231 and an increase in
accounts payable and accrued expenses of $46,742.
Net Cash Used in Investing Activities - We used $24,897 of net cash in investing
activities for the three months ended June 30, 2022, consisting of costs
capitalized for manufacturing and computer equipment.
Net Cash Provided by Financing Activities - During the three months ended June
30, 2022, we used net cash of $1,563 in financing activities consisting of
$1,563 in repayments of a note payable.
Inventory
Inventories are stated at cost, subject to the lower of cost or net realizable
value. Cost includes materials, labor, and manufacturing overhead related to the
purchase and production of inventories. Net realizable value is the estimated
selling price less estimated costs of completion, disposal, and transportation.
We regularly review inventory quantities on hand through an inventory count.
At June 30, 2022, the Company's inventory has a carrying value of $180,874 and
is broken down into $22,989 of finished goods, $31,455 of work in process and
$126,430 in raw materials.
At March 31, 2022, the Company's inventory has a carrying value of $98,313 and
is broken down into $11,889 of finished goods, $22,960 of work in process and
$63,464 in raw materials.
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MATERIAL COMMITMENTS
Notes Payable
As of June 30, 2022, we are obligated on a note and accrued interest of $32,187.
OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2022, and as of the date of this Quarterly Report, we do not have
any off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
GOING CONCERN
The independent auditors' report accompanying our 2022 10-K Report and financial
statements contains an explanatory paragraph expressing substantial doubt about
our ability to continue as a going concern. The financial statements have been
prepared assuming that we will continue as a going concern, which contemplates
that we will realize our assets and satisfy our liabilities and commitments in
the ordinary course of business. In August 2021, we raised approximately
$9,781,000 from the sale of units in a Public Offering. Our working capital at
June 30, 2022 was $3,848,406. We believe this working capital is sufficient to
fund operations for the next seven months (see "Liquidity and Capital Resources"
above).
We have continued to realize losses from operations. However, as a result of our
Public Offering, we believe we will have sufficient cash to meet our anticipated
operating costs and capital expenditure requirements for at least the next seven
months. We will need to raise additional capital in the future to support our
efforts to commercialize Spryng™ and our ongoing operations. We expect to
continue to raise additional capital through the sale of our securities from
time to time for the foreseeable future to fund our business expansion. Our
ability to obtain such additional capital will likely be subject to various
factors, including our overall business performance and market conditions. There
can be no guarantee that the Company will be successful in its ability to raise
additional capital to fund its business plan.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance with generally
accepted accounting standards in the United States of America. Our significant
accounting policies are described in Note 1 to our consolidated financial
statements attached hereto. We believe these accounting policies involve the
most significant judgments and estimates used in the preparation of the
consolidated financial statements.
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company has reviewed the FASB issued ASU accounting pronouncements and
interpretations thereof that have effectiveness dates during the periods
reported and in future periods. The Company has carefully considered the new
pronouncements that alter previous generally accepted accounting principles and
do not believe that any new or modified principles will have a material impact
on the Company's reported financial position or operations in the near term. The
applicability of any standard is subject to the formal review of the Company's
financial management.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments
and Contracts on an Entity's Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under
current GAAP. Consequently, more convertible debt instruments will be reported
as a single liability instrument with no separate accounting for embedded
conversion features. The ASU removes certain settlement conditions that are
required for equity contracts to qualify for the derivative scope exception,
which will permit more equity contracts to qualify for the exceptions. The ASU
also simplifies the diluted net income per share calculation in certain areas.
The new guidance is effective for fiscal years beginning after December 15,
2023, including interim periods within those fiscal years, and early adoption is
permitted. The Company is currently evaluating the impact of the adoption of the
standard on the consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260),
Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock
Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity's Own
Equity (Subtopic 815-40). The new ASU addresses issuer's accounting for certain
modifications or exchanges of freestanding equity-classified written call
options. This amendment is effective for all entities, for fiscal years
beginning after December 15, 2021, including interim periods within those fiscal
years. Early adoption is permitted. The adoption of this standard had no impact
on the consolidated financial statements.
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All other newly issued but not yet effective accounting pronouncements have been
deemed either immaterial or not applicable.
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PETVIVO HOLDINGS, INC. 
