The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

6. STOCK OPTIONS

During the nine months ended December 31, 2019, the Company granted to directors and employees options to purchase an aggregate of 3,250,000 shares of the Company’s common stock with exercise prices of $0.30 to $0.35 per share, that expire ten years from the date of grant, and 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-Merton option pricing model based on the following assumptions: (i) volatility rate of 176.50%, (ii) discount rate of 1.73%, (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 the option grants to employees at their grant dates was approximately $1,026,000.

A summary of the Company’s stock option activity during the nine months ended December 31, 20192020 is as follows:

A summary of the Company’s stock options outstanding and exercisable as of December 31, 20192020 is as follows:

During the nine months ended December 31, 2019,2020, we expensed total stock-based compensation related to stock options of $492,554,$349,546, and the remaining unamortized cost of the outstanding stock-based awards at December 31, 20192020 was approximately $721,000.$160,000. The remaining unamortized cost will be amortized on a straight-line basis over a weighted average remaining vesting period of one year. At December 31, 2019,2020, the 6,546,7105,997,044 outstanding stock options had no intrinsic value.

7. WARRANTS

At December 31, 2019,A summary of warrants to purchase the Company’s common shares were outstandingstock during the nine months ended December 31, 2020 is as follows:

At December 31, 2019,2020, the 1,135,003146,668 outstanding stock warrants had no intrinsic value.

8. DISCONTINUED OPERATIONS

In October 2018, the Company acquired Summit Healthtech, Inc. (renamed Vitality Healthtech, Inc.), a specialty healthcare clinic. In addition to Summit Healthcare, the Company sold research diagnostic testing kits (collectively, the Company’s clinical and test kit operations). In May 2019 the Company decided to close its clinical and test kit operations. The clinical and test kit operations meet the discontinued operations criteria and are reported as such in all periods presented on the accompanying condensed consolidated financial statements.

The following table presents the summarized components of loss from discontinued operations for the clinical and test kit operations:

9. COMMITMENTS AND CONTINGENCIES

SEC Private Investigation

On August 19, 2016, the Companywe 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. On or aboutWe received a letter from the Washington D.C. office of the SEC dated December 10, 2016, we were advisedstating that the Enforcement Divisionstaff of the SEC (the “Enforcement Division”) was conducting (i) a private investigation (a “Private Investigation”) pursuant to Section 20(a) of the Securities Act and Section 21(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (ii) an examination under Section 8(e) of the Securities Act (a “Section 8(e) Examination”)examination with respect to this Form S-1.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. On or about November 14, 2018, we were advised byMay 12, 2020, our outside legal counsel received a letter from the staff of the SEC’s Enforcement Division stating that based onit has concluded the informationinvestigation as to the staff had as of such date,Company, and that it was terminatingdid not intend to recommend an enforcement action by the Section 8(e) Examination. TheSEC against the Company. While certain former officers and directors may request the Company continues to cooperate in connection withreimburse them for legal fees related to this matter, at December 31, 2020, management has determined that the Private Investigation.Company’s liability for those fees is not probable and we could not reasonably estimate those fees.

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, 20192020 filed on July 15, 2019,June 29, 2020, 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: our ability to continue operating as a going concern; 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;business or; results of our research and development activities that are less positive than we 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 of raw materials and costs associated with growing raw materials for our ability to have freely-traded stock;intended products; 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 July 15, 2019.June 29, 2020.

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 areVitality Biopharma is a company focused on the advancement of pharmaceuticals and innovative technologies that improve the lives of patients. We seek to achieve this objective through the development of novel cannabinoid pharmaceutical prodrugs, knownwhich we refer to as cannabosides. We will conduct our operations using our own personnel and facilities through subsidiaries establishedwith the support of third-party resources as necessary to conduct such operations, and, as appropriate, through strategic partnerships with other early stage companies that we believe are bringing innovative products and services to market but lack the necessary capital or resources to fully capitalize on their high growth potential. We may provide assistance to such strategic partners through management assistance, loans of capital or equipment or personnel resources, or other arrangements designed to support the operations ofadvance our Company.drug development programs.

Our cannabosides are cannabinoid-glycoside prodrugs, which we refer to as cannabosides, were discovered through application of the Company’s proprietary enzymatic bioprocessing technologies, that are converted within the body after administration from an inactive molecule into a pharmacologically active drug. Currently, the Company has produced more than 25 novel cannabosides, including glycosylated tetrahydrocannabinol (THC), cannabidiol (CBD), cannabidivarin (CBDV) and cannabinol (CBN), that are covered by worldwide patent applications in the United States and various other countries for composition of matter, method of production and method of use.

As a complementary strategy, the Company plans to leverage its research and managerial expertise to enter into strategic partnerships with early-stage businesses that require capital and resources to drive innovation and bring new medicines, services and technologies to market to advance the health of patients. We plan to focus our energies on companies approaching key value inflection points where our unique capabilities can accelerate growth and provide solutions-oriented strategies to drive better performance and create value for our strategic partners and shareholders.

Our corporate headquarters is located in Los Angeles, California. As of February 13, 2020,January 28, 2021, we employed sixthree full-time employees, including fourone research professionalsprofessional working in our office and laboratory space in Yuba City,Rocklin, California. We alsoIn the past, we have engaged the services of outside scientific and regulatory consultants to assist in our research and development activities, which is an approach that provides us with flexible and highly-experienced resources to advance our clinical efforts while maintaining a relatively lower overhead cost structure.

Cannaboside Prodrugs

A prodrug is a compound 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 prodrugs by combining cannabinoid and glucose molecules. The resulting compounds, known as cannabosides, have unique commercial applications and patentable compositions of matter, 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 large intestine, (iii) improved stability with limited degradation or drug metabolism, and (iv) delayed release enabling longer-lasting effects and fewer administrations by patients.

Our proprietary glycosylation process, which results in adding one or more glucose molecules to compounds, may enable our new cannabosides to act as prodrugs that achieve targeted delivery of the bioactive compounds of cannabinoids to the gastrointestinal tract. Glycosylated compounds are generally more stable and are water soluble, so upon ingestion, we believe they will remain intact and transit through the esophagus, stomach and upper intestine with limited absorption or degradation from stomach acids. However, once the glycosylated compounds reach the lower 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 cannabinoid compound primarily in the large intestine or colon.

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 be provided in very low doses to achieve physiologically beneficial results, serves as an anti-inflammatory agent in the lower gastrointestinal tract and minimizes the amount of THC absorbed into the blood stream, therefore lesseningthereby avoiding the psychoactive and intoxicating properties that hinder the broader pharmaceutical use of THC.

We are developing our THC-glycoside prodrugs for the treatment of gastrointestinal diseases, including inflammatory bowel disease (IBD) and irritable bowel syndrome (IBS) because of the targeted release described previously.above. 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 symptoms. 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 IBD and IBS. VBX-100 was selected from our THC-glycoside portfolio fordue to its compatibility with commercial production techniques and the optimal prodrug delivery profile that maximizes intestinal anti-inflammatory properties while minimizing psychoactive or intoxicating effects. Initial preclinicalpre-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 preclinicalpre-clinical development plan, which includes dose range finding studies, GLP toxicology studies, pharmacokinetic studies and other preclinicalpre-clinical research, is anticipated to be completed during the 2^nd1st half of calendar year 2020,2022, subject to the Company securing sufficient additional funding or entering into a strategic partnership with a third party providing the Company with additional capital or research and development resources.partnership. After our satisfactory completion of all of the prerequisite preclinicalpre-clinical in vitroandin vivo studies, an Investigational New Drug (IND) application would be filed with the FDA and, upon receiving FDA approval, we would initiate our Phase 1 clinical trial, subject to the Company securing sufficient additional funding or entering into athe above-referenced strategic partnership described above.partnership.

In addition to our research and development activities related to our THC-glycoside compounds, we are expanding and diversifying our research and development activities to include the potential safety, efficacy and commercialization of our patented 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 greatlysignificantly improves the water solubility of the CBD molecule.

Furthermore, we have expanded our research and development activities to explore the antimicrobial benefits of THC, specifically medications that slow the growth and kill the bacteriaClostrioides difficile (“C diff”). C diff is a potentially life-threatening gastrointestinal infection often spread in health care facilities such as hospitals and nursing homes. Hospitalized patients receiving antibiotics are particularly susceptible to developing a harmful level of C diff since antibiotics frequently kill healthy bacteria, thus leaving the unhealthy bacteria including C diff to colonize and grow unchecked in their gastrointestinal tract, resulting in microbial dysbiosis. Currently the Company is constructing a development plan for its antimicrobial THC-based drug and exploring the possibility of pursuing an FDA 505(b)(2) expedited drug approval pathway. However, since we do not presently have, nor do we expect in the near future to have, material revenue to pursue FDA 505(b)(2) regulatory approval for this drug, we will need to obtain any necessary funding from external sources, which the Company does not anticipate obtaining, if at all, until such time as the Company’s stock resumes trading in the ordinary course or the Private Investigation is concluded.

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 THC and CBD. We may pursue additional opportunities to develop new products or license this technology.

Strategic Partnerships

As a complement to our capital intensive and longer duration drug development business, we continue to explore the advisability and feasibility of entering into strategic partnerships with promising early-stage companies that are bringing innovative products and services to market but lack the necessary capital or resources to fully realize their high-growth potential. Given the rapid advancements in science and technology, there are many early-stage life science companies that are approaching key value inflection points but lack the necessary managerial expertise, personnel, patents, funding or equipment to advance their efforts or to bring their medicines, services and technologies to market. This strategy would allow us to opportunistically fill those unmet needs, by providing our strategic partner with the necessary funding and value-added support to help transform and improve their businesses.

Strategic partnerships may enable us to expand our network of researchers, clinicians, and medical professionals and provide us with an opportunity to allocate our cash, personnel, equipment, proprietary information and other resources into a diversified collection of assets that strengthen and complement our drug development initiatives. Subject to having sufficient capital, we will target strategic partnerships that provide unique technological or human capital attributes that are well-positioned to provide us with a more diversified cash flow profile that complements our capital-intensive drug development operations.

Intellectual Property

In September 2015, we filed our first provisional U.S. patent application entitled “Cannabinoid Glycoside Prodrugs and Methods of Synthesis”, which described novel CBD-glycosides and THC-glycosides along with methods of production through enzymatic biosynthesis. In October 2015, we filed our second provisional U.S. patent application that added CBDV-glycosides as additional cannabisodes, plus added numerous methods of use claims for our cannabinoid-glycosides. In July 2016, we filed our third provisional U.S. patent application that significantly expanded on the cannabinoid substrates for glycosylation by adding (i) the phytocannabinoid cannabinol (CBN), (ii) the endocannabinoids anandamide, 2-AG, 1-AG, and synaptamide, and (iii) the vanilloids capsaicin, vanillin, and curcumin. In September 2016, one year after the filing of our first provisional patent, our non-provisional cannabinoid glycoside patent was filed, which included all prior material plus additional data derived from our ongoing research and laboratory studies. This expanded international patent application was filed under the Patent Cooperation Treaty system, which included 79 patent claims covering nearly 200 individual compounds, including our THC and CBD prodrugs. In March and April 2018, this application was filed for national and regional prosecution in major pharmaceutical markets worldwide, including the United States, Canada, Mexico, Europe, China, Japan, Australia, New Zealand and Brazil. The prosecutions of these applications are ongoing.

In May 2017, we filed a U.S. patent application entitled “Antimicrobial Compositions Comprising Cannabinoids and Methods of Using the Same”, which described compositions and methods of use involving cannabinoids and cannabinoid-glycosides that provide antimicrobial activity to treat microbial infections in the intestines, includingClostridioides difficile (C diff) infections. In May 2018, one year after filing the provisional U.S. patent, we filed a non-provisional U.S. patent for the use of cannabinoids and cannabinoid-glycosides to deliver cannabinoids to the gastrointestinal tract to treat C diff infections. In May 2019, this application was filed for national and regional prosecution in major pharmaceutical markets worldwide, including the United States, Canada, Europe, and Israel.

On January 14, 2020, the Company was granted its first patent with the United States Patent and Trademark Office (Patent No. US 10,533,205 B1) for “Kaurenoic Acid Glycoside Precursors and Methods of Synthesis”, which covers novel glycoside molecules related to steviol glycoside sweetener biosynthesis (“KA patent”). The Company’s KA Patent was the first application of the Company’s glycosylation platform and served as a foundational building block for the development of its current cannabinoid glycoside intellectual property, and demonstrates the Company’s ability to successfully develop and patent novel intellectual property.

Results of Operations

Three Months Ended December 31, 20192020 and December 31, 20182019

Our net lossincome during the three months ended December 31, 20192020, was $795,295$692,950 compared to a net loss of $1,208,571$795,295 for the three months ended December 31, 2018.2019. This change was primarily attributable to a gain from a settlement of a vendor dispute. Included in net loss during the three months ended December 31, 2019, was our loss from discontinued operations incurred aof $48,769. There was no such loss of $48,769, compared to a loss of $427,817recorded in the 2018corresponding 2020 period. We had no revenue from continuing operations during either the 20192020 or 20182019 period.

During the three months ended December 31, 2019,2020, we incurred general and administrative expenses in the aggregate amount of $506,926$394,567 compared to $839,522$506,926 incurred during the three months ended December 31, 20182019 (a decrease of $332,596)$112,359). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. The decrease in general and administrative costs in the period is primarily attributable to a decrease in employee benefits expense of approximately $37,000, as well as a decrease in travel expenses of approximately $21,000.

In addition, during the three months ended December 31, 2020, we incurred research and development costs of $71,975, compared to $241,840 during the three months ended December 31, 2019 (a decrease of $169,865). This decrease resulted from a reduction in staff in the 2020 period and corresponding decrease in research and development activities.

During the three months ended December 31, 2020, we recorded total net other income in the amount of $1,159,492, compared to total net other income recorded during the three months ended December 31, 2019 in the amount of $2,240. During the three months ended December 31, 2020, we recorded a gain from a settlement of a vendor dispute in the amount of $1,062,405 and a gain related to the forgiveness of our PPP loan of $97,516.

Nine Months Ended December 31, 2020 and December 31, 2019

Our net loss during the nine months ended December 31, 2020 was $520,220 compared to a net loss of $3,614,024 for the nine months ended December 31, 2019. The decrease in net loss of $3,093,804 during the 2020 period is attributable primarily to operating expenses reduced by $1,278,497, elimination of loss from discontinued operations of $714,827, gain on settlement of $1,062,405 and the gain related to the forgiveness of our PPP loan of $97,516. Included in net loss during the nine months ended December 31, 2019, was our loss from discontinued operations of $714,827. There was no loss from discontinued operations recorded in the 2020 period. We had no revenue from continuing operations during either the 2020 or 2019 period.

During the nine months ended December 31, 2020, we incurred general and administrative expenses in the aggregate amount of $1,342,110 compared to $2,094,026 incurred during the nine months ended December 31, 2019 (a decrease of $751,916). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. The majority of the decrease in general and administrative costs in the period relatesis attributable to a reductiondecrease in our consulting fees, which were $0 in the period ending December 31, 2019, as compared to $240,076 in the period ending December 30, 2018.

In addition, during the three months ended December 31, 2019, we incurred research and development costs of $241,840, compared to $96,340 during the three months ended December 31, 2018 (an increase of $145,500). This increase resulted from the gain recorded during the 2018 period related to stock compensation of $229,350.

Our discontinued operations incurred a loss of $48,769 during the three months ended December 31, 2019, compared to a loss of $427,817 incurred during the three months ended December 30, 2018 (a decrease of $379,048). This decrease was attributable to the losses incurred by the Company’s clinical operations in the 2018 period, which losses were substantially reduced in the 2019 period as result of the closure of the Company’s clinical and test kit operations.

During the three months ended December 31, 2018, we incurred related party rent and other costs totaling $7,800. We did not incur any related party rent in the 2019 period.

During the three months ended December 31, 2019, we recorded total net other income in the amount of $2,240, compared to total net other income recorded during the three months ended December 31, 2018 in the amount of $162,908. During the three months ended December 31, 2019, we recorded a gain related to the change in fair value of derivatives of $1,711, compared to a gain of $162,908 during the 2018 quarter. During the three months ended December 31, 2019, we also recorded interest income of $529. We did not earn any interest income in the 2018 period.

This resulted in a net loss of $795,295 during the three months ended December 31, 2019 compared to a net loss of $1,208,571 during the three months ended December 31, 2018.

Nine Months Ended December 31, 2019 and December 31, 2018

Our loss during the nine months ended December 31, 2019 was $3,614,024 compared to a net loss of $3,564,587 for the nine months ended December 31, 2018. Included in net loss during the nine months ended December 31, 2019, our discontinued operations incurred a loss of $714,827, compared to a loss of $516,238 in the 2018 period as result of the closure of the Company’s clinical and test kit operations. We had no revenue from continuing operations during either the 2019 or 2018 period.

During the nine months ended December 31, 2019, we incurred general and administrative expenses in the aggregate amount of $2,094,026 compared to $1,963,497 incurred during the nine months ended December 31, 2018 (an increase of $130,529). General and administrative expenses generally include corporate overhead, salaries and other compensation costs, financial and administrative contracted services, marketing, consulting costs and travel expenses. The majority of the increase in general and administrative costs in the period relates to legal fees, most of which were related toincurred in connection with the Private Investigation and Section 8(e) Examination, which increased to $637,530decreased by approximately $500,000 from the previous nine-month period, as well as a decrease in wages of approximately $152,000 from the period ending December 31, 2019, as compared to $204,715 in the period ending December 31, 2018 offset by stock-based compensation costs which decreased to $304,760 in the period ending December 31, 2019, as compared to $593,227 in the period ending December 31, 2018.previous nine-month period.

In addition, during the nine months ended December 31, 2019,2020, we incurred research and development costs of $864,849,$338,268, compared to $1,162,011$864,849 during the nine months ended December 31, 20182019 (a decrease of $297,162)$526,581). This decrease resulted from a reduction in laboratory and consulting expensesstaff during the 2019 period.2020 period and corresponding decrease in research and development activities.

Our discontinued operations incurred a loss of $714,827 during the nine months ended December 31, 2019, compared to a2019. No loss of $516,238from discontinued operations was incurred during the nine months ended December 31, 2018 (an increase of $198,589). This increase was attributable to the losses incurred by the Company’s clinical operations in the 2019 period.2020.

During the nine months ended December 31, 2018, we incurred related party rent and other costs totaling $23,400. We did not incur any related party rent in the 2019 period.

During the nine months ended December 31, 2019,2020, we recorded total net other income in the amount of $59,678,$1,160,158 compared to total net other income recorded during the nine months ended December 31, 20182019 in the amount of $100,559.$59,678. During the nine months ended December 31, 2019,2020, we recorded a gain from a settlement of a vendor dispute in the amount of $1,062,405 and a gain related to the change in fair valueforgiveness of derivativesour PPP loan of $35,625, compared to a gain of $100,559 during the 2018 period.

This resulted in a net loss of $3,614,024 during the nine months ended December 31, 2019 compared to a net loss of $3,564,587 during the nine months ended December 31, 2018. The net loss during the nine months ended December 31, 2019 compared to the net loss for the nine months ended December 31, 2018 is attributable primarily to the higher legal fees offset by lower stock-based compensation costs in the 2019 period.$97,516.

Liquidity and Capital Resources

We have incurred losses since inception resulting in an accumulated deficit of $45,795,527$47,067,078 as of December 31, 2019,2020, and further losses are anticipated in the development of our business.

As of December 31, 2019,2020, we had total current assets of $3,136,595. Our total current assets as of December 31, 2019 were$1,454,666, comprised primarily of cash in the amount of $3,123,400.$1,441,471. Our total current liabilities as of December 31, 20192020 were $1,389,612,$391,925, represented primarily by accounts payable and accrued liabilities of $977,022,$72,078 and the June 2018 payment of $296,653 recorded as an advance in that period. Onof $296,653. As a result, on December 31, 2019,2020, we had working capital of $1,746,983.$1,062,741.

On November 7, 2018, the SEC suspended the trading of our common stock. Our common stock resumed trading with limited liquidity on the grey market on November 21, 2018. Grey market stocks are not traded or quoted on an exchange or inter-dealer quotation system, but are reported by broker-dealers to their self-regulatory organization (“SRO”) and the SRO distributes the trade data to market data vendors and financial websites. Since grey market securities are not traded or quoted on an exchange or inter-dealer quotation system, investor’s bids and offers are not collected in a central spot, so market transparency is diminished and execution of orders is difficult. We are actively pursuing the resumption of ordinary course trading status on the OTCQB or a national exchange.

In September 2020, we retained DelMorgan & Co., an internationally recognized investment banking firm, to advise us on our strategic alternatives, including potential financings, asset divestitures or strategic partnerships. The continuationCompany is continuing to work closely with DelMorgan in support of their retention.

While we believe that our business is dependent upon us raisingexisting cash balances will be sufficient to fund our currently planned level of operations, we may require additional capital and eventually attaining and maintaining profitablefinancing to fund our planned future operations. We do not have any firm commitments for future capital and until the Company resumes ordinary course trading status on the OTCQB or a national exchange it will be difficult to obtain financing on commercially reasonable or acceptable terms. We do not presently have, nor do we expect in the near future to have, material revenue to fund our business from our operations, and we will need to obtain all of our necessary funding from external sources in the near term. Additional financing may be required to fund our planned operations in future periods, including research 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 may seek to raise such funding from a variety of sources. If 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, 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 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 operations. If any of these were to occur, there is a substantial risk that our business would fail and our stockholders could lose all of their investment.

Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. For the nine months ended December 31, 2019,2020, net cash used in operating activities-continuing operations was $2,144,458$1,047,742 compared to net cash used in operating activities-continuing operations of $1,749,274$2,144,458 for the nine months ended December 31, 2018. This increase was2019. Net cash used in operating activities-continuing operations during the nine months ended December 31, 2020 consisted primarily attributable to an increase in legal feesof a net loss of $520,220, and a decrease in the expenses recorded foraccounts payable of $178,045 offset by $349,546 related to stock-based compensation related to stock options.and gain on settlement of $612,405 net of the cash received. Net cash used in operating activities-continuing operations during the nine months ended December 31, 2019 consisted primarily of a net loss of $3,614,024, offset by $492,554 related to stock-based compensation and an increase in accounts payable of $292,521. Net cash used in operating activities-continuing operations during the nine months ended December 31, 2018 consisted primarily of a net loss of $3,564,587, offset by $944,653 related to stock-based compensation and an increase in accounts payable of $151,387. For the nine months ended December 31,30, 2019, net cash used in operating activities-discontinued operations was $714,883 compared to net$714,883. No cash was used in operating activities-discontinued operations of $686,390 for the nine months ended December 31, 2018. This difference was caused by2020. The losses incurred in the 2019 period were attributed to the losses incurred by the Company’s clinical operations.

Net Cash Provided byUsed in Investing Activities

During the nine months ended December 31, 2020 and December 31, 2019, no net cash was used in or provided by investing activities-continuing operations. During the nine months ended December 31, 2018, cash provided by investing activities–discontinued operations was $141,545 and was attributable to cash acquired from the acquisition of Summit Healthtech.activities.

Net Cash Provided By Financing Activities

During the nine months ended December 31, 2020, net cash provided from financing activities was $96,988 from the issuance of a note payable. During the nine months ended December 31, 2019, no net cash was used in or provided by financing activities. During the nine months ended December 31, 2018, net cash provided by financing activities was $9,100,000, consisting of $8,850,000 in proceeds from the sale of common stock and warrants and $250,000 from an advance from an unrelated party.

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.

Share-Based Payments

The Company periodically issues stock options, warrants, and warrants, shares of common stock and equity interests as share-based compensation to employees and non-employees.non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for its share-based compensation in accordance withsuch grants issued and vesting based on FASB ASC 718,Compensation – Stock Compensation (Topic 718). Stock-based compensation cost whereby the value of the award is measured at the grant date, based on the estimateddate of grant and recognized as compensation expense on the 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.