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 June 30, 2022
☐ 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. 001-40715
PetVivo Holdings, Inc.
(Exact name of registrant as specified 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) (Zip Code)
(952) 405-6216
(Registrant’s telephone number, including area code)
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 |
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001
(Title of Class)
Indicate by check mark 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 every Interactive Data File required to be submitted 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 such files. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| 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 check mark 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 August 10, 2022 | |
| Common Stock, $0.001 |
PETVIVO HOLDINGS, INC.
FORM 10-Q
FOR THE PERIOD ENDED June 30, 2022
INDEX
| Page | ||
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS | i | |
| PART I. FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
| Item 3. | Qualitative and Quantitative Disclosures About Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II. OTHER INFORMATION | 22 | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 22 |
| Item 3. | Defaults Upon Senior Securities | 22 |
| Item 4. | Mine Safety Disclosure | 22 |
| Item 5. | Other information | 22 |
| Item 6. | Exhibits | 23 |
| SIGNATURES | 24 | |
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Information included in this Quarterly Report on 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 in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors” included in documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for our fiscal year ended March 31, 2022 (“2022 10-K Report”) and risks described 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.
| i |
PART I.
ITEM 1. FINANCIAL STATEMENTS
PETVIVO HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2022 (Unaudited) | March 31, 2022 | |||||||
| Assets: | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 4,378,668 | $ | 6,106,827 | ||||
| Accounts receivable | 4,677 | 2,596 | ||||||
| Inventory, net | 180,874 | 98,313 | ||||||
| Prepaid expenses and other assets | 504,819 | 547,664 | ||||||
| Total Current Assets | 5,069,038 | 6,755,400 | ||||||
| Property and Equipment, net | 311,120 | 311,549 | ||||||
| Other Assets: | ||||||||
| Operating lease right-of-use | 284,344 | 299,101 | ||||||
| Patents and trademarks, net | 46,225 | 48,452 | ||||||
| Security deposit | 12,830 | 12,830 | ||||||
| Total Other Assets | 343,399 | 360,383 | ||||||
| Total Assets | $ | 5,723,557 | $ | 7,427,332 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 477,947 | $ | 323,384 | ||||
| Accrued expenses | 676,554 | 784,375 | ||||||
| Operating lease liability – short term | 59,492 | 59,178 | ||||||
| Note payable and accrued interest | 6,639 | 6,549 | ||||||
| Total Current Liabilities | 1,220,632 | 1,173,486 | ||||||
| Other Liabilities | ||||||||
| Note payable and accrued interest (net of current portion) | 25,548 | 27,201 | ||||||
| Operating lease liability (net of current portion) | 224,852 | 239,923 | ||||||
| Total Other Liabilities | 250,400 | 267,124 | ||||||
| Total Liabilities | 1,471,032 | 1,440,610 | ||||||
| Commitments and Contingencies (see Note 9) | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, par value $, shares authorized, and shares issued and outstanding at June 30, 2022 and March 31, 2022 | ||||||||
| Common stock, par value $, shares authorized, shares issued and outstanding at June 30, 2022 and March 31, 2022, respectively | 9,988 | 9,988 | ||||||
| Additional Paid-In Capital | 69,334,386 | 69,103,155 | ||||||
| Accumulated Deficit | (65,091,849 | ) | (63,126,421 | ) | ||||
| Total Stockholders’ Equity | 4,252,525 | 5,986,722 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 5,723,557 | $ | 7,427,332 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 1 |
PETVIVO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | ||||||||
| June 30, | June 30, | |||||||
| 2022 | 2021 | |||||||
| Revenues | $ | 58,174 | $ | 4,145 | ||||
| Cost of Sales | 53,020 | 5,051 | ||||||
| Gross Profit (Loss) | 5,154 | (906 | ) | |||||
| Operating Expenses: | ||||||||
| Sales and Marketing | 656,569 | 49,731 | ||||||
| General and administrative | 1,243,022 | 330,945 | ||||||
| Research and development | 71,656 | 136,937 | ||||||
| Total Operating Expenses | 1,971,247 | 517,613 | ||||||
| Operating Loss | (1,966,093 | ) | (518,519 | ) | ||||
| Other Income (Expense) | ||||||||
| Forgiveness of PPP loan and accrued interest | 31,680 | |||||||
| Interest income (expense) | 665 | (3,790 | ) | |||||
| Total Other Income | 665 | 27,890 | ||||||
| Loss before taxes | (1,965,428 | ) | (490,629 | ) | ||||
| Income Tax Provision | ||||||||
| Net Loss | $ | (1,965,428 | ) | $ | (490,629 | ) | ||
| Net Loss Per Share: | ||||||||
| Basic and Diluted | $ | (0.20 | ) | $ | (0.07 | ) | ||
| Weighted Average Common Shares Outstanding: | ||||||||
| Basic and Diluted | 9,988,361 | 6,946,353 | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 2 |
PETVIVO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three Months Ended June 30, 2022
| Common Stock | Additional Paid-in | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance at March 31, 2022 | 9,988,361 | $ | 9,988 | $ | 69,103,155 | $ | (63,126,421 | ) | $ | 5,986,722 | ||||||||||
| Stock-based compensation | - | 231,231 | 231,231 | |||||||||||||||||
| Net loss | - | (1,965,428 | ) | (1,965,428 | ) | |||||||||||||||
| Balance at June 30, 2022 | 9,988,361 | $ | 9,988 | $ | 69,334,386 | $ | (65,091,849 | ) | $ | 4,252,525 | ||||||||||
Three Months Ended June 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 | ||||||||||||||||
| 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-based compensation | - | 55,674 | 55,674 | |||||||||||||||||
| Net loss | - | (490,629 | ) | (490,629 | ) | |||||||||||||||
| Balance at June 30, 2021 | 7,093,155 | $ | 7,093 | $ | 57,878,784 | $ | (58,602,055 | ) | $ | (716,178 | ) | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
PETVIVO HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
PetVivo Holdings, Inc.
Notes to Consolidated Financial Statements
June 30, 2022
(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.
| (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 inventory obsolescence, estimated useful lives and potential impairment of property and equipment and intangibles, estimate of fair value of share-based payments and derivative instruments and recorded debt discount, lease assets and liabilities and valuation of deferred tax assets.
| (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.
| (F) | Concentration-Risk |
The Company maintains its cash with various financial institutions, which at times may exceed federally insured limits. As of June 30, 2022 and March 31, 2022, the Company did have cash balances in excess of the federally insured limits.
| (G) | 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 to 5 years for production and computer equipment and furniture and 5-7 years for leasehold improvements.
| (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 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.
| 5 |
| (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 had warrants outstanding as of June 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these warrants is $ per share. These warrants are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had restricted stock units outstanding as of June 30, 2022 which are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had options outstanding as of June 30, 2022, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these options is $ per share. These options are excluded from the weighted average number of shares because they are considered anti-dilutive.
The Company had warrants outstanding as of June 30, 2021, with varying exercise prices ranging from $ to $ per share. The weighted average exercise price for these warrants is $ per share. These warrants are excluded from the weighted average number of shares because they are considered anti-dilutive.
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 anti-dilutive.
At June 30, 2021, the Company had a Share-Settled Debt Obligation to a Related Party of $ which converted into common shares pursuant to an underwritten public offering that closed on August 13, 2021. The if-converted method was not applied for the purposes of computing EPS as the effect would be anti-dilutive.
| (J) | Revenue Recognition |
The Company derives revenue from the sale of pet care products to its veterinarian customers in the United States. For performance obligations related to the sale of our pet care products, control transfers to the customer at a point in time. Revenue is recognized upon shipment, which is when control of these products is transferred to our customers and in an amount that reflects the consideration the Company expects to receive for these products. Shipping costs charged to customers are reported as an offset to the respective shipping costs. The Company does not have any significant financing components as payment is received at or shortly after the point of sale. The Company entered into a Distribution Services Agreement with MWI Veterinary Supply Co. on June 17, 2022. For the three months ended June 30, 2022, no revenue was recognized under this agreement.
| (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.
| 6 |
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 and note payable and accrued interest. The carrying amount of the Company’s financial instruments approximates their fair value as of June 30, 2022 and March 31, 2022, 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 June 30, 2022 and March 31, 2022.
| (M) | 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.
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 the contractual term of the instruments and the holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate the holder’s expected exercise behavior.
● 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.
● 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.
| 7 |
● 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 or 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.
| (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.
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.
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, Inventory, and are stated at the lower of cost or net realizable value. We account for inventories using the first in first out (FIFO) methodology.
| (P) | Recent Accounting Pronouncements |
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 does 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.
| 8 |
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 the standard had no impact on the consolidated financial statements.
All other new issued, but not yet effective, accounting pronouncements have been deemed either immaterial or not applicable.
NOTE 2 – INVENTORY
As of June 30, 2022 and March 31, 2022, the Company had inventory of $180,874 and $98,313, respectively.
The inventory components are as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Finished goods | $ | 22,989 | $ | 11,889 | ||||
| Work in process | 31,455 | 22,960 | ||||||
| Raw materials | 126,430 | 63,464 | ||||||
| Total Net | $ | 180,874 | $ | 98,313 | ||||
NOTE 3 – PREPAID EXPENSES AND OTHER ASSETS
As of June 30, 2022, the Company had $504,819 in prepaid expenses and other assets consisting primarily of $183,000 in investor relations services, $55,000 in insurance costs, $59,000 in clinical studies, $76,000 in tradeshows, $45,000 in Nasdaq and FINRA fees, $41,000 in stock compensation and $32,000 in software subscription fees.
As of March 31, 2022, the Company had $547,664 in prepaid expenses and other assets consisting primarily of $220,000 in investor relations services, $148,000 in insurance costs, $71,000 in clinical studies, $46,000 in tradeshows and $45,000 in Nasdaq fees.
NOTE 4 –PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Leasehold improvements | $ | 216,159 | $ | 216,159 | ||||
| Production equipment | 217,760 | 197,967 | ||||||
| R&D equipment | 25,184 | 25,184 | ||||||
| Computer equipment and furniture | 82,002 | 76,898 | ||||||
| Total, at cost | 541,105 | 516,208 | ||||||
| Accumulated depreciation | (229,985 | ) | (204,659 | ) | ||||
| Total Net | $ | 311,120 | $ | 311,549 | ||||
Depreciation expense was $25,326 and $11,870 for the three months ended June 30, 2022 and 2021, respectively.
NOTE 5 – PATENTS AND TRADEMARKS
The components of patents and trademarks, all of which are finite-lived, were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Patents | $ | 3,870,057 | $ | 3,870,057 | ||||
| Trademarks | 26,142 | 26,142 | ||||||
| Total at cost | 3,896,199 | 3,896,199 | ||||||
| Accumulated Amortization | (3,849,974 | ) | (3,847,747 | ) | ||||
| Total net | $ | 46,225 | $ | 48,452 | ||||
Amortization expense was $2,227 and $1,729 for the three months ended June 30, 2022 and 2021, respectively.
| 9 |
NOTE 6 – ACCRUED EXPENSES
The components of accrued expenses were as follows:
| June 30, 2022 | March 31, 2022 | |||||||
| Accrued payroll and related taxes | $ | 344,316 | $ | 452,137 | ||||
| Accrued lease termination expense | 332,238 | 332,238 | ||||||
| Total | $ | 676,554 | $ | 784,375 | ||||
Pursuant to a lease wherein our subsidiary, Gel-Del Technologies, Inc., was the lessee until and through the lease’s termination in fiscal year 2017-2018, the Company had recorded approximately $332,000 as a potential payable to the lessor. This liability remains outstanding as of June 30, 2022 and March 31, 2022 and is included in accrued expenses.
NOTE 7 – NOTE PAYABLE
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 June 30, 2022 and March 31, 2022, the amount outstanding on the note was $32,187 and $33,750, respectively. At June 30, 2022, the Company classified $6,639 as a current liability and $25,548 in other liabilities. At March 31, 2022, the Company classified $6,549 as a current liability and $27,201 in other liabilities.
NOTE 8 – 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 made contributions to the plan of $6,158 and $1,729 for the three months ended June 30, 2022 and 2021, respectively.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Lease Obligations
The Company entered into an -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 to extend the lease term through November of 2026 in exchange for receipt of a loan of $42,500 recorded to notes payable. The monthly base rent as of June 30, 2022 and March 31, 2022 is $2,205.
The Company entered into a month lease for 2,400 square feet of office space located in Edina, Minnesota in January 2022. The base rent has annual increases of 2.5% and the Company is responsible for its proportional share of common space expenses, property taxes, and building insurance. The monthly base rent as of June 30, 2022 and March 31, 2022 is $2,673.
Rent expense for the three months ended June 30, 2022 and 2021 was $35,435 and $11,511, respectively.
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2022:
| 2023 | $ | 59,243 | ||
| 2024 | 60,588 | |||
| 2025 | 61,964 | |||
| 2026 | 63,372 | |||
| 2027 | 55,102 | |||
| $ | 300,269 | |||
| Less: amount representing interest | (15,925 | ) | ||
| Total | $ | 284,344 |
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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 asset for approximately $189,600 and corresponding and equal operating lease liabilities for the lease. As of June 30, 2022, the present value of future base rent lease payments based on the remaining lease term and weighted average discount rate of approximately 6 years and 0.12%, respectively, are as follows:
| Present value of future base rent lease payments | $ | 284,344 | ||
| Base rent payments included in prepaid expenses | ||||
| Present value of future base rent lease payments – net | $ | 284,344 |
As of June 30, 2022, the present value of future base rent lease payments – net is classified between current and non-current assets and liabilities as follows:
| Operating lease right-of-use asset | $ | 284,344 | ||
| Total operating lease assets | 284,344 | |||
| Operating lease current liability | 59,492 | |||
| Operating lease other liability | 224,852 | |||
| Total operating lease liabilities | $ | 284,344 |
Employment Agreements
The Company has employment agreements with its executive officers. As of June 30, 2022, these agreements contain severance benefits ranging from one month to six months if terminated without cause.
Legal Proceedings
The Company has received correspondence from an attorney representing Dr. David Masters, our former Chief Technology Officer and former director, alleging that the Company, among other items, breached its settlement and consulting agreement with him and owes him additional monies pursuant to these agreements. His attorney also alleges that the Company promised to enter into a new employment agreement with him and failed to fulfill that promise. The Company believes that Dr. Masters’ claims are without merit and has retained legal counsel. The Company does not believe that this matter will have a material impact on its financial position or results of operations.
Purchase Commitment
We issued purchase orders as of June 30, 2022 totaling $204,000 for inventory that we expect to receive within the next nine months.
NOTE 10 - 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 $1,965,428 for the three months ended June 30, 2022, had net cash used in operating activities of $1,701,699 for the same period and has an accumulated deficit of $65,091,849 at June 30, 2022. 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 of these 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 the offering of its equity securities. 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 ability 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.
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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 11 – STOCKHOLDERS’ EQUITY
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 shares. Unless sooner terminated by the Board, the 2020 Plan will terminate at midnight on . The number of shares available to grant under the Plan was at June 30, 2022.
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 to promote or maintain a market for PetVivo common stock.
The 2020 Plan is 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.
The aggregate number of shares of PetVivo common stock available and reserved to be issued under the 2020 Plan is 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 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.
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.
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Common Stock
The Company did not issue any shares of its common stock in the three months ended June 30, 2022. The Company issued shares of common stock in the three months ended June 30, 2021 as follows:
i) shares in April 2021 pursuant to a conversion of a $230,000 convertible note and $2,658 in accrued interest at a conversion rate of $2.89 per share;
ii) 4,500 shares in April 2021 pursuant to a warrant holder’s exercise of warrants for purchase with a strike price of $4.44 per share for cash proceeds of $40,000.
iii) shares in May 2021 pursuant to John Lai’s (CEO and a Director of the Company) cashless exercise of a warrant for purchase of 42,188 shares of common stock at a strike price of $1.33 per share;
iv) shares in May 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 139,286 shares of common stock at a strike price of $1.40 per share;
v) shares during May and June of 2021 in exchange for $343,098 in cash to accredited investors, including an officer and two directors of the Company at a price of $7.00 per share; and
vi) shares in June 2021 pursuant to a warrant holder’s cashless exercise of a warrant for purchase of 56,250 shares of common stock at a strike price of $2.22 per share.
Time-Based Restricted Stock Units
We have granted time-based restricted stock units to certain participants under the 2020 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2020 Plan vest over three years. Stock-based compensation expense included in the Consolidated Statements of Operations for time-based restricted stock units was $182,377 and $24,846 for the three months ended June 30, 2022 and 2021, respectively. At June 30, 2022, there were approximately $ of total unrecognized pre-tax compensation expense related to time-based restricted stock units that is expected to be recognized over a weighted-average period of years.
Our time-based restricted stock unit activity for the year ended March 31, 2022, and the three month period ended June 30, 2022 is as follows:
| Units Outstanding | Weighted Average Grant Date Fair Value Per Unit | Aggregate Intrinsic Value (1) | ||||||||||
| Balance at March 31, 2021 | ||||||||||||
| Granted | 549,565 | $ | 3.86 | - | ||||||||
| Expired | (4,073 | ) | 2.70 | - | ||||||||
| Vested | (172,824 | ) | 3.44 | - | ||||||||
| Balance at March 31, 2022 | 372,668 | $ | 4.07 | |||||||||
| Balance at June 30, 2022 | 372,668 | $ | 4.07 | $ | 588,815 | |||||||
| (1) | The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period. |
Stock Options
Stock options issued to employees typically vest over and have a contractual term of . Stock-based compensation expense included in the Consolidated Statements of Operations for stock options was $ for the three months ended June 30, 2022. options vested in the three month period ended June 30, 2022. At June 30, 2022, there was approximately $of total unrecognized stock option expense which is expected to be recognized on a straight-line basis over a weighted-average period of years.
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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Annually, we make predictive assumptions regarding future stock price volatility, dividend yield, expected term and forfeiture rate. The dividend yield assumption is based on expected annual dividend yield on a grant date. To date, no dividends on common stock have been paid by us. Expected volatility for grants is based on our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility. The risk-free interest rate is based on yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. We use the “simplified method” to determine the expected term of the stock option grants. We utilize this method because we do not have sufficient public company exercise data in which to make a reasonable estimate.
| Three Months | Year Ended | |||||||
| June 30, 2022 | March 31, 2022 | |||||||
| Expected term | years | years | ||||||
| Expected volatility | % - | % | % - | % | ||||
| Risk-free interest rate | % - | % | % – | % | ||||
| Expected dividend yield | % | % | ||||||
| Fair value on the date of grant | $ | - $ | $ | - $ | ||||
| Options Outstanding | Weighted- Average Exercise Price Per Share (1) | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value (2) | |||||||||||||
| Balance at March 31, 2021 | - | |||||||||||||||
| Granted | 195,000 | $ | 1.56 | - | ||||||||||||
| Balance at March 31, 2022 | 195,000 | 1.56 | years | $ | 100,200 | |||||||||||
| Granted | 90,073 | 1.95 | ||||||||||||||
| Balance at June 30, 2022 | 285,073 | $ | 1.68 | years | $ | 0 | ||||||||||
| (1) | The exercise price of each option granted during the period shown above was equal to the market price of the underlying stock on the date of grant. |
| (2) | The aggregate intrinsic value of stock options outstanding was based on our closing stock price on the last trading day of this period. |
There were options exercisable at June 30, 2022.
The following summarizes additional information about our stock options:
| June 30, 2022 | ||||
| Number of: | ||||
| Non-vested options, beginning of period | 195,000 | |||
| Non -vested options, end of period | 285,073 | |||
| Vested options, end of period | ||||
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Warrants
During the three months ended June 30, 2022 and 2021, no warrants were issued.
A summary of warrant activity for the year ended March 31, 2022 and three month period ended June 30, 2022 is as follows:
| Number of Warrants | Weighted- Average Exercise Price | Warrants Exercisable | Weighted- Average Exercisable Price | |||||||||||||
| Outstanding, March 31, 2021 | 1,081,668 | $ | 2.02 | 881,982 | $ | 2.00 | ||||||||||
| Issued and granted | 3,043,556 | 5.63 | ||||||||||||||
| Exercised for cash | (6,094 | ) | (6.90 | ) | ||||||||||||
| Cashless warrant exercises | (237,724 | ) | (1.58 | ) | ||||||||||||
| Expired | (15,922 | ) | (5.27 | ) | ||||||||||||
| Cancelled | (108,000 | ) | (1.79 | ) | ||||||||||||
| Outstanding, March 31, 2022 | 3,757,484 | 4.95 | 3,693,734 | 5.00 | ||||||||||||
| Outstanding, June 30, 2022 | 3,757,484 | $ | 4.95 | 3,703,109 | $ | 4.99 | ||||||||||
| 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 | |||||||||||||||||
| $ | -$ | 418,237 | $ | 1.35 | 418,237 | $ | 1.35 | |||||||||||||||
| - | 207,938 | 2.48 | 153,563 | 2.57 | ||||||||||||||||||
| - | 3,131,309 | 5.60 | 3,131,309 | 5.60 | ||||||||||||||||||
| Total | 3,757,484 | $ | 4.95 | 3,703,109 | $ | 4.99 | ||||||||||||||||
For the three months ended June 30, 2022 and 2021, the total stock-based compensation on all instruments was $ and $, respectively. It is expected that the Company will recognize expense after June 30, 2022 related to warrants issued, outstanding, and valued using the Black Scholes pricing model as of June 30, 2022 in the amount of approximately $.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures.
Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective.
Changes in internal control over financial reporting.
There were no significant changes in our internal control over financial reporting in the first quarter of our fiscal year ending March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business, the resolution of which we do not anticipate would have, individually or in the aggregate, a material adverse effect on our business, financial condition, or results of operations.
Refer to Note 9. Commitments and Contingencies, in the Notes to Consolidated Financial Statements set forth in Part I, Item 1 Financial Statements of this Quarterly Report, for further information regarding legal contingencies.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, Item 1A Risk Factors in our 2022 10-K Report. The risks discussed in our 2022 10-K Report could materially affect our business, financial condition and future results. The risks described in our 2022 Form 10-K Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be insignificant also may materially and adversely affect our business, financial condition or operating results in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None
Use of Proceeds from IPO
On August 13, 2021, we completed our Public Offering pursuant to which we issued and sold an aggregate of 2,500,000 units at the 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. At the closing of the Public Offering, the underwriter exercised its over-allotment option to purchase an additional 375,000 warrants for an aggregate purchase price of $3,850.
The offer and sale of all of the units in our Public Offering were registered under the Securities Act pursuant to a registration statement on Form S-1, as amended (File No. 333-249452), which was declared effective by the SEC on August 10, 2021 (“Registration Statement”) . ThinkEquity, a division of Fordham Financial Management, Inc. acted as the sole book-running manager for the offering. 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.
We received aggregate gross proceeds from our Public Offering of $11,253,850 (inclusive of the underwriter’s exercise of its overallotment option to purchase warrants). After deducing underwriting discounts and commissions and other offering expenses, we received net proceeds of approximately $9,781,000 from the Public Offering.
As disclosed in the Registration Statement, we used a portion of the net proceeds from the Public Offering for debt repayment of $101,400 consisting of (i) $36,808 in accrued salary and expenses relating to the CEO; (ii) $20,000 in a note payables to four directors, which accrued interest at a rate of 6.5% per annum and matured in September 2021; and (iii) repayment of $44,554 in a note payable to our former Director of Science and Technology and a director, which accrued interest at a rate of 8% per annum, and maturity date of June 30, 2022.
There has been no material change in our intended use of proceeds from our Public Offering as described in the Prospectus filed with the SEC pursuant to Rule 424(b)(4) on August 13, 2021.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not required.
ITEM 4. MINE SAFETY DISCLOSURES
Not required.
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS
The following exhibits are filed as part of this Quarterly Report.
+ Certain confidential portions of this Exhibit were omitted by means of marking such portion with brackets ([***]) because the identified confidential portions are both (i) not material and (ii) the type of information that PetVivo Holdings, Inc. treats as private or confidential.
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PETVIVO HOLDINGS, INC.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| August 11, 2022 | By: | /s/ John Lai |
| John Lai | ||
| Its: | CEO, President and Director (Principal Executive Officer) | |
| August 11, 2022 | By: | /s/ Robert J. Folkes |
| Robert J. Folkes | ||
| Its: | Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 10.1
CERTAIN CONFIDENTIAL INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND REPLACED WITH “ [***]” BECAUSE IT IS NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT PETVIVO HOLDINGS, INC. TREATS AS PRIVATE OR CONFIDENTIAL.
DISTRIBUTION SERVICES AGREEMENT
This Distribution Services Agreement (“Agreement”) is made as of June 17, 2022 (“Effective Date”), by and between MWI Veterinary Supply Co., an Idaho corporation (“MWI”), and PetVivo, Inc. (“Supplier”). Intending to be legally bound, the parties hereby agree as follows:
1. SERVICES.
1.1 Appointment. Supplier hereby authorizes and appoints MWI to distribute, advertise, promote, market, supply, and sell (collectively, “Distribution” or “Distribution Services”) the Products within the United States of America (the “Territory”) and agrees to sell the Products to MWI as ordered by MWI from time to time in MWI’s sole discretion. This authorization and appointment shall designate MWI as the exclusive veterinary product distributor of Products for a period of two years commencing upon the execution of this Agreement and shall transition to a non-exclusive veterinary product distributor designation for all subsequent years of the Term thereafter; provided that, Supplier shall extend such exclusivity for a third year upon MWI achieving the mutually agreed [***] target for the second year. The term “Products” means all animal health and related products of Supplier that are identified in the Pricing Schedule of Exhibit A and are purchased by MWI. Supplier shall make available for purchase by MWI all products Supplier makes available for purchase to any other animal health distributors or resellers of similar or smaller size (“Comparable Distributors”).
1.2 Contract Price. Supplier shall sell the Products to MWI at a price (“Contract Price”) equal to the lower of (a) the price listed in the Pricing Schedule which is attached hereto as Exhibit A (as adjusted in accordance with Section 1.4), or (b) the lowest price Supplier sells to any other Comparable Distributors. In addition, Supplier will provide MWI the incentives described in Exhibit A. MWI is solely responsible for determining the price and other terms at which MWI sells the Products to its customers.
1.3 Net Price Requirement. Notwithstanding any other provision of this Agreement, Supplier shall ensure the Contract Price is at all times equal to or lower than the lowest Net Price at which Supplier sells any relevant Product to any other Comparable Distributors by immediately providing MWI the same incentives, discounts, rebates, bonuses, commissions and/or promotions provided to other Comparable Distributors or adjusting the Contract Price as necessary or, failing that, issuing a credit on the next applicable invoice. “Net Price” means the net purchase price for a Product after application of all applicable incentives, discounts, rebates, bonuses, commissions, and promotions, (including national, regional and local sales, rebate, and other promotional programs), whether temporary or permanent, but excluding any early pay discounts.
1.4 Price Changes. Subject to Sections 1.3 and 1.5 and with 30 days’ prior written notice to MWI, Supplier may prospectively increase the Contract Price for any Product but only by a percentage that is equal to or less than the percentage increase applied to all other Comparable Distributors. The removal or reduction in any incentives, discounts, rebates, bonuses, commissions, or promotions offered to MWI are considered price increases subject to the requirements of this Section 1.4. In the event of any price increase, MWI shall be entitled to purchase Product (based on the training 12 month purchase history or, if shorter, the period of time that MWI has purchased such Product from Supplier) at the [***] price for the entire notice period. Supplier may decrease the Contract Price at any time upon written notice; provided however, Supplier will provide [***] by paying MWI in an amount equal to [***].
| Distribution Services Agreement – Page 1 |
1.5 List Price. In the event that Supplier unilaterally establishes, or has established, for any Product a list price, vet list price, manufacturer’s suggested retail price, or suggested veterinary price (collectively, “List Price”), Supplier (a) may only increase the Contract Price in connection with an increase in the List Price and any increase to the Contract Price may not exceed the simultaneous percent increase in the List Price, and (b) shall immediately decrease the Contract Price in proportion to any decrease to the List Price, in each case as necessary to ensure that the percent difference between the List Price and the Contract Price does not decrease.
1.6 Chargebacks & Reimbursements.
(a) If Supplier agrees with any customer (excluding other distributors) to have any Product supplied at a specific or discounted price (“Customer Price”) or removes or modifies any Customer Price, Supplier will promptly notify MWI of such Customer Price. For each Product MWI sells to a customer with Customer Pricing, Supplier will issue MWI a chargeback equal to [***]. The chargeback is exclusive of any service fees, incentives, or other reimbursements payable to MWI under this Agreement.
(b) In the event Supplier extends or makes available any promotion, incentive or special offer or program to any customer of MWI (including extended payment terms, temporary discounts, free goods with a purchase, new practice offers, and the like), Supplier will allow MWI to match the terms of such offer and [***]. [***] for extended payment terms will be calculated at a rate of [***] for each day of extended payment terms beyond 30 days.
(c) Supplier will [***] in connection with MWI’s Distribution of Products to such retailer.
(d) All chargebacks and reimbursements payable pursuant to this Section 1.6 are due on the 10th day of the month following the sale of the Product.
1.7 Primary Distribution Services. For the primary Distribution Services performed by MWI, which may include stocking, packing, and shipping Products; inventory management; customer validation and monitoring; order management; inventory and sales data collection and management; receivable risk management; and category management, Supplier shall pay MWI an amount equal to [***] times the monthly gross purchases of Products calculated at the Contract Price (“Distribution Services Fee”), which includes a [***]. The Distribution Services Fee shall be invoiced monthly and payment shall be due within 15 days of the date of the invoice and is subject to MWI’s right to setoff. The Distribution Services Fee is a bona fide fee for service negotiated at arm’s length and together with any other services fees set forth herein, shall at all times be equal to or higher than any services fees paid to any other Comparable Distributor.
1.8 Standard Terms and Conditions; Continuing Guaranty. The sale, purchase, and Distribution of Products and all respective rights and obligations of the parties under this Agreement shall be governed by the DSA Standard Terms and Conditions set forth in Exhibit B. Supplier accepts and agrees to the terms of, and shall execute and deliver contemporaneously with this Agreement, the Continuing Guaranty and Indemnification Agreement (the “Continuing Guaranty”) set forth as Schedule A.
| Distribution Services Agreement – Page 2 |
2. PRODUCTS.
2.1 Ordering. MWI will submit orders to Supplier via Electronic Data Interchanges (“EDIs”) in an industry-standard format or other format reasonably acceptable to both parties. Supplier will, within 2 business days of order placement, confirm acceptance or rejection of MWI’s order and confirm the Product quantity, shipping date, delivery location and Contract Price, in an acceptable electronic format. Supplier shall not unreasonably reject any order from MWI. Supplier will accept orders at the Contract Prices in effect on the day the order is transmitted. No order will be canceled after acceptance by Supplier without MWI’s prior written approval.
2.2 Shipping; Risk of Loss; Title. Supplier shall, within 7 calendar days of Supplier’s confirmation of MWI’s order or such later date as MWI may request, ship the Products DDP – Delivered Duty Paid (Incoterms 2010) directly to the distribution center or other location designated by MWI. Supplier shall pay all costs associated with delivering the Product to MWI, including freight, detention, demurrage, sorting, packing, and segregation, except to the extent any such charges result from MWI’s failure to timely accept any proper shipment of conforming Products. Supplier will not ship any partial cases of Products to MWI. Title and risk of loss for the Products shall pass from Supplier to MWI upon MWI’s receipt of delivery of such Products in good order and condition at MWI’s distribution center or other destination designated by MWI.
2.3 Payment for Products. Supplier will invoice MWI when Products are shipped to MWI. All invoices shall be submitted electronically in an industry standard format or other format mutually acceptable to the Parties. MWI may, at MWI’s option, pay Supplier by Automated Clearing House (ACH) or wire transfer to an account designated in writing by Supplier, check, or credit card. MWI will pay all Supplier invoices for undisputed orders on terms of: net 60 days from date Products are delivered to MWI.
2.4 Product Capacity. Supplier will maintain capacity to supply Products historically purchased by MWI at all times during the Term of this Agreement, in the amount no less than of [***] of MWI’s [***] of that Product (based on the [***]). Within 90 days following the six month anniversary of the Effective Date of this Agreement, the Parties will reassess whether the Supplier’s monthly capacity requirement of [***] should be increased or decreased and if the Parties agree to such a change, will negotiate in good faith a new Supplier’s monthly capacity. [***].
2.5 Shortages. In the event that Supplier anticipates that it will not be able to maintain the capacity requirements set forth in Section 2.4, Supplier shall notify MWI within 48 hours and the parties shall promptly meet to discuss the potential shortage. Supplier shall provide a written plan of action stating in reasonable detail the identifiable cause and proposed measures to remedy the potential shortage and the date such shortage is expected to end. [***]. Such allocations shall continue until Supplier no longer anticipates the potential shortage set forth in Section 2.4.
| Distribution Services Agreement – Page 3 |
2.6 Short Dated Product. For Products with an expiration date, Supplier will not ship any Products with less than 18 months’ shelf life remaining (“Short Dated Product”), unless (a) the Product is manufactured with a limited shelf life less than the above, in which case (i) Supplier will notify MWI of such shorter shelf life at the time of order acceptance, (ii) such Product will be shipped per Supplier’s guidelines if MWI elects to proceed with the order, and (iii) such Product will have a minimum of 80% of its total shelf life remaining at the time of shipment to MWI, or (b) MWI, in its sole discretion, accepts such shipment of Short Dated Product in writing on a case-by-case basis in individual purchase situations.
2.7 New Product Launches. For Products new to market, MWI and Supplier will jointly determine the amount of Products to be included in the initial stocking order and an appropriate evaluation period, which will be no less than 8 months from the date the initial stocking order is delivered to MWI. Beginning 6 months after the delivery of the initial stocking order and continuing until the end of the agreed-upon evaluation period, [***]. Supplier will grant MWI extended payment terms of net 3 months and invoice MWI separately for all new Products ordered during the evaluation period. Supplier will provide MWI with complete new item set up material for all new Products, including HDA Product Specification Form, label reproduction, layout or facsimile, dimensions and Safety Data Sheet (SDS) prior to shipping such Product.
2.8 Free Goods. Upon Supplier’s request, MWI may agree to distribute free, promotional or no-cost Products, including samples and replacement products (collectively, “Free Goods”), in MWI’s sole discretion. In the event MWI distributes any Free Goods pursuant to Supplier’s request, Supplier agrees to issue a reimbursement to MWI for (a) any and all amounts paid or payable by MWI for the Free Goods, and (b) any mutually agreed upon logistics fee or other compensation. The reimbursement for Free Goods shall be due within 30 days of the date of Supplier’s receipt of MWI’s report of monthly Sales Data and the shipment details of all distributed Products and is subject to MWI’s right to setoff. [***].
3. TERM; TERMINATION.
3.1 Term. This Agreement is effective as of the Effective Date and will continue in effect for a period of 1 year (as renewed or extended, the “Term”). Thereafter, the Term will automatically renew for subsequent terms of 12 months unless either party elects not to renew the Term by providing written notice to the other party at least 60 days’ prior to the end of the then current Term.
3.2 Termination. Either party may terminate this Agreement for cause (a) upon 30 days’ written notice of a material default to the other party and failure of that party to cure the default within the 30 day period or (b) immediately upon the other party’s insolvency, voluntary or involuntary bankruptcy, suspension of business, assignment of assets for the benefit of creditors, voluntary dissolution, or appointment of a trustee or receiver for all or a substantial portion of the other party’s assets.
| Distribution Services Agreement – Page 4 |
4. RETURNS.
4.1 Unopened Products. MWI will request a return authorization from Supplier and Supplier shall issue such authorization within 15 days of MWI’s request. If Supplier does not respond to MWI’s return authorization request within 30 days, MWI will process the Product return and either invoice or deduct the refund from Supplier invoice. Except for Products documented to have been purchased on a non-returnable basis, MWI may return unopened Products to Supplier at any time up to [***] days prior to the expiration date of the Product for a full refund. Notwithstanding the previous sentence, all unopened Products returned to MWI by a MWI customer may be returned to Supplier at any time up to [***] days past the expiration date of the Product for a [***] refund. [***] will be responsible for return shipping costs for all returned Products that are not shipment errors, damaged, or otherwise defective or non-conforming. No [***] fees will apply. Title and risk of loss for returned Products will pass from MWI to Supplier upon delivery of the Products to Supplier. Upon receipt of the return, Supplier shall credit MWI at the then current [***] within 30 days.
4.2 Nonconforming Products. Supplier will issue a full refund at the then current [***] and pay for all return shipping costs for any Product that (a) does not conform to the Limited Warranties (defined in Exhibit B, Section 4) or any specific requirement of this Agreement, (b) has been recalled by Supplier or any governing agency, or (c) is a Short Dated Product that was not preapproved by MWI.
4.3 Shipment Errors. Supplier shall immediately contact the MWI purchasing department regarding any delay or failure of delivery, incomplete shipment, leakage or spillage during shipment, shortage in shipment, misdirection of any delivery, or over shipment and shall comply with any reasonable directions provided by MWI. MWI shall have the right to cancel any such order without penalty and Supplier will be responsible for any related freight or accessorial charges and other costs and expenses caused by the error.
4.4 Damaged Products. Should MWI receive any Products in apparent damaged condition, MWI will note on the delivery slip the apparent damage and promptly notify Supplier. MWI will report any concealed damage or latent defects within 30 days of discovery. Supplier will credit MWI for such damaged Products at the invoice price within 30 days of MWI’s notification. MWI will hold such damaged Products for inspection by the insurer, the carrier, or Supplier’s designated representative for up to 30 days.
4.5 [***] of Remaining Inventory. MWI may return, for a [***]at the then current Contract Price, any unopened Products still in MWI’s possession (“Remaining Inventory”) upon or after the expiration or termination of this Agreement. If MWI does not return all of the Remaining Inventory (a) MWI may sell such Remaining Inventory and will remain an authorized distributor of the Products and (b) this Agreement shall remain in effect with respect to the Distribution of such Remaining Inventory, in each case for the limited purpose of MWI selling the Remaining Inventory until all of the Remaining Inventory is sold.
4.6 Supplier’s Return Policy. Subject to the terms of this Section 4, MWI will use commercially reasonable efforts to follow the reasonable procedural requirements set forth in any Supplier Returned Goods Policy (“SRGP”) attached to this Agreement as an Exhibit. Supplier must propose any changes to its SRGP by providing MWI with at least 30 days’ prior written notice and MWI may reject any such proposed changes by notifying Supplier within 60 days of receipt of Supplier’s proposal. In the event of a conflict between any SRGP and this Agreement, this Agreement controls.
| Distribution Services Agreement – Page 5 |
5. MISCELLANEOUS.
5.1 No Minimum Requirements. Nothing in this Agreement will be interpreted to require or obligate MWI to (a) purchase or pay for any minimum amount of Products, (b) purchase any portion of its requirements for the Products from Supplier, or (c) comply with any quota, sales targets, sales minimum, or other sales objectives. Statements by MWI regarding present or future markets, conditions, expectations, orders, estimates, forecasts, outlooks, objectives, plans, goals, intentions and other words or phrases of similar import are only beliefs about the present and future and do not constitute any obligation or binding commitment of MWI.
5.2 Established Accounts. Supplier may directly sell Products within the Territory to designated and currently established accounts (“Established Accounts”) without liability (including but not limited to any monetary obligation) to Distributor or otherwise breaching the terms of this Agreement. Established Accounts means: (a) parties who have purchased Products from Supplier prior to the Effective Date of this Agreement, (b) parties who require that they deal directly with the Supplier, (c) governmental agencies, and (d) parties that order via the internet who are not directly solicited by the Supplier to purchase the Products.
5.3 Notices. Any notice required or permitted hereunder will be in writing and will be deemed given upon delivery, when delivered personally or by overnight courier, or email with confirmation of receipt, or the third business day after being deposited in the U.S. mail as registered or certified mail, postage prepaid, return receipt requested, addressed to the receiving party at its address indicated below its signature to this Agreement or to such other address as such party has indicated by written notice.
5.4 Entire Agreement. The Exhibits identified in this Agreement are incorporated herein by reference and made a part hereof as if set out in full herein. Except for any Continuing Guaranty, this Agreement constitutes the entire agreement and understanding of the parties and supersedes any prior agreements and understandings between the parties with respect to the specific subject matter hereof. In the event of any conflict between this Agreement and its Exhibits, this Agreement shall control; in the event of any conflict between this Agreement and the Continuing Guaranty, the Continuing Guaranty shall control. For purposes of clarity, the terms and conditions of a purchase and sale of Products shall be controlled only by this Agreement (including its Exhibits) and shall not be varied or supplemented by the terms of purchase or sale otherwise used by Supplier or MWI or set forth on any purchase order, acknowledgement, or other documents relating to an order. This Agreement shall not supersede any agreements in place between the parties related to MWI private label products manufactured by Supplier for MWI.
5.5 Modifications; Waivers. This Agreement may not be altered, amended or changed in any way except by a written instrument executed by both parties. No waiver of any rights or obligations shall be (a) implied, whether by course of dealing, any failure or delay in exercising any right, power or privilege hereunder, or otherwise, or (b) effective unless in writing and signed by the party holding such rights or to whom such obligations are owed. Any waiver shall be effective only in the specific instance and for the specific purpose stated in such writing and shall not obligate the waiving patty to grant any further or similar waivers.
5.6 Survival. All rights, obligations or liabilities accrued hereunder prior to the expiration or termination of this Agreement and all provisions under this Agreement, which, by their terms and conditions, show the parties intended them to survive the expiration or termination of this Agreement, including provisions governing confidentiality, indemnification, warranties, returns, recalls, insurance and liability, will survive the expiration or termination of this Agreement. The Continuing Guaranty is an independent agreement that supplements this Agreement and will survive the expiration or termination of this Agreement. Notwithstanding any expiration or termination of this Agreement, the terms and conditions of this Agreement shall survive and continue to apply to any purchase or Distribution of Products by MWI until the parties have entered into a written agreement that replaces this Agreement.
5.7 Counterparts; Originals. This Agreement may be executed and delivered in counterparts and by facsimile, PDF or other electronic format, each of which will be deemed an original but all of which will constitute one and the same instrument.
[Signatures on Following Page]
| Distribution Services Agreement – Page 6 |
IN WITNESS WHEREOF, the parties by their authorized representatives have executed this Agreement as of the date first set forth above.
| SUPPLIER: PetVivo, Inc. | MWI VETERINARY SUPPLY CO. | |||
| Signature: | /s/ John Lai | Signature: | /s/ Steve Shell | |
| Name: | John Lai | Name: | Steve Shell | |
| Title: | Chief Executive Officer | Title: | President, MWI Animal Health | |
Address for Notices: 5151 Edina Industrial Blvd. Suite 575 Edina, MN 55439 Email: mmiddleton@petvivo.com Attn: Mark Middleton, National Sales Director With a Copy to same address: Email: jdolan@petvivo.com Attn: Legal Department |
Address for Notices: MWI Veterinary Supply Co. 3041 W. Pasadena Dr. Boise, ID 83705 Email: CategoryManagement@mwianimalhealth.com Attn: Vice President, Animal Health Sourcing With a Copy to same address: Email: Legal@mwiah.com Attn: Legal Department |
| Distribution Services Agreement – Page 7 |
Exhibit A
PRICING SCHEDULE
Contract Price List:
| Product | Size/Quantity | Contract Price | List Price | |||||||
| Spryng - (sold in cases of 6 syringes each) | [***] | $[***] ($*** for a case of 6 syringes) | $*** |
Incentives:
Performance Rebate:
a. Within 2 months after each anniversary of the Effective Date, Supplier shall pay to MWI an annual performance rebate (“Performance Rebate”) on the aggregate purchase price of all Products purchased by MWI in such year. The applicable rate for the first year is set forth in the table below if MWI’s purchases for such year meet the minimum number of syringes identified in the Annual Purchase Target of the table below. For each subsequent term of 12 months, the Parties shall negotiate in good faith a new Annual Purchase Target that must be achieved for MWI to obtain a Performance Rebate incentive for each respective 12 month period.
b. Supplier shall pay the Performance Rebate within 45 days after the end of each calendar year in which MWI earns such Performance Rebate.
| Annual Performance Target | Performance Rebate | ||
| [***] | [***]% | ||
| [***] | Additional [***]% | ||
| [***] | Additional[***]% |
| Distribution Services Agreement – Exhibit A |
Exhibit B
DSA STANDARD TERMS AND CONDITIONS
Purchase of Products and Distribution Services
1. Supplier’s Responsibilities.
1.1 License Grant. For the Term of this Agreement and any extension thereafter, Supplier hereby grants MWI a non-exclusive, perpetual, royalty-free, sublicensable (to MWI’s customers that purchase Products from MWI) license to use Supplier’s Product images, trademarks, service marks, logos, trade dress, and other distinctive brand features solely in connection with the Distribution and resale of the Products in the Territory.
1.2 Promotional Materials; Advertising. Supplier shall supply MWI, at Supplier’s cost, catalogs, circulars and other promotional and informational material regarding the Products as mutually agreed. Supplier will ensure that all such material and any other marketing or promotional materials or language provided to MWI is (a) accurate, truthful and not false or misleading; (b) supported by appropriate scientific and/or medical research; (c) fairly balanced in its discussion of risks and benefits of Products; (d) consistent with and supported by FDA approved prescribing information or instructions for use, as applicable; (e) in compliance with all applicable FDA regulations pertaining to the promotion of the Products and Applicable Laws; and (f) subject to a reasonable expiration date. MWI may alter such materials or develop other materials in connection with the Distribution of Products (including product brochures and sales aids), subject to Supplier’s review and prior written approval, and Supplier is solely responsible to confirm that all such materials satisfy and comply with all legal requirements, including applicable FDA regulations. MWI may freely use information related to Products made publicly available by Supplier. Supplier will also support MWI through Supplier’s active promotion of the Products by advertising and other promotional activities as mutually agreed by Supplier and MWI.
1.3 Training. Supplier shall supply, at Supplier’s cost and by Supplier representatives, (a) educational and training programs for MWI’s personnel and (b) wet lab, clinical, educational, and training programs for MWI’s customers and other end-users of the Products, all at such times and locations as mutually agreed.
1.4 Packaging. Supplier shall clearly label all cartons and pallets with the following shipping information: (a) MWI Purchase Order Number, (b) Ship-From Address, (c) Ship-To Address, (d) Product Description (not applicable for controlled substances), (e) Item Number, and (f) Case Quantity. For all cartons and pallets containing controlled substances, in addition to the foregoing labeling requirements, Supplier shall (i) label such packaging with DEA numbers and the symbol designating the schedule in which such controlled substance is listed, in a prominent location and in a font that is clear and large enough to afford prompt identification, (ii) securely seal such packaging so as to disclose any tampering or opening of such packaging, in each case as set forth in 21 U.S.C. 821, 825, 871(b), 958(e) (Labeling and Packaging Requirements for Controlled Substances), and (iii) adhere to all other Applicable Laws regarding the packaging of such controlled substances. Supplier shall label, package and transport the Products to MWI in accordance with all applicable federal, state, local, foreign and other laws, rules and regulations (“Applicable Laws”) and in a manner that reasonably protects against breakage, leakage, contamination or spillage. Each container holding liquid Products shall be liquid tight and have a liquid tight seal in addition to a fully fastened liquid tight cap. Any squirt handles, sprayers, pumps or similar fixtures shall be included separately with, and not installed in, such containers. Supplier will be responsible for any damage, including damage caused to other products, equipment or property, caused by any Product leaks resulting from Supplier’s failure to comply with the requirements of this Section.
| Distribution Services Agreement – Exhibit B |
1.5 Compliance with Laws. Supplier shall comply with all Applicable Laws, including (a) those governing the manufacture, purchase, handling, sale, marketing, labeling, packaging, storage, shipping, and distribution of Products, including the labeling requirements set forth in the California Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. H.S.C. §§ 25249.5-25249.13), (b) requirements that Supplier publicly identify its authorized distributors, and (c) government contractual requirements. Supplier understands that MWI sells, or may sell, products (including the Products) to governmental entities, including U.S. federal governmental entities, and that all Products offered for sale to the U.S. Government under this Agreement by MWI must be compliant with the Trade Agreements Act (TAA) (19 U.S.C. 2501, et seq.) and certifies that all Products will be Country of Manufacture confirmed pursuant to TAA requirements. If Supplier is not the actual manufacturer of the Products, Supplier certifies that it has supporting information on file from the manufacturer of the Product to confirm compliance with the TAA and other Applicable Laws. If any previously provided information to MWI changes, Supplier will provide 30 days’ prior written notice to MWI. Supplier understands that MWI is relying on Supplier’s certification to meet its contractual obligations to the government. Supplier will work with MWI to comply in all material respects with all applicable provisions of DSCSA, Title II of the Drug Quality and Security Act of 2013 and other Applicable Laws with respect to the Distribution of the Products.
Supplier is an equal opportunity employer and agrees that, as applicable, it will abide by the requirements of 41 CFR 60-1.4(a), 41 CFR 60-300.5(a) and 41 CFR 60-741.5(a) and that these laws are incorporated herein by reference. These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities and prohibit discrimination against all individuals based on their race, color, religion, sex, sexual orientation, gender identity, or national origin. These regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, protected veteran status or disability. Supplier also agrees that, as applicable, it will abide by the requirements of Executive Order 13496 (29 CFR Part 471, Appendix A to Subpart A), relating to the notice of employee rights under federal labor laws.
1.6 Code of Conduct. Supplier acknowledges that MWI is subject to the Code of Ethics and Business Conduct Policy (“Code of Conduct”) issued by its parent company AmerisourceBergen, which Code of Conduct (as it may be revised from time to time) can be found at the Investors tab, Corporate Governance, of www.amerisourcebergen.com. Supplier covenants that it either (a) will comply with MWI’s Code of Conduct or (b) has and will comply with its own Code of Conduct that is substantially similar to MWI’s Code of Conduct, including those sections on Fraud & Abuse Laws, Antitrust & Competition Laws and Anti-Bribery/Anti-Corruption Laws. In the event Supplier violates the applicable Code of Conduct or any Applicable Laws related to fraud, abuse, antitrust, competition, anti-bribery or anti-corruption, Supplier will be deemed to be in material breach of this Agreement.
| Distribution Services Agreement – Exhibit B |
1.7 Sales Force Compensation and Conflicts of Interest. Supplier shall not offer or provide to any employee or contractor of MWI, including any member of MWI’s sales force or management, any payments, gifts, travel, entertainment, incentives or other benefits (collectively, “Employee Incentives”), other than token, non-cash gifts of nominal value or typical business meals. If Supplier wishes to provide any form of Employee Incentive to MWI’s employees, Supplier shall first discuss such Employee Incentives with MWI and if MWI approves such Employee Incentives in its sole discretion, all such Employee Incentives shall be paid directly to and pass through MWI and will be subject to reasonable deductions and fees and applicable taxes and withholdings.
1.8 Supporting Information. Supplier shall provide any documentation or instructions to MWI reasonably necessary for MWI to fully comply with Applicable Laws with respect to the handling, storage and Distribution of the Products, including any documentation, certification or instruction regarding the classification, handling and shipping of any hazardous materials, controlled substances and compliance with the TAA and the California Safe Drinking Water and Toxic Enforcement Act of 1986. Supplier will maintain all federal, state or local registrations necessary for the lawful manufacturing, packaging, labeling, marketing, handling and shipment of all Products, including those deemed hazardous, and immediately notify MWI of any denial, revocation or suspension of any such registration or any changes in the Products which MWI is authorized to distribute. To the extent the Products include any controlled substances, Supplier will provide MWI with a copy of its U.S. Drug Enforcement Agency certificates and any other required documentation.
1.9 Warranties and Corrective Actions. Supplier shall be solely responsible and take all appropriate corrective actions for (a) Supplier’s full or limited warranties relating to Products, (b) failure of a Product, and (c) Recalls except to the extent any such issues are caused by MWI’s negligence or willful misconduct.
2. MWI’S Responsibilities.
2.1 Efforts. MWI shall use commercially reasonable efforts in performing the Distribution Services for the Products in the Territory, including determining (a) which Products to distribute and (b) the scope of the effort.
2.2 Stock Product. MWI shall make a good faith effort to maintain sufficient stock of Products to satisfactorily supply MWI’s expected customer base demand.
2.3 Sales Force; Customer Service. MWI shall maintain a sales force to represent and promote the Products and provide prompt and effective customer service regarding the Products.
| Distribution Services Agreement – Exhibit B |
2.4 Storage Conditions. MWI shall use commercially reasonable efforts to store the Products, both in storage and in-transit to MWI customers, in accordance with instructions on the Product label.
2.5 Compliance with Laws. MWI shall store, ship and distribute the Products, as applicable, in compliance with all Applicable Laws.
2.6 Documentation. MWI shall, upon request with respect to any order for controlled substances, furnish Supplier with commercially reasonable assurances that MWI is authorized to possess and distribute such controlled substances under federal law.
3. Product Complaints; Recalls.
3.1 Product Complaints. Subject to any pharmacovigilance agreements between the parties, upon receipt by MWI of notice of (a) an adverse drug experience, product defect, or manufacturing defect (as defined in 21 C.F.R. § 514.3) of the type that is reportable on FDA Form 1932a or successor form, or (b) a lawsuit, in each case concerning a Product, MWI will promptly forward the notice to Supplier. Upon completion of notice, MWI shall have no further obligation to Supplier concerning such event unless Supplier and MWI mutually agree otherwise.
3.2 Product Recalls. If a recall, market withdrawal, field collection, corrective action, or similar action (“Recall”) is implemented by Supplier or required by any federal, state, local or other regulatory or governmental authority with respect to any Product sold under this Agreement, Supplier shall notify MWI and take all actions necessary to promptly execute the Recall, including working with or through MWI regarding the Recall. Each Recall will be conducted and directed by Supplier, and MWI will follow Supplier’s reasonable directions. For any Recall, Supplier shall directly pay or reimburse MWI for all reasonable costs, fees, and expenses, if any, incurred by MWI (including reimbursement for pass through fees and time worked by MWI internal employees to manage the Recall, and costs and expenses related to the shipping, notification and the repurchase of any Recalled Products in MWI’s possession); provided, however, that Supplier shall not be responsible for reimbursing MWI for costs and expenses to the extent the Recall was caused by MWI’s failure to handle and store the Products in accordance with instructions on the Product label. The patties will each retain complete and accurate records as may be maintained in the ordinary course of business for all Products, including sales and service records, for no less than the period of time required by Applicable Law, to facilitate any Recalls.
4. Supplier Limited Warranties. Supplier represents and warrants to MWI that (a) Supplier will operate, and all Products have been manufactured, labeled, packaged, stored, shipped and distributed, in compliance with all Applicable Laws and applicable industry standards, (b) the Products are free and clear of any defects in design, materials and workmanship and are not adulterated or misbranded, (c) Supplier has and will transfer to MWI good and marketable title to the Products free and clear of all liens, claims, security interests or other encumbrances, (d) the Products conform to the description, grade, condition, and specifications of the Products invoiced and may be legally transported and distributed in the Territory by MWI under all Applicable Laws, (e) the Products do not infringe on or violate any patent, copyright, trademark, trade secret or other intellectual property or proprietary right (“Intellectual Property Rights”) of any third party, and (f) Supplier has all right and authority to appoint MWI as an authorized distributor of the Products (the “Limited Warranties”). Supplier understands that these Limited Warranties will be passed through to any veterinarian, veterinary hospital, clinic, feedlot, integrator, animal owner or other third-party end-user of the Product (“End-User”) and Supplier hereby issues the Limited Warranties to such End Users. THE WARRANTIES SET FORTH HEREIN CONSTITUTE THE SOLE AND EXCLUSIVE WARRANTIES BY SUPPLIER WITH RESPECT TO THE PRODUCTS AND SUPPLIER EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
| Distribution Services Agreement – Exhibit B |
5. Indemnification.
5.1 MWI’s Indemnification. MWI will defend, indemnify, and hold harmless Supplier, its affiliates and subsidiaries, and their officers, directors and employees, from and against all damages, losses, costs, expenses (including reasonable attorney’s fees and court costs), claims, judgments, and liabilities (“Claims”) to the extent arising out of (a) any violation of Applicable Law by MWI; (b) breach of this Agreement by MWI; and/or (c) any actual or asserted fraud, negligence or willful misconduct of MWI except to the extent arising from the fraud, negligence, willful misconduct of Supplier or Supplier’s breach of this Agreement or Applicable Laws.
5.2 Supplier’s Indemnification. Supplier will defend, indemnify, and hold harmless MWI, its affiliates and subsidiaries, and their officers, directors and employees, from and against all Claims arising as a result of (a) any actual or asserted third party claim of a breach of the Limited Warranties; (b) any breach of this Agreement by Supplier; and/or (c) any actual or asserted fraud, negligence or willful misconduct of Supplier except to the extent arising from the fraud, negligence, willful misconduct of MWI or MWI’s breach of this Agreement or Applicable Laws. Contemporaneously with the execution of this Agreement, Supplier will execute and deliver to MWI the Continuing Guaranty attached hereto as Schedule A. The representations, warranties and indemnification provisions contained in the Continuing Guaranty are in addition to those contained herein.
5.3 Indemnification Procedure. If any written claim is made by any third party against a party to this Agreement for which such party (“Indemnitee”) properly seeks indemnification, Indemnitee shall promptly notify the other party (“Indemnitor”) and Indemnitor shall defend against the claim. Such notice will in any event be given within a reasonable period of time of becoming aware of any claim against Indemnitee stating the nature and basis of such claim; provided, however, that any delay or failure to notify Indemnitor of any claim will not relieve it from any liability except to the extent that Indemnitor demonstrates that the defense of such action has been materially prejudiced by such delay or failure. Indemnitor will promptly notify Indemnitee of its intention to assume the defense of such claim. If Indemnitor assumes the defense, it shall have sole control of the defense and all related settlement negotiations and Indemnitee shall, at Indemnitor’s sole expense, provide Indemnitor with all reasonable assistance in connection with any claim. Indemnitor shall consult with Indemnitee regarding the defense and shall provide Indemnitee with reasonably requested information. Indemnitor may not settle any claim, suit, or proceeding in which Indemnitee is named or otherwise involved without Indemnitee’s prior written consent, except in the case of a cash settlement payable by Indemnitor in which there is no admission or imposition of fault or liability as to Indemnitee. If Indemnitor does not assume the defense of any such claim, Indemnitee may, at Indemnitor’s expense, defend against such claim in such manner as Indemnitee may deem appropriate and settle such claim on such terms as it may deem appropriate, and assert against Indemnitor any rights or claims to which Indemnitee is entitled.
| Distribution Services Agreement – Exhibit B |
6. Confidentiality. Confidential Information may be disclosed by one party (the “Disclosing Party”) to the other party (the “Receiving Party”) pursuant to this Agreement. During the Term of this Agreement and for a period of one year from the date of termination or expiration of this Agreement, the Receiving Party will not disclose, either directly or indirectly, such Confidential Information to any third party and only use such Confidential Information for purposes of fulfilling its obligations under this Agreement. “Confidential Information” means any confidential information furnished by the Disclosing Party that is conspicuously marked as “Confidential” (a) in the subject line of the e-mail, if disclosure is by e-mail, and (b) on the first page of any paper or electronic copy of a disclosed document in conspicuous print. Any information provided by or on behalf of MWI regarding MWI’s Distribution of the Products, including the Sales Data (defined in Section 9 below), is confidential and proprietary information of MWI and may not be aggregated with other data, sold or commercialized by Supplier unless such information meets the exclusions as defined below in this Section 6. If any information is not so marked as “Confidential,” then the information is not Confidential Information. The term “Confidential Information” does not include or apply to information that, as evidenced by existing documentation, (i) is or becomes generally available to and known by the public, through no fault of the Receiving Party; (ii) is received by Receiving Party from a third party without any obligations of confidentiality, or (iii) is independently developed by Receiving Party without use of or access or reference to Confidential Information. Within 30 days after any written request by Disclosing Party, the Receiving Party shall return or destroy all physical and electronic copies of the Confidential Information received from Disclosing Party and all materials that contain or reflect Confidential Information created by Receiving Party. Notwithstanding anything in this Agreement to the contrary, the Receiving Party may retain Confidential Information as and to the extent required by any applicable law, automatic back-up archiving practice, or bona-fide records retention policy, provided that any Confidential Information so retained shall continue to be subject to the terms of this Agreement.
7. Liability; Disputes.
7.1 Limitation of Liability. MWI and Supplier shall not be liable to each other for any special, incidental, consequential, punitive or exemplary damages even if the parties have been made aware of the possibilities of such damages. Notwithstanding anything in this Agreement to the contrary, no limitation or waiver of liability, damages, claims or remedies shall apply to any loss, damage, claim, judgment, or liability related to a third party claim for which one party is obligated to indemnify the other party under this Agreement and/or the Continuing Guaranty.
7.2 Dispute. If a dispute related to this Agreement, other than a breach of confidentiality, arises between the parties, the parties shall first attempt to settle the dispute by direct discussions at the vice-president or higher level. If the dispute cannot be settled by the parties by direct discussions, then the parties agree to endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules. Thereafter, any unresolved dispute arising from or relating to this Agreement shall be resolved as provided by this Agreement and by law.
| Distribution Services Agreement – Exhibit B |
8. Payments. For purposes of determining the timing of payment, payment will be deemed to have been made on the date MWI initiates the wire, ACH payment or other payment. Supplier will not debit any MWI account electronically without MWI’s prior written consent. Supplier shall not make additions or surcharges to any invoice amounts without MWI’s prior written consent. Supplier shall immediately remit any monies due to MWI in the event of an MWI accounts payable debit balance situation with Supplier that persists for more than 10 days, including any debit balance arising from chargebacks, rebates, credits, reimbursements, refunds, Distribution Services Fee, Redistribution Services Fee, backend margin, or other incentives owed by Supplier (collectively, “Supplier Payables”). Debit balance is defined as the sum of all transactions with Supplier in MWI’s accounts payable system, including Supplier Payables, having due dates through, but not extending beyond, the then present date. If Supplier credits would no longer hold value to MWI, Supplier will issue cash in lieu of credit. MWI may set off any amounts owed by Supplier to MWI, including Supplier Payables, against any amounts owed by MWI to Supplier. All amounts, payments and credits contemplated by this Agreement are to be made in U.S. Dollars. For amounts past due, including Supplier Payables, the party owed (“Claiming Party”) may charge the owing party (“Owing Party”) interest at an amount not to exceed the lesser of (a) 12% per year or (b) the highest amount permitted by applicable law on any past due amounts that are not paid (or credited if permitted in this Agreement) by the Owing Party within 10 days after receipt of written notice from Claiming Party that such amounts are past due. Notwithstanding the foregoing, interest may not be charged on the portion of any amounts past due that are subject to a bona fide dispute raised by the Owing Party prior to such amounts becoming past due, and not caused or contributed to by Owing Party’s lack of diligence. The parties shall work in a timely manner and in good faith to resolve disputes.
9. Sales Reporting. So long as Supplier is in good standing, MWI shall report certain data to Supplier regarding the sales of the Products (“Sales Data”) to veterinary practices on a mutually agreed format and time. The Sales Data shall include, but may not be limited to, (i) veterinary clinic and/or veterinarian name, (ii) clinic and/or veterinarian business address, (iii) date of Product shipment to clinic and/or veterinarian, and (iv) number of Product units delivered to clinic and/or veterinarian. This Sales Data is owned by MWI and MWI hereby grants Supplier a limited license during the Term to use the Sales Data only for internal tracking and regulatory purposes, including production scheduling and inventory management, regulatory quality control documenting and monitoring, and to calculate any Supplier Payables owed to MWI. The use of Sales Data by Supplier and the extension of the limited license shall be allowed past the Term only for regulatory purposes. Supplier is prohibited from using the Sales Data, in any manner whatsoever, to sell Products to MWI’s customers either directly or through other distributors or intermediaries. This Section shall survive any termination or expiration of the Agreement. MWI may report to Animalytix data regarding the sales of the Products and the sales of products of other manufacturers.
| Distribution Services Agreement – Exhibit B |
10. Force Majeure. Each party’s obligation under this Agreement will be excused to the extent any delay is caused by acts of God, war, terrorism, natural disaster or other conditions beyond the reasonable control of that party, but only during the duration of such condition and provided such party gives prompt written notice thereof to the other party. The nonperforming party shall take all reasonable steps to recommence performance as soon as possible.
11. Governing Law; Venue. This Agreement shall be governed by Delaware law without regard to its conflict of law provisions. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Delaware for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or inconvenient venue for such proceeding.
12. Taxes. MWI shall pay all sales and use taxes attributable to MWI’s purchase of Products from Supplier, subject to Section 13. All other taxes, duties and fees applicable to the Products, MWI’s purchase of the Products hereunder or any transaction contemplated by this Agreement shall be paid by Supplier, including without limitation all taxes on Supplier’s income, import and export duties, excise fees, license fees, permit fees, transfer fees, privilege fees and value added taxes.
13. Reimbursement of Controlled Substance Tax Payments. Notwithstanding any contrary provision of this Agreement, with respect to any current or future Product under this Agreement that is classified as a “Controlled Substance” as defined by section 102 of the Controlled Substances Act, 21 U.S.C. § 802(6), Supplier shall be responsible to reimburse MWI for any MWI paid tax, assessment, charge, fee, or other levy, regardless of how denoted imposed by or payable to any federal, state, or local governmental agency or authority on, or in connection with, MWI’s purchase (for inventory or drop-ship), distribution, sale or transfer of such Product based on the Product’s Controlled Substance classification (collectively, a “Controlled Substance Tax”). If MWI is required by law to pay any Controlled Substance Tax, MWI shall provide written notice to Supplier, which notice shall include a detailed invoice to Supplier, copies of state-specific invoices or MWI’s official document submission of net distribution into each state, and calculations of Controlled Substance Tax paid based on distribution reporting, and Supplier shall reimburse MWI for such undisputed invoices for Controlled Substance Tax by issuing a credit to MWI within 30 days of receiving that notice. All discrepancies in distribution data, Controlled Substance Tax, and late reimbursement shall be resolved within 30 days through good faith discussions or meetings as necessary. If Supplier is required by law to pay any Controlled Substance Tax, Supplier shall not pass on or otherwise invoice MWI for such Controlled Substance Tax as a separate line item or other charge specifically identifiable as a Controlled Substance Tax. This Section 13 shall not apply to any generally applicable tax, assessment, charge, fee, or other levy that does not discriminate on the basis of product type or category.
14. Interpretation. The parties have jointly negotiated this Agreement and, thus, neither this Agreement nor any provision will be interpreted for or against any party on the basis that it or its attorney drafted this Agreement or the provision at issue. “Or” is disjunctive but not necessarily exclusive. “Including” means “including but not limited to.”
15. Successors; Assignments. All of the terms and provisions of this Agreement will be binding on and inure to the benefit of the patties and their respective successors and assigns. Neither party may assign, subcontract, delegate or transfer its rights or obligations hereunder without the prior written consent of the other party.
16. Severability. All provisions of this Agreement are severable. If any term, provision, or agreement contained in this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions of this Agreement shall remain valid, legal, and enforceable and be enforced and construed as if such invalid provision were never a part of this Agreement.
17. Independent Contractors. MWI and Supplier are independent businesses with a vendor and vendee relationship. Neither party shall have, nor represent that it has, the power, right or authority to bind the other party or to assume or to create any obligation or responsibility, express or implied, on behalf of the other party. Nothing contained in this Agreement will be construed so as to characterize the relationship between the parties as a joint venture, partnership, agency or franchise for any purposes whatsoever.
* * * * *
| Distribution Services Agreement – Exhibit B |
Schedule A
CONTINUING GUARANTY AND INDEMNIFICATION AGREEMENT
The undersigned guarantees to MWI Veterinary Supply Co. and each of its affiliate and subsidiary companies and any successors (collectively, “MWI”) that (i) any food, drugs, devices, cosmetics, merchandise, or animal health related products (“Products”) now or hereafter shipped or delivered by or on behalf of the undersigned, or any of its affiliates or subsidiary companies or any successors, (collectively, “Guarantors”) to or on the order of MWI will not be at the time of delivery, adulterated, misbranded, or otherwise prohibited under applicable federal, state and local laws, including applicable provisions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §301 et seq. (“FDCA”), and Sections 351 and 361 of the Federal Public Health Service Act, 42 U.S.C. §§ 262 and 264, and their implementing regulations, each as amended (collectively, “Applicable Laws”), in effect at the time of shipment or delivery of such Products; (ii) Products are not, at the time of shipment or delivery, merchandise that may not otherwise be introduced or delivered for introduction into interstate commerce under Applicable Laws, including FDCA section 301 (21 U.S.C. §331); and (iii) Products are merchandise that may be legally transported or sold under the provisions of any other applicable federal, state or local law. Guarantors guarantee further that, in the case of food shipments, only those chemicals or sprays approved by federal, state, or local authorities have been used, and any residue in excess of the amount allowed by any such authorities has been removed from Products.
Guarantors shall promptly defend, indemnify and hold MWI harmless against any and all claims, losses, damages, costs, liabilities and expenses, including attorneys’ fees and expenses, arising as a result of (a) any actual or asserted violation of Applicable Laws or by virtue of which Products made, sold, supplied, or delivered by or on behalf of Guarantors may be alleged or determined to be adulterated, misbranded or otherwise not in full compliance with or in contravention of Applicable Laws, (b) the possession, distribution, sale and/or use of, or by reason of the seizure of, any Products of Guarantors, including any prosecution or action whatsoever by any governmental body or agency or by any private party, including claims of bodily injury, death or property damage, (c) any actual or asserted claim that Guarantors’ Products infringe any proprietary or intellectual property rights of any person, including infringement of any trademarks or service names, trade names, trade secrets, inventions, patents or violation of any copyright laws or any other applicable federal, state or local laws, and (d) any actual or asserted claim of negligence, willful misconduct or breach of contract except to the extent arising from the negligence, willful misconduct or breach of contract of MWI.
Guarantors shall maintain primary, noncontributory product liability insurance of not less than $5 million per occurrence for claims relating to Products. This insurance must include “MWI Veterinary Supply Co. and each of its affiliate and subsidiary companies and any successors” as additional insureds for claims arising out of Products. Guarantor shall provide for at least thirty days’ advance written notice to MWI Veterinary Supply Co. of cancellation or material reduction of the required insurance. If the required insurance is underwritten on a “claims made” basis, the insurance must include a provision for an extended reporting period (“ERP”) of not less than twenty-four months; Guarantors further agree to purchase the ERP if continuous claims made insurance, with a retroactive date not later than the date of this Agreement, is not continually maintained or is otherwise unavailable. This insurance shall be with an insurer and in a form acceptable to MWI Veterinary Supply Co., and any deductible or retained risk must be commercially and financially reasonable and acceptable to MWI Veterinary Supply Co. Guarantors warrant that they have sufficient assets to cover any self-insurance or retained risk. Upon request, Guarantors will promptly provide satisfactory evidence of the required insurance.
Provisions in this Continuing Guaranty and Indemnification Agreement are in addition to, and not in lieu of, any terms set forth in any purchase orders accepted by Guarantors or any separate agreement entered into between MWI and Guarantors. If the language in this Agreement conflicts with the language in any other document, the language in this Agreement controls.
| Supplier: PetVivo, Inc. | ||
| Signature: | /s/ John Lai | |
| Name: | John Lai | |
| Title: | Chief Executive Officer | |
| Date: | June 15, 2022 | |
| CGIA – Schedule A |
EXHIBIT 31.1
Certification of Principal Executive Officer
Required By Rule 13a-14(A) of the Securities Exchange Act of 1934, As Amended,
As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
I, John Lai, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of PetVivo Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 11, 2022 | By: | /s/ John Lai |
John Lai CEO, President and Director (Principal Executive Officer) |
EXHIBIT 31.2
Certification of Principal Financial Officer
Required By Rule 13a-14(A) of the Securities Exchange Act of 1934, As Amended,
As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert J. Folkes, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of PetVivo Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 11, 2022 | By: | /s/ Robert J. Folkes |
Robert J. Folkes Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
Certification of Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of PetVivo Holdings, Inc., a Nevada corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John Lai, Principal Executive Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: August 11, 2022 | By: | /s/ John Lai |
John Lai CEO, President and Director (Principal Executive Officer) |
EXHIBIT 32.2
Certification of Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of PetVivo Holdings, Inc., a Nevada corporation (the “Company”), on Form 10-Q for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John Carruth, Principal Financial Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| Date: August 11, 2022 | By: | /s/ Robert J. Folkes |
Robert J. Folkes Chief Financial Officer (Principal Financial and Accounting Officer) |