UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended December 31, 2017June 30, 2021

For the transition period from _____ to _____

Commission File Number:000-53832

VITALITY BIOPHARMA, INC.

(Exact name of registrant as specified in its charter)

(530)231-7800

Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 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[X]Yes ☒ No [  ]☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] ☒ No [  ]☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 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 [X] ☒

As of February 14, 2018,August 12, 2021, there were 24,200,147 50,700,147 shares of the registrant’s common stock outstanding.

VITALITY BIOPHARMA, INC.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended

December 31, 2017June 30, 2021

INDEX

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

VITALITY BIOPHARMA, INC.

CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2021 AND 20162020

(Unaudited)

VITALITY BIOPHARMA, INC.

CONDENSEDCONSOLIDATED BALANCE SHEETS

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA, INC.

CONDENSED STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

NINETHREE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2021 AND 2020

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

TheSee accompanying notes are an integral part of these condensedto the consolidated financial statements.

VITALITY BIOPHARMA, INC.

NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED DECEMBER 31, 2017JUNE 30, 2021 AND 20162020

(Unaudited)

1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Vitality Biopharma, Inc. (the “Company”, “we”, “us” or “our”), was incorporated in the State of Nevada on June 29, 2007. The Company’s fiscal year end is March 31.

In 2015, the Company developed a new class of cannabinoids known as cannabosides, which were discovered through application of the Company’s proprietary enzymatic bioprocessing technologies originally developed for stevia sweeteners.technologies. In 2016, the Company received approvals from the U.S. Drug Enforcement Administration (the “DEA”) and the State of California to initiate studies and manufacturing scale-up at its research and development facilities in order to develop cannabosides as pharmaceutical products.cannabosides. Currently, we do not have any commercial products and have not yet generated any revenues from our cannabinoid prodrug pharmaceuticals.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, forduring the ninethree months ended December 31, 2017,June 30, 2021, the Company incurred a net loss of $3,246,847$612,235 and used $562,701 of cash in our operating activities of $2,180,055.activities. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s March 31, 2017 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are issued. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. We estimate that as of December 31, 2017June 30, 2021, we will have sufficient funds to operate the business for the next ninethree months. In December 2017, the Company issued an aggregateSince our existing cash balances are estimated to be insufficient to fund our currently planned level of 933,332 sharesoperations, we will need additional financing or other sources of our common stock and warrants to purchase 466,667 shares of our common stock to certain investors for net proceeds of approximately $1,395,000 and in July 2017, the Company issued an aggregate of 666,667 shares of our common stock and warrants to purchase 333,334 shares of our common stock to certain investors for net proceeds of approximately $995,000. We will require additional financingcapital to fund our planned future operations, including the continuation of our ongoing research and development efforts, licensing or acquiring new assets, and researching and developing any potential patents and any further intellectual property that we may acquire.operations. Further, these estimates could differ if we encounter unanticipated difficulties, in which case our current funds may not be sufficient to operate our business for that period. In addition,or if our estimates of the amount of cash necessary to operate our business may prove to be wrong, and we could spenduse our available financial resources much faster than we currently expect. No assurance can be given that any future financing or capital, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company.

We do not have any firm commitments for future capital. We will need to raise additional funds in order to continue operating our business and pursue and execute our planned research and development and commercial operations. We do not presently have, nor do we expect in the near future to have, sufficient or consistentsignificant revenue to fund our business from our operations, and will need to obtain significantmost of our necessary funding from external sources.sources in the near term. Since inception, the Company has experienced recurring operating losses and negative operating cash flows, and we have funded our operations primarily through equity and debt financings, and we expect to continue to rely on these sources of capital in the future. However, ifIf we raise additional funds by issuing equity or convertible debt securities, our existing stockholders’ ownership will be diluted, and obtaining commercial loans would increase our liabilities and future cash commitments. If we pursue capital through alternative sources, such as collaborations or other similar arrangements, we may be forced to relinquish rights to our proprietary technology or other intellectual property that could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Further, these or other sources of capital may not be available on commercially reasonable or acceptable terms when needed, or at all. If we cannot raise the money that we need in order to continue to operate and develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations. If any

COVID-19

The Company is subject to risks and uncertainties of these were to occur, there is a substantial riskthe COVID-19 pandemic that could adversely impact our business, would failour liquidity and access to capital markets and our stockholders could lose all of their investment.business development activities. The Company has implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines.

The extent of the impact of the COVID-19 pandemic has had and will continue to have on the Company is highly uncertain and difficult to predict and quantify. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, including vaccination efforts, as well as the economic impact on local, regional, national and international markets.

Basis of Presentation of Unaudited Condensed Financial Information

The unaudited condensedconsolidated financial statements include the accounts of the Company for the three and nine months ended December 31, 2017its wholly owned subsidiary, Vitality Healthtech, Inc. (dissolved in May 2021), and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, applied on a consistent basis,America. Intercompany balances and pursuant to the requirements for reporting on Form 10-Q and the requirements of Regulation S-K and Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete audited financial statements. However, the information includedtransactions have been eliminated in these financial statements reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of theconsolidation. The Company’s financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year or any future annual or interim period. The balance sheet information as of March 31, 2017 was derived from the Company’s audited financial statements as of and for the year ended March 31, 2017 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on June 28, 2017. These financial statements should be read in conjunction with that report.end is December 31.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. SignificantThe more significant estimates and assumptions by management include, among others, assumptions used in reserves for accounts receivable, the fair value ofassumptions used in valuing equity instruments issued for services, and assumptions used in the valuation of derivative liabilities and the valuation allowance for deferred tax assets, and the accrual ofaccruals for potential liabilities. Actual results could differ from those estimates.

Financial AssetsCash and Liabilities Measured at Fair ValueCash Equivalents

The Company uses various inputs in determiningconsiders all highly liquid investments with an original maturity of three months or less at the fair valuedate of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value inacquisition to be cash equivalents. From time to time, the balance sheets are categorizedCompany’s cash account balances exceed the balances covered by the level of objectivity associated with the inputs usedFederal Deposit Insurance System. The Company has never suffered a loss due to measure their fair value. Authoritative guidance provided by FASB defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets:such excess balances.

The fair value of the derivative liabilities of $201,836 and $240,791 at December 31, 2017 and March 31, 2017, respectively, were valued using Level 2 inputs.

The carrying value of cash and accounts payable and accrued liabilities approximates their fair value because of the short maturity of these instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average Black-Scholes-Merton modelsOption Pricing model to value the derivative instruments at inception and on subsequent valuation dates through the December 31, 2017, reporting date.dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

Stock-Based CompensationIncome Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income (loss) in the period that includes the enactment date.

Leases

The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. The Company had no lease commitments for longer than one year as of June 30, 2021. The laboratory space lease in Rocklin, California ends on March 31, 2022.

Stock-Based Compensation

The Company periodically issues stock options and warrantsrestricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs.services. The Company accounts for share-based payments undersuch grants issued and vesting based on ASC 718, Compensation-Stock Compensation, whereby the guidance as set forth in the Share-Based Payment Topicvalue of the FASB Accounting Standards Codification (“ASC”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directorsaward is measured on the date of grant using a Black-Scholes-Merton option-pricing model, and recognized for employees as compensation expense on the straight-line basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the portion ofCompany’s stock options is estimated using the award that is ultimatelyBlack-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected to vest is recognized as expense over the required service period in the Company’s statements of operations. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance whereas the valuevolatility, expected life of the stock compensationoptions or restricted stock, and future dividends. Compensation expense is recorded based upon the measurement date as determined at either a)value derived from the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation isBlack-Scholes-Merton Option Pricing model and based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated atactual experience. The assumptions used in the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company periodically issues unvested (“restricted”) shares of its common stock to employees as equity incentives. The Company’s restricted stock vests upon the satisfaction of a recipient’s service condition, which is satisfied over a period of years. The restricted shares vest over certain period and remain subject to forfeiture if vesting conditions are not met. The Company values the shares based on the price per share of the Company’s shares at the date of grant and recognizes the value asBlack-Scholes-Merton Option Pricing model could materially affect compensation expense ratably over the vesting period.recorded in future periods.

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock subject to vesting are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

Patents and Patent Application Costs

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Accordingly, patent costs are expensed as incurred.

Research and Development

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s treatments and product candidates. Research and development costs are expensed as incurred.

Recent Accounting PronouncementsSegments

The Company operates in one segment for the development of pharmaceuticals products. In May 2014,accordance with the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09“Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAPmanagement approach to segment reporting, establishes requirements to report selected segment information quarterly and replace it with a principle based approach for determining revenue recognition. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods orto report annually entity-wide disclosures about products and services, major customers, and is recognizedthe countries in an amount that reflects the consideration which the entity expectsholds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to receivetheir similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing, and distribution processes. Since the Company operates in exchange for those goods or services. one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Recent Accounting Pronouncements

In addition,June 2016, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The FASB has recently issued ASU 2016-08,2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-10,2016-13 requires entities to use a forward-looking approach based on current expected credit losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-11, ASU 2016-12, ASU 2016-20, and ASU 2017-05, all of which clarify certain implementation guidance within ASU 2014-09. ASU 2014-092016-13 is effective for interimthe Company beginning April 1, 2023, and annual periods beginning after December 15, 2017. Earlyearly adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. The standard can be adopted either retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the cumulative catch-up transition method).permitted. The Company is currently indoes not believe the process of analyzing the information necessary to determine thepotential impact of adopting thisthe new guidance onand related codification improvements will be material to its financial position, results of operations and cash flows. The Company will adopt the provisions of this statement in the quarter beginning April 1, 2018.

In February 2016, the FASB issued ASU No. 2016-02, Leases. This update will require the recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments, for all leases with terms longer than 12 months. For operating leases, the asset and liability will be expensed over the lease term on a straight-line basis, with all cash flows included in the operating section of the statement of cash flows. For finance leases, interest on the lease liability will be recognized separately from the amortization of the right-of-use asset in the statement of comprehensive income and the repayment of the principal portion of the lease liability will be classified as a financing activity while the interest component will be included in the operating section of the statement of cash flows. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its financial statements and related disclosures.

In July 2017, the FASB issued ASU 2017-11,Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 allows companies to exclude a down round feature when determining whether a financial instrument (or embedded conversion feature) is considered indexed to the entity’s own stock. As a result, financial instruments (or embedded conversion features) with down round features may no longer be required to be accounted for as derivative liabilities. A company will recognize the value of a down round feature only when it is triggered and the strike price has been adjusted downward. For equity-classified freestanding financial instruments, an entity will treat the value of the effect of the down round as a dividend and a reduction of income available to common shareholders in computing basic earnings per share. For convertible instruments with embedded conversion features containing down round provisions, entities will recognize the value of the down round as a beneficial conversion discount to be amortized to earnings. The guidance in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, and the guidance is to be applied using a full or modified retrospective approach. The adoption of ASU 2017-11 is not expected to have an impact on the Company’s financial statements and related disclosures because the conversion feature of the Company’s warrants have features other than down round provisions that require current accounting treatment and classification.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

2. DERIVATIVE LIABILITY

In May 2015, the Company issued certain warrants which included an anti-dilution provision that allows for the automatic reset of the exercise price of the warrants upon future sale of the Company’s common stock, warrants, options, convertible debt or any other equity-linked securities at an issuance, exercise or conversion price below the current exercise price of the warrants. In addition, the Company determined that the warrants can be settled for cash at the holders’ option in a future fundamental transaction, as defined. As a result of the anti-dilution and fundamental transaction provisions, the Company determined that the conversion feature of the warrants should be separated from the host contract, be recognized as a derivative liability, and re-measured at each reporting period with the change in value reported in the statement of operations.

At March 31, 2017, the balance of the derivative liabilities was $240,791. During the nine months ended December 31, 2017, the Company recorded a decrease in derivative liability of $38,955. At December 31, 2017, the balance of the derivative liabilities was $201,836.

At December 31, 2017 and March 31, 2017, the derivative liabilities were valued using a probability weighted Black-Scholes-Merton pricing model with the following assumptions:

4. STOCK OPTIONS

A summary of the Company’s stock option activity during the ninethree months ended December 31, 2017June 30, 2021 is as follows:

SUMMARY OF STOCK OPTION ACTIVITY

A summary of the Company’s stock options outstanding and exercisable as of December 31, 2017June 30, 2021 is as follows:

SCHEDULE OF STOCK OPTIONS OUTSTANDING AND EXERCISABLE

In

During the ninethree months ended December 31, 2017, the Company granted an aggregate of 470,000 options to purchase shares of the Company’s common stock with exercise prices ranging from $1.59 to $1.81 per share to five employees and two directors, that expire ten years from the date of grant. The options issued to the two directors have a vesting period of one year and the options issued to employees all have vesting periods of 24 months. The fair value of each option award was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate between 123.13% and 124.88%, (ii) discount rate between 2.33% and 2.265%, (iii) zero expected dividend yield, and (iv) expected life of 6 years, which is the average of the term of the options and their vesting periods. The total fair value of these option grants at their grant dates was approximately $740,000.

During the nine months ended December 31, 2017,June 30, 2021, we expensed total stock-based compensation related to stock options of $842,121, and the$46,539. There is 0 remaining unamortized cost of the outstanding stock-based awards at December 31, 2017 was approximately $1,497,000. This cost will be amortized on a straight line basis over a weighted average remaining vesting period of 2 years.June 30, 2021. At December 31, 2017,June 30, 2021, the 3,216,7105,997,544 outstanding stock options had an0 intrinsic valuevalue.

3. WARRANTS

A summary of approximately $2,659,000.

5. WARRANTS

At December 31, 2017, warrants to purchase common shares were outstanding as follows:

In conjunction with the December 2017 Offering (see Note 3), the Company granted to investors warrants to purchase up to 466,667 shares of the Company’s common stock. The warrants were exercisable immediately, have an exercise price of $2.00 per share, and expire onstock during the three year anniversary ofmonths ended June 30, 2021 is as follows:

SUMMARY OF WARRANTS ACTIVITY

At June 30, 2021, the date of issuance. The exercise price of the warrants is subject to adjustment for standard anti-dilution provisions, such as146,668 outstanding stock dividends and splits, subsequent rights offerings and pro rata distributions to the Company’s common stockholders. The exercisability of the warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% or 9.99% of the Company’s common stock.

In conjunction with the July 2017 Offering (see Note 3), the Company granted to investors warrants to purchase up to 333,334 shares of the Company’s common stock. The warrants were exercisable immediately, have an exercise price of $2.00 per share, and expire on the three year anniversary of the date of issuance. The exercise price of the warrants is subject to adjustment for standard anti-dilution provisions, such as stock dividends and splits, subsequent rights offerings and pro rata distributions to the Company’s common stockholders. The exercisability of the warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% or 9.99% of the Company’s common stock.

At December 31, 2017, the 1,164,422 outstanding warrants had no0 intrinsic value.

6. RELATED PARTY OBLIGATIONS4. COMMITMENTS AND CONTINGENCIES

On April 23, 2012, theThe Company entered into a lease agreement with One World Ranches, which is jointly-owned by Dr. Avtar Dhillon, the Chairman of the Company’s Board of Directors, and his wife, to rent the space being used as the Company’s principal office and laboratory facility. The original term of the lease was from May 1, 2012 to May 1, 2017. In May 2017, the Company extended the lease through May 1, 2020. Our rent payments thereunder were $2,300 per month until May 1, 2017 and increased to $2,600 per month on May 1, 2017. Aggregate payments under the lease for the nine months ended December 31, 2017 and 2016 were $25,700 and $20,700, respectively.

7. LEGAL AND OTHER PROCEEDINGS

On August 19, 2016, we filed a resale registration statement on Form S-1 (“Form S-1”) with the SEC to register 2,650,000 shares of our common stock and 7,950,000 shares of our common stock issuable upon exercise of certain warrants. We received a letter in February 2021 from counsel for the Washington D.C. officeCompany’s previous director and officer insurance carrier (the “insurer”) demanding that the Company reimburse the insurer for sums advanced by the insurer without the Company’s knowledge or consent to a former director of the SEC dated December 10, 2016, stating that the staff of the SEC was conducting a Section 8(e) examination with respect to this Form S-1 and that the Division of Corporate Finance would not take any further action on the Form S-1 while the examination was pending. We received subpoenas to produce documents dated December 14, 2016, and January 23, 2017, and a further subpoena for testimony and any supplemental production of documents dated June 5, 2017. The document requests were primarilyCompany as defense costs in connection with a claim purportedly arising under a previous director and officer liability insurance policy. The Company believes it has no liability for this matter. We have complied with all document requestsclaim on the basis of, among other things, Nevada law, the Company’s governing documents and the Company’s CEO will provide testimony when the SEC schedules such testimony, which we believe will be sometime before the end of September 2018.

As of December 31, 2017, we had accrued approximately $11,000 in legal fees related to the SEC examination.

8. SUBSEQUENT EVENTS

In February 2018, the Company issued a total of 75,000 shares of common stock to one consultant as payment for services and recorded expenses of $144,000 based on the fair valuelanguage of the policy. Accordingly, as of June 30, 2021, no contingent liability has been recorded in the Company’s common stock at the issuance date.consolidated statements of financial condition for this matter.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this discussion and analysis and elsewhere in this Quarterly Report, the “Company”, “we”, “us” or “our” refer to Vitality Biopharma, Inc., a Nevada corporation.

Cautionary Statement

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Unaudited Condensed Financial Statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the fiscal year ended March 31, 20172021 filed on June 28, 2017,May 19, 2021, and the related audited financial statements and notes included therein.

Certain statements made in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause our or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These risks and uncertainties include: general economic and financial market conditions; our ability to obtain additional financing as necessary; our ability to continue operating as a going concern; any adverse occurrence with respect to our business or; results of our research and development activities that are less positive than we expect ;expect; our ability to bring our intended products to market; market demand for our intended products; shifts in industry capacity; product development or other initiatives by our competitors; fluctuations in the availability and costs of raw materials and costs associated with growing raw materials forrequired in our intended products; poor growing conditions for the stevia plant;drug development process; other factors beyond our control; and the other risks described under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on June 28, 2017.May 19, 2021.

Although we believe that the expectations and assumptions reflected in the forward-looking statements we make are reasonable, we cannot guarantee future results, levels of activity or performance. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed by any forward-looking statements. As a result, readers should not place undue reliance on any of the forward-looking statements we make in this report. Forward-looking statements speak only as of the date on which they are made. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Company Overview

We were incorporatedUnless otherwise provided in this Quarterly Report, references to the State of“Company,” “we,” “us”, and “our” refer to Vitality Biopharma, Inc., a Nevada corporation formed on June 29, 2007 under the nameas Legend Mining Inc., and its consolidated subsidiaries. On October 10, 2011, we completed a merger with our wholly-owned subsidiary, Stevia First Corp., whereby we changed our name from “Legend Mining Inc.” to “Stevia First Corp.” Also on October 10, 2011, we effected a seven for one forward stock split of authorized, issued and outstanding common stock. As a result, our authorized capital was increased from 75,000,000 shares of common stock with a par value of $0.001 to 525,000,000 shares of common stock with a par value of $0.001, and issued and outstanding shares of common stock increased from 7,350,000 to 51,450,000. In February 2012, we substantially changed our management team, and added other key personnel. In December 2015, we discovered novel pharmaceutical applications of our glycosylation technology for producing cannabinoid prodrugs and we have recently changed our operational focus towards pharmaceutical development of the cannabinoid prodrugs. On July 15, 2016, the holders of a majority of our outstanding common stock and our Board of Directors and shareholders approved 1) a name change whereby our name changed from Stevia First Corp. to Vitality“Vitality Biopharma, Inc., 2) a reverse split of our outstanding common shares whereby each 10 shares of common stock will be exchanged for 1 share of common stock and 3) an increase in the number of shares of authorized common stock from 525,000,000 to 1,000,000,000. These changes became effective on July 20, 2016.”

Plan of Operations

Business Overview

Vitality Biopharma is unlockinga company focused on the poweradvancement of cannabinoids forpharmaceuticals and innovative technologies that improve the treatmentlives of serious neurological and inflammatory disorders, such as inflammatory bowel disease and narcotic bowel syndrome, a formpatients. We seek to achieve this objective through the development of severe opiate-induced bowel dysfunction.

Vitality Biopharma has developed a new class ofnovel cannabinoid pharmaceuticalspharmaceutical prodrugs known as cannabosides. We conduct our operations using our own personnel and facilities with the support of third-party resources to advance our drug development programs.

Our cannabosides are cannabinoid-glycoside prodrugs, which were discovered in 2015 through application of the company’sCompany’s proprietary enzymatic bioprocessing technologies, originally developed for stevia sweeteners. Cannabosides are cannabinoid glycoside “prodrugs,” which means that they are medications or compounds that, after administration, are converted within the body after administration from an inactive molecule into a pharmacologically active drug,drug. Currently, the Company has produced more than 100 novel cannabosides, including glycosylated tetrahydrocannabinol (THC), cannabidiol (CBD), cannabidivarin (CBDV) and cannabinol (CBN), that are covered by worldwide patent applications for composition of matter, method of production and method of use.

Additionally, the Company is evaluating the expansion of its corporate strategy to create long-term sustainable value for its shareholders by building a more diversified portfolio of assets through organic growth and strategic acquisitions. Specifically, the Company is considering special situation opportunities in a variety of industries, including without limitation, businesses that utilize innovative technologies to address the unfavorable environmental impacts of climate change.

Our corporate headquarters is located in Los Angeles, California. As of August 12, 2021, we employed three full-time employees, including one research professional working in our office and laboratory space in Rocklin, California. We also have, in the past, engaged the services of scientific and regulatory consultants to assist in our research and development activities, which already hasis an approach that provides us with flexible and highly-experienced resources to advance our clinical efforts while maintaining a long history of clinical investigation and use. relatively lower overhead cost structure.

Cannaboside Prodrugs

A classic prodrug example is Aspirin, acetylsalicylic acid, which was first made by Felix Hoffmann at Bayer in 1897 and is a synthetic prodrugcompound that, after administration, is metabolized into a pharmacologically active drug. Prodrugs are often designed to improve drug properties and reduce known or expected toxicities and adverse side effects. By using our proprietary enzymatic bioprocessing technologies, our clinical research team has developed a novel family of salicylic acid. Because there already exists independent verification of the active drug’s safetyprodrugs by combining cannabinoid and efficacy, prodrugs may receive marketing approval more quickly than others, and in some cases may receive drug approvals through completion of small clinical studies evaluating bioequivalence or bioavailability. At the same time, a prodrug canglucose molecules. The resulting compounds, known as cannabosides, have manyunique commercial advantages, including that they can be proprietaryapplications and patentable compositions of matter, unlike cannabinoids themselves,which are separate and distinct from ordinary cannabinoids. The advantages of cannabosides may include: (i) administration in a convenient oral formulation, (ii) targeted delivery with release in the colon or older pharmaceutical formulations where patent protection has already expired.large intestine, (iii) improved stability with limited degradation or drug metabolism, and (iv) delayed release enabling longer-lasting effects and fewer administrations by patients.

CannabosideOur proprietary glycosylation process, which results in adding one or more glucose molecules to compounds, may enable our new cannabosides to act as prodrugs are intended to reduce or eliminatethat achieve targeted delivery of the psychoactivitybioactive compounds of cannabinoids while providing amplified therapeutic effects. Upon oral delivery, cannaboside prodrugs passto the gastrointestinal tract. Glycosylated compounds are generally more stable and water soluble, so upon ingestion, we believe they will remain intact and transit through the digestive tractesophagus, stomach and upper intestine with limited absorption or degradation from stomach acids. However, once the glycosylated compounds reach the large intestine, we expect them to encounter glycoside hydrolase enzymes secreted by the human intestinal microbiota that will cleave the polar glucose residues and release the active cannabinoids withincannabinoid compound primarily in the large intestine or colon. This

We have focused our research and development activities on the glycosylation of cannabinoids given their well-known positive effects on the human endocannabinoid system. Our research and development activities originally focused on the glycosylation of CBD and then later expanded into the glycosylation of THC. The use of the cannabinoid THC has been shown to provide substantial anti-inflammatory benefits on the human body, among other benefits, but is limited as a pharmaceutical option given its psychoactive and intoxicating properties. However, by glycosylating THC, we have learned through initial animal studies that the binding of glucose and THC molecules restricts the release of THC into the body’s digestive system until the prodrug reaches the large intestine, at which point the glycoside hydrolase enzymes cleave the glucose from the prodrug and the THC is released in a targeted and restricted manner. Further, we have learned through our initial animal studies that this targeted release of THC, which could enable cannabinoids suchbe provided in very low doses to achieve physiologically beneficial results, serves as tetrahydrocannabinol (THC) to be restricted toan anti-inflammatory agent in the lower gastrointestinal tract minimizing entryand minimizes the amount of THC absorbed into the bloodstream or brain,blood stream, therefore avoiding the psychoactive and enabling targeted deliveryintoxicating properties that hinder the broader pharmaceutical use of THC.

We are developing our THC-glycoside prodrugs for the treatment of gastrointestinal disorders. Targeted deliverydiseases, including inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS) because of cannabinoidsthe targeted release described previously. IBD is a frequently chronic inflammatory condition where parts of the digestive system become inflamed from an overactive immune response. The disease can lead to irreversible damage to the gastrointestinal tract and may require surgery to remove affected areas of the intestine. Two major forms of the disease are Crohn’s disease, which can affect any part of the digestive system, and ulcerative colitis, which often affects the colon or large intestine. The disease is often unpredictable with periods of painful and debilitating symptoms followed by periods of remission with limited psychoactivity may be especially usefulsymptoms. IBS has similar symptoms to IBD, including abdominal pain, but the underlying disease process is quite different. IBS is a functional gastrointestinal disorder that commonly affects the large intestine and is characterized by abdominal cramping, diarrhea, constipation, and pain. Currently, patients suffering from IBD are frequently prescribed anti-inflammatory drugs such as steroids, biologics and immunosuppressants, and patients suffering from IBS are prescribed antibiotics, antidepressants and gastrointestinal motility compounds, all of which often result in unwanted side effects.

Our most promising THC-glycoside (VBX-100) is being developed as an oral prodrug for the treatment of pediatric conditions. Cannaboside prodrugs are also more stableIBD and far more water soluble than cannabinoids,IBS. VBX-100 was selected from our THC-glycoside portfolio for compatibility with commercial production techniques and the optimal prodrug delivery profile that maximizes intestinal anti-inflammatory properties while minimizing psychoactive or intoxicating effects. Initial pre-clinical studies on the efficacy of VBX-100 in animal models have shown favorable outcomes, including reduced inflammation of the gastrointestinal tract and no measurable systemic THC found in tissue examined using highly-sensitive testing equipment. Our pre-clinical development plan, which enables themincludes dose range finding studies, GLP toxicology studies, pharmacokinetic studies and other pre-clinical research, is anticipated to be readily formulated withincompleted during the 2^nd half of calendar year 2022, subject to the Company securing sufficient additional funding or entering into a pill or capsule.

We have produced more than 25 novel cannabosides so far strategic partnership. After our satisfactory completion of all of the prerequisite pre-clinical in vitro and have patent applications that include composition of matter claims for prodrugs of cannabinoids that have been studied extensively in clinical trials worldwide, including THC, cannabidiol (CBD), cannabidivarin (CBDV), and other phytocannabinoids and endocannabinoids. Upon successful patent prosecution, protectionvivo studies, an Investigational New Drug (IND) application would extend until 2035 and be available in all major markets worldwide. In addition, we have filed patent applications that seek to protect claims onwith the novel vanilloid glycoside compounds that target the TRPV receptors for mediating pain relief, methods of use for TRPV1 agonists to effect neural repair, and based on findings in early 2017, for methods to use cannabinoids to treat gut dysbiosis and drug-resistantC.difficile infections, which colonize the large intestine. We aim to develop and approve our proprietary molecules as pharmaceuticals using a low-risk regulatory strategy that is available for prodrugs, and to amplify the benefits that have been seen in independent clinical trials describing the use of cannabinoids for treatment of neurological and inflammatory conditions.

A key part of our strategy will be to take advantage of a more efficient U.S. Food and Drug Administration (FDA) review and, upon receiving FDA approval, process that is available for prodrugs, which reduceswe would initiate our Phase 1 clinical trial, subject to the need for largeCompany securing sufficient additional funding or entering into a strategic partnership.

In addition to our research and expensive clinical trials. Expedited regulatory processes may be available fordevelopment activities related to our cannabosides because in the U.S. and internationally there have already been many independent preclinical and clinical studies completed using the reference cannabinoid drugsTHC-glycoside compounds, we are studying,expanding and so existing clinical data may be submitteddiversifying our research and development activities to drug regulatory agencies as supporting evidenceinclude the potential safety, efficacy and commercialization of our compounds’ safety and efficacy.

We are initially developing our cannabosides drug formulations for treatment of gastrointestinal disorders, including inflammatory bowel disease, irritable bowel syndrome, and narcotic bowel syndrome, a severe form of opiate-induced abdominal pain.

For inflammatory bowel disease (IBD), there have been independently-conducted preclinical and clinical studies that have demonstrated the benefit of cannabinoids, and many U.S. states now permit the use of medical marijuana for IBD, including for treatment of Crohn’s disease or ulcerative colitis patients. Independently-run retrospective clinical studies have found that in 56 patients who used cannabinoids with IBD that 83.9% of patients reported improvement in abdominal pain and 76.8% of patients reported improvement in abdominal cramping. In addition, in a prospective trial that was independently-managed and placebo-controlled, it was found that 45% of Crohn’s disease patients achieved remission through only 8 weeks of treatment. Patients reported improvements in sleep and appetite with no significant side effects, and some patients were able to eliminate use of corticosteroids and opiate pain medications. Patients experienced benefits with cannabis treatment despite being non-responders to traditional front-line and second-line IBD therapies, such as corticosteroids, immunomodulators, and biologic TNF-alpha inhibitors.

In early 2017, we obtained new data about the anti-cancerpatented CBD-glycoside compounds. CBD has well-known anti-anxiety, anti-inflammatory and anti-microbial properties, but unlike THC, CBD is non-psychoactive and non-intoxicating. By glycosylating CBD, we can create CBD-glucose compounds that may enable a targeted and concentrated delivery of CBD in the gastrointestinal tract. Currently we are evaluating the optimal CBD-glycoside delivery mechanism, which may include an aqueous drink formulation since our glycosylation process significantly improves the water solubility of the CBD molecule.

Enzymatic Processing Methods

The Company originally developed its proprietary enzymatic bioprocessing technologies to attach glucose molecules to the molecules of stevia as part of our activities in the stevia processing industry. We then expanded the application of this proprietary technology to attach glucose molecules to cannabinoids, including evidence that cannabinoids provide cytotoxicity against cell lines of colorectal cancerTHC andC.difficile, a drug-resistant microbial infection that colonizes the large intestine. Both colorectal cancer andC.difficile infections are more prevalent in IBD patients than in the general population. CBD. We may pursue additional opportunities to develop new products utilizing this proprietary technology.

Narcotic bowel syndrome (NBS) is a severe form of opiate-induced abdominal pain. In studies, more than half (58%) of opiate users have reported chronic abdominal pain. When opiate-induced abdominal pain is overlooked or misdiagnosed, potentially due to common gastrointestinal side effects like opiate-induced constipation, it may lead to a vicious cycle of dose escalation. While seeking pain relief, increasing the dose of opiate medications could lead both to worsening abdominal pain and to more severe drug addiction. Studies have reported that approximately 6% of opiate users have NBS, and that patients afflicted with this disorder report a quality-of-life that is worse than patients with quadriplegia. Independent preclinical studies have reported that endogenous opioid peptides may play a role within the intestinal tract in the development of inflammation, and that they act in a synergistic manner to cannabinoids for pain relief, meaning that cannabinoids could enable opiate dose reduction without sacrificing pain relief. Independent clinical studies have confirmed this effect, where it was reported that cannabis provides additional pain relief to patients taking stable doses of opiates for chronic pain management. Independent clinical studies have also found that treatment regimens for narcotic bowel syndrome are ineffective, as 45.8% of patients were shown to return to using narcotics within only three months following treatment.Orphan Drug Designation

Our primary operations are based in Yuba City, California, whereIn January 2018, we originally developed our proprietary bioprocessing methods. The Company’s research and development facilities include laboratories andfiled a manufacturing suite that will be usedrequest with the FDA’s Office of Orphan Products Development (OOPD) for pharmaceutical-grade production of cannabosides for clinical trials. These facilities have been registered with and approved by the DEA as well as the State of California.

Product Pipeline

Our pipeline includes drug formulations of cannabosides, which are cannabinoid glycosides that we are developing as small molecule pharmaceutical products. Prodrugs are medications or compounds metabolized by the body into a pharmacologically active drug. We have patents pending for more than 25 of these novel pharmaceutical compositions including prodrugs of THC, CBD, and CBDV, which are cannabinoids that are either marketed and approved as pharmaceutical products today, or that are currently under investigation in independent clinical trials. Prodrugs can optimize the marketability of a drug because they can be patented and proprietary, and yet still be approved through an abbreviated regulatory pathway.

Cannaboside prodrugs are designed to deliver a variety of benefits including:

VITA-100 is an oral cannabinoid formulation containing THC-glycosides that is being developed for acute treatment of inflammatory bowel disease (inducing disease remission), irritable bowel syndrome, and narcotic bowel syndrome. VITA-210 is an oral cannabinoid formulation containing cannabosides being investigated in preclinical studies for chronic (long-term) administration, and which is being developed for chronic treatment of inflammatory bowel disease (maintaining disease remission), irritable bowel syndrome, opiate-induced bowel dysfunction,C. difficile infections, and colorectal cancer. The company is developing additional cannabinoid product formulations, and these development efforts will be guided by the results of observational clinical studies that will be conducted by the company or through company collaborators. These observational studies will be designed to treat serious neurological conditions including treatment of complex, refractory, or neuropathic pain (cannabis substitution therapy for opioid painkillers).

Our Operations

For each of the pharmaceutical products in our pipeline, the active cannabinoid pharmaceutical agents have either been independently approved by regulatory bodies, or are now in late-stage clinical trials, and there is extensive clinical data already available related to drug safety and effectiveness. Because of this, we will in general benefit from the increased familiarity of clinical investigators and regulators with these compounds, which may enable abbreviated paths towards clinical testing and eventual approvalOrphan Drug Designation of our pharmaceutical products.

Short Term Development Targets

We plan to complete all necessary preclinical studies for VITA-100 and to conduct a Phase 1a/1b clinical trial in the first half of 2018. This first-in-man clinical study will focus primarily on evaluating the clinical pharmacokinetics, safety, and tolerability of cannabosides, and it will also provide a preliminary evaluation of effects on pain, cramping, and gastrointestinal motility. We plan to conduct additional preclinical studies on our proprietary cannaboside drug formulations also, which are designed to evaluate and further explore their utility for treatment of additional conditions, such as colorectal cancer.

We are also developing additional cannabinoid formulations geared towards treatment of complex or refractory pain, for use within cannabis substitution therapy for opioid painkillers, andVBX-100 prodrug for the treatment of serious neurological conditions. The cannabinoid formulations and existing cannabinoid products that we planpediatric ulcerative colitis. In March 2018, the OOPD denied our request based, in part, on the FDA’s decision to study may eventually be developed internally either as standalone productsno longer grant Orphan Drug Designation status to drugs for pediatric subpopulations of common diseases (i.e., diseases or used in combinationconditions with our cannaboside drug formulations. We plan to initiate observational studies in the 1^sthalfan overall prevalence of 2018 in order to assess the benefits of existing cannabinoid products for one or more treatment indications, including complex, refractory, or neuropathic pain (substitution therapy for opioid painkillers)over 200,000), opiate-induced bowel dysfunction, Huntington’s disease, Guillain-Barré syndrome, or multiple sclerosis. The results from these observational studies on existing cannabinoid products will be used to guide selection of appropriate treatment indications for our proprietary cannaboside pharmaceutical formulations, and to help develop additional internal intellectual property related tounless the use of cannabinoidsthe drug in the pediatric subpopulation meets the regulatory criteria for treatmentan orphan subset, or the disease in the pediatric subpopulation is considered a different disease from the disease in the adult population.

However, in December 2019, we received a letter from the OOPD informing us that the FDA determined that the Company may be eligible for pediatric-subpopulation designation because we submitted our original request for an Orphan Drug Designation before the guidance Clarification of these conditions.Orphan Designation of Drugs and Biologics for Pediatric Subpopulations of Common Diseases was finalized in July 2018.

As a result, in May 2020, we filed a response letter with the OOPD addressing the other deficiencies noted in the Company’s original submission in January 2018, which included, among other things (1) support for the prevalence of pediatric ulcerative colitis; (2) our scientific rationale for the specific animal models used in our pre-clinical animal studies; and (3) more comprehensive supporting documentation for the use of VBX-100 in pediatric patients with ulcerative colitis. In these observationalAugust 2020, we received a letter from the OOPD informing us that it was unable to grant our request for an Orphan Drug Designation status because our VBX-100 prodrug was administered before and after colitis was induced in our in vivo mouse studies, which may be coordinated by Vitality as well as through company collaborators, we intendresulted in the need for more scientific data to evaluate usesupport the efficacy of cannabinoids both as standalone agents as well as examine their useour VBX-100 prodrug in combination with other therapies in order to help identify treatment regimens that provide maximal benefit to patients.

Short-term development targets include:

We believe that our long-term commercial success and profit potential depends in large part on our ability to develop and advance proprietary cannabinoid prodrugs that are strongly differentiated from both medical cannabis and existing cannabinoid drugs, and to do this more quickly, efficiently and effectively than our competitors. Another critical factor that will determine our success is our ability to obtain and enforce patents, maintain protection of trade secrets, and operate our business without infringing the proprietary rights of third parties.a treatment-only setting. As a result, we are dedicatedwere advised to perform a second in vivo mouse study in which our VBX-100 prodrug would be administered only after colitis was induced in order to provide a clear indication that the continued developmentactive drug was released only after ulcerative colitis was present. In May 2021, we completed the treatment-only in vivo mouse study and protectionfiled a supplemental response letter with the OOPD providing the requested in vivo treatment-only mouse study results in support of our intellectual property portfolio.position that VBX-100 may be effective as a treatment for pediatric ulcerative colitis.

In September and October 2015, the Company filed two U.S. patent applications, titled “Cannabinoid Glycoside Prodrugs and Methods of Synthesis.” In September 2016, an expanded international application was filed under the Patent Cooperation Treaty system, which includes 79 patent claims to almost 200 individual compounds, including but not limited to the prodrugs of delta-9-tetrahydrocannabinol, the primary psychoactive component of medical cannabis, as well as the non-psychotropic compounds cannabidiol and cannabidivarin.

Additional Operations

Our glycosylation technology in the past was applied primarily to production of better tasting varieties of stevia through enzyme bioprocessing, which was developed in concert with additional technologies designed to improve the taste and yield of stevia sweetener derivedOn August 9, 2021, we received a letter from the stevia plant. WeOOPD stating that we have an intellectual property portfolio related to stevia, as well as commercial operations related tobeen granted Orphan Drug Designation for our glycosylated cannabinoid VBX-100 for the manufacture and saletreatment of research products that commenced in 2014. We intend to sustain these operations and technologies in a manner that is cash-flow neutral or better and to commercialize them primarily through new out-licensing arrangements or strategic partnerships.pediatric ulcerative colitis.

Results of Operations

Three Months Ended December 31, 2017June 30, 2021 and December 31, 2016June 30, 2020

Our net loss during the three months ended December 31, 2017June 30, 2021 was $1,241,973$612,235 compared to a net loss of $2,499,974$740,238 for the three months ended December 31, 2016. June 30, 2020. We had no revenue from continuing operations during either the 2021 or 2020 period.

During the three months ended December 31, 2017, we generated $19,305 in revenue and $2,329 in gross profit, compared to $39,682 in revenue and $19,752 in gross profit for the 2016 period.Our revenue in each of the periods presented is earned from the sale of research diagnostic testing `kits and chemicals. In May 2014, we purchased the assets of a Percipio Biosciences, Inc., which produced and sold these products, and which we continue to sell under their existing brand names. These products are sold primarily to research universities and companies in the United States and through a network of research product distributors internationally. The tests enable measurement by life science researchers of biomarkers of inflammation and oxidative signaling and stress. The kits and products include antibodies, enzymes, as well as specialty chemicals.We expect such sales to continue at approximately the rate during the 2017 period.

During the three months ended December 31, 2017,June 30, 2021, we incurred general and administrative expenses in the aggregate amount of $619,312$514,437, compared to $669,574$573,253 incurred during the three months ended December 31, 2016June 30, 2020 (a decrease of $50,262)$58,816). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. A significant portion of these costs are related to the development of our organizational capabilities as a biotechnology company, including costs such as legal and advisory fees related to intellectual property development. The majority of the decrease in general and administrative costs in the period relates to stock-based compensation costs which decreased to $182,087$39,456 in the period ending December 31, 2017,June 30, 2021, as compared to $294,646$108,122 in the period ending December 31, 2016 (a decrease of $112,559),June 30, 2020, and audit fees, which decreased to $17,000 in the period ending June 30, 2021, as compared to $47,062 in the period ending June 30, 2020, offset by professionalan increase in legal fees, which increased to $160,000$99,919 in the period ending December 31, 2017,June 30, 2021, as compared to $72,375$39,757 in the period ending December 31, 2016 (an increase of $87,625).InJune 30, 2020.

In addition, during the three months ended December 31, 2017,June 30, 2021, we incurred research and development costs of $562,504,$97,812, compared to $255,334$167,464 during the three months ended December 31, 2016 (an increaseJune 30, 2020 (a decrease of $307,170)$69,652). This increasedecrease resulted from increased laboratorya decrease in wages related to research and consulting expenses duringdevelopment, which decreased to $48,443 in the 2017 period ending June 30, 2021, as we focus on preparation for clinical trials.compared to $82,604 in the period ending June 30, 2020.

During the three months ended December 31, 2017, we incurred related party rent and other costs totaling $7,800 compared to $6,900 incurred during the three months ended December 31, 2016 (an increase of $900). This resulted from an increase in the monthly office rent during the 2017 period.

This resulted in a loss from operations of $1,187,287 during the three months ended December 31, 2017 compared to a loss from operations of $912,056 during the three months ended December 31, 2016.

During the three months ended December 31, 2017,June 30, 2021, we recorded total net other expensesincome in the amount of $54,686,$14, compared to total net other expensesincome recorded during the three months ended December 31, 2016June 30, 2020 in the amount of $1,587,918. During the three months ended December 31, 2017, we recorded a loss related to the change in fair value$479, all of derivatives of $54,686, compared to a loss of $1,587,854 during the 2016 quarter. which represented interest income.

This resulted in a net loss of $1,241,973$612,235 during the three months ended December 31, 2017,June 30, 2021 compared to a net loss of $2,499,974$740,238 during the three months ended December 31, 2016.June 30, 2020.

The decreaseLiquidity and Capital Resources

We have incurred losses since inception resulting in net loss during the three months ended December 31, 2017 compared to the net loss for the three months ended December 31, 2016 is attributable primarily to the larger loss related to the changean accumulated deficit of $48,039,944 as of June 30, 2021, and further losses are anticipated in fair value of derivatives recorded during the 2016 quarter.

Nine Months Ended December 31, 2017 and December 31, 2016

Our net loss during the nine months ended December 31, 2017 was $3,246,847 compared to a net loss of $4,105,232 for the nine months ended December 31, 2016. During the nine months ended December 31, 2017, we generated $77,324 in revenue and $22,382 in gross profit from sales ofcertain research products, compared to$131,947 in revenue and $66,005 in gross profit from sales ofcertain research products during the nine months ended December 31, 2016.Our revenue in each of the periods presented is earned from the sale of research diagnostic testing kits and chemicals. In May 2014, we purchased the assets of a Percipio Biosciences, Inc., which produced and sold these products, and which we continue to sell under their existing brand names. These products are sold primarily to research universities and companies in the United States and through a network of research product distributors internationally. The tests enable measurement by life science researchers of biomarkers of inflammation and oxidative signaling and stress. The kits and products include antibodies, enzymes, as well as specialty chemicals.We expect such sales to continue at approximately the 2017 rate.

During the nine months ended December 31, 2017, we incurred general and administrative expenses in the aggregate amount of $1,894,984 compared to $1,685,527 incurred during the nine months ended December 31, 2016 (an increase of $209,457). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, costs of financial and administrative contracted services, marketing and consulting costs and travel expenses. A significant portion of these costs are related to the development of our organizational capabilities as a biotechnology company, including costs such as legal and advisory fees related to intellectual property development. The general and administrative expenses included stock-based compensation of $505,555 during the nine months ended December 31, 2017, as compared to stock-based compensation of $659,611 during the nine months ended December 31, 2016 (a decrease of $154,056), professional fees of $475,929 during the nine months ended December 31, 2017, as compared to professional fees of $313,424 during the nine months ended December 31, 2016 (an increase of $162,505), and legal fees of $82,839 during the nine months ended December 31, 2017, as compared to legal fees of $35,240 during the nine months ended December 31, 2016 (an increase of $47,599).business.

In addition, during the nine months ended December 31, 2017, we incurred research and development costs of $1,390,100 relating to research and development, compared to research and development costs of $483,638 during the nine months ended December 31, 2016 (an increase of $906,462). The increase resulted primarily from increased laboratory and consulting expenses during the 2017 period as we focus on preparation for clinical trials as well as increase in stock compensation expense in 2017 compared to 2016.

During the nine months ended December 31, 2017, we incurred related party rent and other costs totaling $23,100 compared to $20,700 incurred during the nine months ended December 31, 2016 (an increase of $2,400). This resulted from an increase in the monthly office rent during the 2017 period.

This resulted in a loss from operations of $3,285,802 during the nine months ended December 31, 2017 compared to a loss from operations of $2,123,860 during the nine months ended December 31, 2016.

During the nine months ended December 31, 2017, we recorded total other income (expense) in the amount of $38,955, compared to total other income (expense) recorded during the nine months ended December 31, 2016 in the amount of $(1,981,372). During the nine months ended December 31, 2017, we recorded a gain related to the change in fair value of derivative liabilities of $38,955, compared to a loss of $1,980,592 during the nine months ended December 31, 2016.

Liquidity and Capital Resources

As of December 31, 2017,June 30, 2021, we had total current assets of $1,381,828, which was$331,138. Our total current assets as of June 30, 2021 were comprised mainlyprimarily of cash in the amount of $1,362,710.$321,436. Our total current liabilities as of December 31, 2017June 30, 2021 were $399,328$33,440, represented entirely by a lease payment attributable to our wholly-owned subsidiary, The Control Center, Inc., which was dissolved in May 2021, and consisted of accounts payable and accrued liabilities of $197,492 and derivative liability of $201,836. The derivative liabilityfor which Vitality Biopharma, Inc. is a non-cash item related to certain of our outstanding warrants as of December 31, 2017.not responsible. As a result, on December 31, 2017,June 30, 2021, we had working capital of $982,500.$297,698. We had no long-term liabilities as of June 30, 2021.

Sources of Capital

We havedo not yet received significant revenues from sales of products or services, and have recurring losses from operations. Our financial statements included in this report have been prepared on a going concern basis, which assumes that we will be ableexpect to realize our assets and discharge our liabilitiesgenerate any revenue in the normal coursenear term. We currently have no commitments for any future funding. As of businessJune 30, 2021, we had cash in the amount of $321,436. Based on our current corporate strategy, our total expenditures for the foreseeable future. For12 months following June 30, 2021, are expected to be approximately $1,500,000, which is comprised of research and development and general operating expenses. Based on our cash balance of $321,436 on June 30, 2021, and our estimated total expenditures of approximately $1,500,000 for the nine months ended December 31, 2017, the Company incurred a net loss of $3,246,847 and used cash in operating activities of $2,180,055. These factors raise substantial doubt about our ability to continue as a going concern within one year of the date that the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s March 31, 2017 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and raising additional capital. The financial statements included in this report12-month period ending June 30, 2022, we do not include any adjustments relatingexpect to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations.

We estimate that we will have sufficient funds to operate our business over the business for the nine months after December 31, 2017. In December 2017, the Company issued an aggregatenext 12 months. Furthermore, our estimate of 933,332 shares of our common stock and warrants to purchase 466,667 of our common stock to certain investors for net proceeds of approximately $1,395,000 and in July 2017, the Company issued an aggregate of 666,667 shares of our common stock and warrants to purchase 333,334 of our common stock to certain investors for net proceeds of approximately $995,000. We will require additional financing to fund our planned long-term operations. These estimatestotal expenditures could differincrease if we encounter unanticipated difficulties, in which case our current funds may not be sufficient to operate our business for that period.difficulties. In addition, our estimates of the amount of cash necessary to operatefund our business may prove to be wrong,too low, and we could spend our available financial resources much faster than we currently expect.

We do not have any firm commitments for future capital. Significant additional financing If we cannot raise the capital necessary to continue to develop our business, we will be requiredforced to delay, scale back or eliminate some or all of our proposed operations. If any of these were to occur, there is a substantial risk that our business would fail.

Since inception, we have primarily funded our operations through equity and debt financings. We expect to continue to fund our planned operations in future periods, including researchprimarily through equity and development activities relating to our principal product candidate, seeking regulatory approval of that or any other product candidate we may choose to develop, commercializing any product candidate for which we are able to obtain regulatory approval or certification, seeking to license or acquire new assets or businesses, and maintaining our intellectual property rights and pursuing rights to new technologies. We do not presently have, nor do we expectdebt financings in the near future to have, revenue to fund our business from our operations, and will need to obtain significant funding from external sources. Weforeseeable future. However, sources of additional funds may seek to raise such funding from a variety of sources.not be available when needed, on acceptable terms, or at all. If we raise additional funds by issuingissue equity or convertible debt securities to raise additional funds, our existing stockholders’ ownership willstockholders may experience substantial dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses. Obtaining commercial loans, assuming those loans would be diluted, and obtaining commercial loansavailable, would increase our liabilities and future cash commitments. If we pursue capital through alternative sources, such as collaborations or other similar arrangements, we may be forced to relinquish rights to our proprietary technology or other intellectual property thatand which could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Further,Moreover, regardless of the manner in which we seek to raise capital, we may not be able to obtain additional financing from any of these sources on commercially reasonable or acceptable terms when needed, or at all. If we cannot raise the money that we needincur substantial costs in order to continue to operatethose pursuits, including investment banking fees, legal fees, accounting fees, printing and develop our business, we will be forced to delay, scale back or eliminate some or all of our operations. If any of these were to occur, there is a substantial risk that our business would faildistribution expenses and our stockholders could lose all of their investment.other related costs.

Sources of Capital

On December 12, 2017, the Company entered into a Securities Purchase Agreement with the purchasers identified therein providing for the issuance and sale by the Company to the purchasers, of an aggregate of 933,332 shares of the Company’s common stock (collectively, the “Shares”) and Warrants to purchase up to an aggregate of 466,667 shares of the Company’s common stock (the “Warrants”), at a price of $1.50 per share (the “Offering”). The Warrants have an exercise price of $2.00 per share, are exercisable immediately, expire on the three year anniversary of the date of issuance, and may be exercised on a cashless basis. The Offering closed on December 15, 2017. The aggregate proceeds to the Company from the sale of the Shares and Warrants was approximately $1,395,000.Pursuant to the terms of the Offering, we filed a registration statement on Form S-1 to register the resale of the Shares and the Warrants.

On July 26, 2017, the Company entered into a Securities Purchase Agreement with the purchasers identified therein providing for the issuance and sale by the Company to the purchasers, of an aggregate of 666,667 shares of the Company’s common stock (collectively, the “Shares”) and Warrants to purchase up to an aggregate of 333,334 shares of the Company’s common stock (the “Warrants”), at a price of $1.50 per share (the “July Offering”). The Warrants have an exercise price of $2.00 per share, are exercisable immediately, expire on the three year anniversary of the date of issuance, and may be exercised on a cashless basis. The July Offering closed on July 28, 2017. The aggregate proceeds to the Company from the sale of the Shares and Warrants was approximately $995,000.Pursuant to the terms of the July Offering, we filed a registration statement on Form S-1 to register the resale of the Shares and the Warrants. The registration statement on Form S-1 was declared effective on October 13, 2017.

On August 19, 2016, we filed a resale registration statement on Form S-1 (“Form S-1”) with the SEC to register 2,650,000 shares of our common stock and 7,950,000 shares of our common stock issuable upon exercise of certain warrants. We received a letter from the Washington D.C. office of the SEC dated December 10, 2016, stating that the staff of the SEC was conducting a Section 8(e) examination with respect to this Form S-1 and that the Division of Corporate Finance would not take any further action on the Form S-1 while the examination was pending. We received subpoenas to produce documents dated December 14, 2016, and January 23, 2017, and a further subpoena for testimony and any supplemental production of documents dated June 5, 2017. We have complied with all document requests and the Company’s CEO will provide testimony when the SEC schedules such testimony, which we believe will be sometime before the end of September 2018.

Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. For the ninethree months ended December 31, 2017,June 30, 2021, net cash used in operating activitiesactivities-continuing operations was $2,180,055$562,701 compared to net cash used in operating activitiesactivities-continuing operations of $883,627$719,276 for the ninethree months ended December 31, 2016.June 30, 2020. This increasedecrease was primarily attributable to increased net loss duringa decrease in accounts payable, partially offset by a decrease in the current period ended December 31, 2017.expenses recorded for stock-based compensation related to stock options. Net cash used in operating activitiesactivities-continuing operations during the ninethree months ended December 31, 2017June 30, 2021 consisted primarily of a net loss of $3,246,847$612,235, offset by $1,151,304 in aggregate stock compensation from vested stock options and common stock, and $313,676 of shares of stock issued for services.$46,539 related to stock-based compensation. Net cash used in operating activitiesactivities-continuing operations during the ninethree months ended December 31, 2016June 30, 2020 consisted primarily of a net loss of $4,105,232$740,238, and a decrease in accounts payable of $106,017 offset by a change in fair value of derivative liability of $1,980,592, $817,009 in aggregate$124,927 related to stock-based compensation for vested stock options and common stock, and $276,000 for stock issued in exchange for services.compensation.

Net Cash Used in Investing Activities

During the ninethree months ended December 31, 2017June 30, 2021 and December 31, 2016,June 30, 2020, no net cash was used in or provided by investing activities.

Net Cash Provided By Financing Activities

During the ninethree months ended December 31, 2017,June 30, 2020, net cash provided byfrom financing activities was $2,389,999 compared to$96,988, from the issuance of a note payable. During the three months ended June 30, 2021, no net cash was used in or provided by financing activities of $942,030 for the nine months ended December 31, 2016. Net cash provided by financing activities during the nine months ended December 31, 2017 was attributable to the net proceeds from sale of stock and warrants of $2,389,999. Net cash provided by financing activities during the nine months ended December 31, 2016 was attributable to $165,030 from the sale of common stock and warrants and $777,000 provided by the exercise of warrants.activities.

Off-Balance Sheet Arrangements

We have no significant 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 would be material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes included in this report have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) applied on a consistent basis. The preparation of financial statements in conformity with U.S. GAAP requires management 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 the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from the estimates made by management.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements included in this report:

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The more significant estimates and assumption by management include, among others, the fair value of shares issued for services, the fair value of options and warrants, and assumptions used in the valuation of our outstanding derivative liabilities.

Stock-Based Compensation

Share-Based Payments

The Company periodically issues stock options, warrants, and warrantsshares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for share-based payments undersuch grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the guidance as set forth in the Share-Based Payment Topicvalue of the Financial Accounting Standards Board (FASB”) Accounting Standards Codification (“ASC”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of share-based payment awards to employees and directorsaward is measured on the date of grant using an option-pricing model, and recognized as compensation expense on a straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the portionCompany’s stock options and warrants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods. The Company issues stock options and warrants, shares of common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, that is ultimately expected to vestand is recognized as expense over the requiredrequisite service period inperiod.

In June 2021, the Company’s statementsBoard of operations. The Company accounts for stock optionDirectors approved the Company’s 2021 Stock Incentive Plan (the “2021 Plan”) and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance whereas the valuereserved 10,000,000 shares of the Company’s common stock compensation is based uponfor issuance pursuant to the measurement date as determined at either (a)2021 Plan. The shareholders of the date at which a performance commitment is reached, or (b)Company approved the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based2021 Plan on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimatedAugust 12, 2021, at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

Derivative Financial Instruments

We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, we use a probability weighted average Black-Scholes-Merton model to value the derivative instruments at inception and on subsequent valuation dates through the December 31, 2017 reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlementCompany’s annual stockholder meeting. All of the derivative instrument could be required within 12 monthsoutstanding options as of June 30, 2021, were issued under the balance sheet date.Company’s 2012 Stock Incentive Plan, which will expire on February 3, 2022.

Recent Accounting Pronouncements

Please refer to Footnote 1 of the accompanying financial statements for management’s discussion of recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive and financial officer, we conducted an evaluation of ourWe have established disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on this evaluation, our principal executive and financial officer concluded that as of December 31, 2017, these disclosure controls and procedures were not effectiveare designed to ensure that the information required to be disclosed byin our Company in reports we filefiled or submitsubmitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SecuritiesSEC, and Exchange Commission (“SEC”), including that such information relating to the Company is accumulated and communicated to our management, including our principal executive and financial officer,officers, as appropriate to allow timely decisions regarding required disclosures .. The conclusiondisclosure. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021, and have concluded that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in our internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, as previously disclosed in Item 9A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2017. In light of the material weaknesses identified by management, we performed additional analyses and procedures in order to conclude that our condensed financial statements for the interim period ended December 31, 2017 are fairly presented, in all material respects, in accordance with GAAP.

Description of Material Weaknesses and Management’s Remediation Initiatives

As of the date of this report, our remediation efforts continue related to each of the material weaknesses that we have identified in our internal control over financial reporting and additional time and resources will be required in order to fully address these material weaknesses. We have not been able to complete all actions necessary and test the remediated controls in a manner that would enable us to conclude that such controls are effective. We are committed to implementing the necessary controls to remediate the material weaknesses described below, as and when resources permit. These material weaknesses will not be considered remediated until (1) the new processes are designed, appropriately controlled and implemented for a sufficient period of time and (2) we have sufficient evidence that the new processes and related controls are operating effectively. The following is a list of the material weaknesses identified by management as of December 31, 2017:June 30, 2021.

(1) Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the nine months ended December 31, 2017, we internally performed all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. Due to the fact that these duties were often performed by the same person, there was a lack of review over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. This could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

(2) Insufficient corporate governance policies. The Company does not have a majority of independent members on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Changes in Internal Control over Financial Reporting

We are currently considering adding additional independent members to our board of directors and adding accounting personnel to our staff in connection with the ongoing efforts to remediate the material weaknesses described above, but no specific progress has been made on these goals or other remediation efforts during the three months ended December 31, 2017. As a result, thereThere were no changes in our internal control over financial reporting during the nine monthsquarter ended December 31, 2017,June 30, 2021, that havehas materially affected, or areis reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. In addition, projections of any evaluation of effectiveness to future periods are subject to risks that controls that are effective at one date may subsequently become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. The impact and outcome of litigation, if any, is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not currently a party to and our properties are not currently the subject of any material pending legal proceedings the adverse outcome of which, individually or in the aggregate, would be expected to have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors

Please refer to the risks described under the heading “Risk Factors” in our Registration StatementAnnual Report on Form S-110-K filed with the SEC on JanuaryMay 19, 2018.2021.

COVID-19 Considerations

The global outbreak of COVID-19 has led to significant disruptions in the global economy, including the curtailment of activities by businesses and consumers in much of the world as governments and others seek to limit the spread of the disease. The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the duration and severity of the outbreak, the length of restrictions and business closures imposed by domestic and foreign governments, the impact on capital and financial markets, all of which are highly uncertain and cannot be predicted. In the quarter ended June 30, 2021, the COVID-19 pandemic did not have a material net impact on our operating results. We have also not observed any material impairments of our assets or a significant change in the fair value of our assets due to the COVID-19 pandemic. While it is not possible at this time to estimate the full impact that COVID-19 will have on our business, restrictions resulting from COVID-19 on general economic conditions could, among other things, impair our ability to raise capital when needed. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In October 2017, we issued a total of 82,468 shares of our common stock to one consultant as compensation for services valued at $150,000. The issuance of this common stock, has not been registered under the Securities Act and the shares of common stock were issued in reliance on exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder based on the following facts: the consultant has represented that it is an accredited investor as defined in Regulation D and that it is acquiring the shares of common stock for its own account and not with a view to or for distributing or reselling the shares of common stock and that it has sufficient investment experience to evaluate the risks of the investment; the shares of commons stock were issued as restricted securities.None.

Item 6. Exhibits