UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2019 or

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

For the transition period from ___________ to ___________

Commission File No. 000-53832

VITALITY BIOPHARMA, INC.

(Exact name of registrant as specified in charter)

Nevada	75-3268988
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

1901 Avenue of the Stars, 2nd Floor
Los Angeles, California 90067	(530) 231-7800
(Address of principal executive office, including zip code)	(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:	Securities registered pursuant to Section 12(g) of the Act:
None	Common Stock, $0.001 par value

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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] 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 (as defined in Rule 12b-2 of the Act). See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]	Non-accelerated filer [X]	Smaller reporting company [X]
Emerging growth company [  ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]

As of September 28, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $47,381,980, based on the closing price of $2.13 for the registrant’s common stock as quoted on the OTC Markets Group’s OTCQB tier (“OTCQB”) on that date. For purposes of this calculation, it has been assumed that shares of common stock held by each director, each officer and each person who owns 10% or more of the registrant’s outstanding common stock are held by affiliates. The treatment of these persons as affiliates for purposes of this calculation is not conclusive as to whether such persons are, in fact, affiliates of the registrant.

As of July 12, 2019, there were 52,290,147 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

	Page
PART I
Item 1. Business	4
Item 1A. Risk Factors	9
Item 1B. Unresolved Staff Comments	26
Item 2. Properties	26
Item 3. Legal Proceedings	27
Item 4. Mine Safety Disclosures	27
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6. Selected Financial Data	29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	35
Item 8. Financial Statements and Supplementary Data	35
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	35
Item 9A. Controls and Procedures	35
Item 9B. Other Information	36
PART III
Item 10. Directors, Executive Officers and Corporate Governance	37
Item 11. Executive Compensation	40
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42
Item 13. Certain Relationships and Related Transactions, and Director Independence	43
Item 14. Principal Accounting Fees and Services	44
PART IV
Item 15. Exhibits, Financial Statement Schedules	45
Item 16. Form 10-K Summary	45

2

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations concerning matters that are not historical facts, and are generally identified by words such as “believe”, “expect”, “anticipate”, “estimate”, “intend”, “strategy”, “may”, “will likely” and similar words or phrases. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and our actual results could differ materially and adversely from those expressed in any forward-looking statement. The forward-looking statements contained in this annual report are all based on currently available market, operating, financial and competitive information and assumptions and are subject to various risks and uncertainties that are difficult to predict, any of which could cause actual results to differ materially from those expressed in such forward-looking statements. These risks and uncertainties may include, without limitation, risks related to general economic and business conditions; our ability to continue as a going concern; our ability to obtain financing necessary to operate our business; our limited operating history; our ability to recruit and retain qualified personnel; our ability to manage any future growth; our ability to research and successfully develop our planned products; our ability to successfully complete potential acquisitions and collaborative arrangements; and other factors including those set forth below under the caption “Risk Factors” in Part I, Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7, and elsewhere in this annual report, as well as in the other reports we file with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they were made, and, except as required by law, we undertake no obligation to revise or update any forward-looking statement for any reason.

Unless the context otherwise requires, all references to “we,” “our,” “us,” “Vitality Biopharma,” and the “Company” in this annual report refer to Vitality Biopharma, Inc., a Nevada corporation and our consolidated subsidiaries. We do not currently hold any trademarks, and all trademarks used in this annual report are the property of their respective owners.

3

PART I

Item 1. Business

Company Overview

Unless otherwise provided in this Annual Report, references to the “Company,” “we,” “us”, and “our” refer to Vitality Biopharma, Inc., a Nevada corporation formed on June 29, 2007 and formerly known as Legend Mining Inc. 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.” On July 15, 2016, our Board of Directors and shareholders approved a name change to Vitality Biopharma, Inc.

Vitality 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 known as cannabosides. We will conduct our operations using our own personnel and facilities, through subsidiaries established to conduct such operations, and through 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 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 of our Company.

Our cannabosides are cannabinoid-glycoside prodrugs, which 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 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 July 12, 2019, we employed eight full-time employees, including five research professionals working in our office and laboratory space in Yuba City, California. We also have engaged the services of 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.

4

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 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. 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 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 preclinical 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 preclinical development plan, which includes dose range finding studies, GLP toxicology studies, pharmacokinetic studies and other preclinical research, is anticipated to be completed during the 2^nd half of calendar year 2020, subject to the Company securing sufficient additional funding or entering into a strategic partnership. After our satisfactory completion of all of the prerequisite preclinical in vitro and in 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 a strategic 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 greatly improves the water solubility of the CBD molecule.

5

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 plan to expand and diversify our corporate strategy to include 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. Our strategy is to opportunistically fill those unmet needs, including funding and, equally important, to provide our strategic partners with the necessary resources 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. 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.

Government Regulation

Due to our development of pharmaceutical products, we are subject to extensive regulation by the U.S. Food and Drug Administration (FDA) and other federal, state, and local agencies. Also, since we are researching and developing cannabinoid-based products, we are subject to regulation by the U.S. Drug Enforcement Administration (DEA). If we expand our clinical research, product development or commercialization activities outside of the United States in the future, we anticipate that we would then be subject to additional regulation by the applicable foreign jurisdictions and governing bodies, which may have different requirements.

The FDA is the main regulatory body that controls pharmaceutical and biologic drugs in the United States, with additional layers of regulation from other federal, state and local agencies. The Federal Food, Drug, and Cosmetic Act governs most of the requirements for the development and marketing of our pharmaceutical products. The FDA’s drug approval process is extensive, generally including: preclinical animal studies of drug safety, efficacy and dosing, submission and approval of an Investigational New Drug (IND) application, clinical studies in humans to determine safety, efficacy and dosing (Phases 1 – 3 studies), submission and approval of a New Drug Application (NDA), and additional post-approval requirements. Failure to comply with any FDA-requirements may result in the FDA refusing to approve our application.

The DEA establishes procedures and monitors research and development activities of “controlled substances” subject to the Controlled Substances Act. Our research and development activities focus on cannabinoids, particularly THC and CBD, which the DEA has classified as Schedule I substances. Schedule I substances are defined as drugs with no currently accepted medical use and a high potential for abuse. In May 2019, the DEA informed us that it had determined that they consider our VBX-100 prodrug a Schedule I substance. As a result, any developing, testing, manufacturing, or clinical studies involving our VBX-100 prodrug, and by inference potentially all of our THC-glycoside molecules, are required to be properly licensed by the DEA and adhere to strict diversion control standards. Our current research and development efforts involving our THC-glycoside molecules are conducted at our Yuba City laboratory, which holds a DEA-issued Controlled Substance Registration Certificate for “Research” that expires on May 31, 2020 and is renewable on an annual basis. Our research and development activities are also approved by and operated in compliance with the State of California’s Research Advisory Panel, which is a division of the California Department of Justice that oversees research performed within the state using DEA Schedule I and II substances.

6

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 greatly 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. Also, in September 2016, we filed an expanded international patent application 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.

In May 2017, we filed a U.S. patent application entitled “Antimicrobial Compositions Comprising Cannabinoids and Methods of Using”, which described compositions and methods of use involving cannabinoid-glycosides that provide antimicrobial activity to treat microbial infections in the intestines, including Clostridium difficile (C. diff) infections. In May 2018, one year after the filing of the provisional U.S. patent, we filed a non-provisional U.S. patent for the use of cannabinoid-glycosides to deliver cannabinoids to the gastrointestinal tract to treat C. diff infections.

We believe our intellectual property portfolio of cannabinoid-glycosides possess significant value and, as a result, we have allocated substantial resources to ensure that our U.S. and international patents are properly filed and successfully prosecuted. As our research efforts involving cannabinoid-glycosides continue to progress, we plan to develop and file additional patents to cover compositions of matter, methods of production and methods of use to further expand our growing family of intellectual property assets and create long-term value for our shareholders.

Competition

The Company operates in a highly competitive and dynamic market environment, frequently against much larger and better capitalized competitors. Currently, the Company’s cannabinoid prodrug development program competes against many well-capitalized, multinational pharmaceutical drug manufacturers that are developing, producing and marketing pharmaceutical drugs for the treatment of IBD and IBS. Additionally, an increasing number of cannabinoid drug manufacturers are entering the market with cannabinoid-based drug development programs to treat a wide range of diseases, which could include IBD and IBS. Our expectation is that competition from traditional pharmaceutical drug developers and non-traditional cannabinoid-based drug developers will continue to increase substantially over the next 12 months. Furthermore, the Company’s strategy to secure strategic partnerships with promising early stage companies is likely to experience a substantial amount of competition, particularly from investment companies, debt financing providers, and other alternative sources of capital.

The Control Center

In October 2018, Summit Healthtech, Inc. acquired The Control Center, a Beverly Hills addiction clinic owned by Dr. Arif Karim. After that transaction closed, we acquired all of the outstanding capital stock of Summit Healthtech, Inc., through a share exchange transaction. We then changed the name of Summit Healthtech, Inc. to Vitality Healthtech, Inc., which is our wholly-owned subsidiary.

Vitality Healthtech assembled a team of physicians, psychologists and other medical professionals to provide specialty care services to patients suffering from addiction and dependency issues, with a particular focus on the use of cannabinoids for opiate reduction treatment protocols. Unfortunately, due to the poor financial and operating performance of The Control Center following its acquisition in October 2018, Vitality Healthtech ceased all operations of The Control Center effective June 14, 2019.

7

On May 31, 2019, Vitality Healthtech terminated its Executive Employment Agreement with Dr. Arif Karim, dated October 12, 2018, whereby Dr. Karim was employed by Vitality Healthtech to serve as its Chief Medical Officer. Vitality Healthtech is currently negotiating a separation agreement with Dr. Karim.

On June 13, 2019, Vitality Healthtech timely submitted a notice of claims under the Share Purchase Agreement, dated October 12, 2018, by and among Summit Healthtech, Inc. (n/k/a Vitality Healthtech, Inc.), The Control Center and Dr. Arif Karim. Vitality Healthtech is currently negotiating a settlement of its claims with Dr. Karim.

Stock Relisting and Liquidity

On November 7, 2018, the SEC temporarily suspended the trading of the Company’s common stock on the OTCQB marketplace. The Company’s 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 who, in turn, distribute the trade data to market data vendors and financial websites.

Since inception, the Company has funded its operations primarily through equity and debt financings. However, it would currently be very challenging for the Company to raise significant capital through an equity financing because of our “grey market” trading status. Therefore, it is critical that the Company resumes trading status on the OTCQB or another national exchange in order to raise additional capital to fund our continued operations. If we cannot resume ordinary course trading status or raise additional capital, then we will be forced to delay, scale back or eliminate some or all of our operations, including our preclinical prodrug development initiatives for VBX-100.

We have made relisting our common stock on the OTCQB or another national exchange a top corporate priority and, as a result, have expended significant resources to accomplish this critically-important goal. Although we cannot determine if and when a relisting would occur, we continue to actively pursue a relisting of our common stock and are fully committed to taking all steps necessary to successfully complete the relisting process and provide our Company with access to new capital through equity financings and higher levels of liquidity for our shareholders.

To that end, our Board of Directors, which includes three directors who joined the Board subsequent to the suspension of the Company’s common stock in November 2018, has passed several corporate resolutions to institute stronger protections and safeguards against unscrupulous market participants, specifically addressing undisclosed beneficial owners and stock promotion firms. More specifically, the Board has resolved that any future non-underwritten capital raises would be limited to U.S.-based investors and that the Company will not enter into any marketing or stock promotion arrangements unless, in each case, expressly vetted and approved by the Board. Lastly, we are considering the pursuit of legal actions under Section 16 of the Securities and Exchange Act of 1934, as amended, against any undisclosed beneficial owners of the Company’s common stock that were involved in the Company’s equity financing in May 2016 to ensure that any short swing profits improperly earned in connection with that equity financing are properly recovered for the benefit of the Company’s shareholders and that the integrity and transparency of our shareholder base is reaffirmed.

Employees

As of July 12, 2019, we employed eight full-time employees, including five research professionals working in our office and laboratory space in Yuba City, California. We also have engaged the services of scientific and regulatory consultants to assist with 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 and variable overhead cost structure.

Properties

Our corporate headquarters is a leased office located at 1901 Avenue of the Stars, 2^nd Floor, Los Angeles, California 90067. Our office and laboratory space at 5225 Carlson Road, Yuba City, California 95993 requires a lease payment of approximately $2,600 per month under a lease agreement that expires on May 1, 2020. Prior to its closure in June 2019, The Control Center had operated in leased office space located at 8383 Wilshire Boulevard, Suite 228, Beverly Hills, California 90211, which requires a lease payment of approximately $11,500 per month, under a lease agreement that expires on February 28, 2021. We believe our current facilities are adequate to support our corporate strategy over the next 12 months.

8

Organizational History

We were incorporated under the laws of the State of Nevada on June 29, 2007 as Legend Mining Inc. 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 increased from 7,350,000 to 51,450,000.

On July 15, 2016, the holders of a majority of our outstanding common stock and our Board of Directors approved (i) a corporate name change from Stevia First Corp. to Vitality Biopharma, Inc., (ii) a ten-for-one reverse stock split of our outstanding shares of common stock, and (iii) an increase in the number of authorized shares of common stock from 525,000,000 to 1,000,000,000. These changes became effective on July 20, 2016.

General Information

We maintain a corporate website at: www.vitality.bio. Information contained on our website is not incorporated by reference in this annual report. We file reports with the Securities and Exchange Commission (SEC) and make available free-of-charge through our website our annual reports, quarterly reports, current reports, proxy and information statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act).

Item 1A. Risk Factors

The following risk factors should be considered carefully in addition to the other information contained in this annual report. This annual report contains forward-looking statements. Our business, financial condition, results of operations and stock price could be materially adversely affected by any of these risks.

Risks Related to Our Business

We have a history of operating losses and expect to continue to incur losses and we may never become profitable.

For the fiscal year ended March 31, 2019, the Company incurred a net loss of $13,121,567 and used $3,665,094 of cash in our operating activities. We have incurred losses since inception, resulting in an accumulated deficit of $42,181,503 as of March 31, 2019. We expect to incur further losses as we continue to develop our business. We have not yet received significant revenues from sales of products or services, and have recurring losses from operations, and further losses are anticipated in the development of our business.

We expect to incur substantial losses for the near future, and we may never achieve or maintain profitability. Even if we succeed in obtaining regulatory approval to market our products, we may still incur losses for the foreseeable future. We also expect to experience negative cash flow for the near future, as we plan to use all available resources to fund our operations and make significant capital expenditures. As a result, we would need to generate significant revenues if we are to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability. Our failure to achieve or maintain profitability could negatively impact the value of our common stock and you could lose some or all of your investment.

9

We will need to raise substantial additional capital to operate our business. If we cannot obtain the capital we need to continue our operations, our business could fail.

We will likely need to raise additional funds in order to continue operating our business. Since inception, we have primarily funded our operations through equity and debt financings. We expect to continue to fund our operations primarily through equity and debt financings for the foreseeable future. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders 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 available, 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 compounds, technology or other intellectual property or marketing rights, which could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Moreover, regardless of the manner in which we seek to raise capital, we may incur substantial costs in those pursuits, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other related costs.

Over the 12 months following March 31, 2019, we expect our total operating expenditures to be approximately $3,400,000 and total strategic partnership investments to be approximately $1,500,000. However, our estimate of total expenditures could increase if we encounter unanticipated difficulties. In addition, our estimates of the amount of cash necessary to fund our business may prove to be wrong and we could spend our available financial resources much faster than we currently expect. Further, our operational expenses may increase substantially during our current fiscal year if we pursue an expansion of our current operational goals and research and development activities. If we cannot raise the money that we need in order to continue to develop our business, we will be forced to delay, scale back or eliminate some or all of our proposed operations and/or forego other attractive business opportunities that may arise. If any of these were to occur, there is a substantial risk that our business would fail. Sources of additional funds may not be available on acceptable terms or at all. Weak economic and capital market conditions could result in increased difficulties in raising capital for our operations. We may not be able to raise money through the sale of our equity securities or through borrowing funds on terms we find acceptable, or at all. If we cannot raise the funds that we need, we will be unable to continue our operations, and our stockholders could lose their entire investment in our company.

If we engage in acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may engage in various acquisitions and strategic partnerships in the future, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any acquisition or strategic partnership may entail numerous risks, including:

● increased operating expenses and cash requirements;

● the assumption of indebtedness or contingent liabilities;

● the issuance of our equity securities which would result in dilution to our stockholders;

● assimilation of operations, intellectual property, products and product candidates of an acquired company, including difficulties associated with integrating new personnel;

● the diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition or strategic partnership;

● retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

● risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

● our inability to generate revenue from acquired intellectual property, technology and/or products sufficient to meet our objectives or even to offset the associated transaction and maintenance costs.

In addition, if we undertake such a transaction, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense.

We currently face, and will continue to face, significant competition.

Our major competitors for the development of pharmaceutical products related to cannabinoids and inflammatory disorders include major pharmaceutical companies, smaller companies, and academic research groups that are devoted to biological or pharmaceutical research either independently or by providing contract research services. A number of multinational pharmaceutical companies are developing products in similar therapeutic areas, including, but not limited to, Biogen, Teva Neuroscience, Pfizer, Purdue Pharma, Endo Pharmaceuticals, Genzyme, Novartis, Bayer Healthcare, and additional companies such as GW Pharmaceuticals, Arena Pharmaceuticals, Insys Therapeutics, Trait Biosciences, and Zynerba Pharmaceuticals are developing cannabinoid pharmaceuticals for treatment of various clinical indications and commercial applications.

Our limited operating experience could make our operations inefficient or ineffective.

We are an early-stage company with only a limited operating history upon which to base an evaluation of our current business and future prospects and how we will respond to competitive, financial or technological challenges. We only recently commenced operations in the development of pharmaceutical products, our primary business focus, and additionally we are pursuing strategic partnerships with early stage companies, which is a new corporate strategy for us. As a result, we have limited experience with these activities and the revenue and income potential of our business is unproven. In addition, because of our limited operating history, we have limited insight into trends that may emerge and affect our business, and limited experience responding to such trends. We may make errors in predicting and reacting to relevant business trends and we will be subject to the risks, uncertainties and difficulties frequently encountered by early-stage companies in evolving markets. We may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause our business, results of operations and financial condition to suffer or fail.

10

We may not be able to manage our expansion of operations effectively.

Our success will depend upon the expansion of our operations and the effective management of any growth we may experience, which will place a significant strain on our management and on our administrative, operational and financial resources. To manage this growth, we must expand our facilities, augment our operational, financial and management systems and hire and train qualified personnel. Our management will also be required to develop relationships with customers, suppliers and other third parties. Our current and planned operations, personnel, systems, and internal procedures and controls may not be adequate to support our future growth. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

If we are unable to hire and retain qualified personnel, we may not be able to implement our business plan.

As of July 12, 2019, we employed eight full-time employees, including five dedicated to research and development. Attracting and retaining qualified scientific, management and other personnel will be critical to our success. There is intense competition for qualified personnel in our area of activities, and we may not be able to attract and retain the qualified personnel necessary for the development of our business. In addition, we may have difficulty recruiting necessary personnel as a result of our limited operating history. The loss of key personnel or the failure to recruit necessary additional personnel could impede the achievement of our business objectives.

We may choose to hire part-time employees or use consultants. As a result, certain of our employees, officers, directors and consultants may from time to time serve as officers, directors and consultants of other companies. These other companies may have interests in conflict with ours. In addition, we expect to rely on independent organizations, advisors and consultants to provide certain services, including product testing and development plan construction. The services of these independent organizations, advisors and consultants may not be available to us on a timely basis when needed or on acceptable terms, and if they are not available, we may not be able to find qualified replacements. If we are unable to retain the services of qualified personnel, independent organizations, advisors and consultants, we may not be able to implement our business plan.

If we are unable to market and distribute our products effectively, we may be unable to generate significant revenue.

We currently have limited sales, marketing or distribution capabilities. We intend to build these capabilities internally and also to pursue collaborative arrangements regarding the sales and marketing of our products, including steps necessary to commercialize our pharmaceutical products. However, we may be unable to establish or maintain any such collaborative arrangements, or if able to do so, they may not provide us with the sales and marketing benefits we expect. To the extent that we decide not to, or are unable to, enter into successful collaborative arrangements with respect to the sales and marketing of our cannabinoid products, significant capital expenditures, management resources and time will be required to establish and develop an in-house marketing and sales force with appropriate expertise. We may be unable to establish or maintain relationships with third party collaborators or develop in-house sales and distribution capabilities. To the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through third parties, our business, financial condition and results of operations could be materially adversely affected.

We are largely dependent on the success of our products, which are still in preclinical development and will require significant capital resources and years of clinical development effort.

We currently have no pharmaceutical products on the market, and our product candidates are still in preclinical development. Our business substantially depends on the successful clinical development, regulatory approval and commercialization of our product candidates, and additional preclinical testing and substantial clinical development and regulatory approval efforts will be required before we are permitted to commence commercialization, if ever. The clinical trials and manufacturing and marketing of product candidates will be subject to extensive and rigorous review and regulation by numerous government authorities in the United States and other jurisdictions where we intend to test and, if approved, market our product candidates. Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through preclinical testing and clinical trials that the product candidate is safe and effective for use in each target indication, and potentially in specific patient populations. This process can take many years and may include post-marketing studies and surveillance, which would require the expenditures of substantial resources beyond our current resources. Of the large number of drugs in development for approval in the United States and the European Union, only a small percentage successfully complete the FDA or European Medicines Agency (EMA) regulatory approval processes, as applicable, and are commercialized. Accordingly, even if we are able to obtain the requisite financing to continue to fund our research, development and clinical programs, we cannot assure you that any of our product candidates will be successfully developed or commercialized.

11

Because the results of preclinical testing are not necessarily predictive of future results, our products may not have favorable results in our planned clinical trials.

Any positive results from our preclinical testing of our products may not necessarily be predictive of the results from our planned clinical trials in humans. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive results in preclinical development, and we cannot be certain that we will not face similar setbacks. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or EMA approval. If we fail to produce positive results in our clinical trials, the development timeline and regulatory approval and commercialization prospects for our products, and, correspondingly, our business and financial prospects, would be materially adversely affected.

Failures or delays in the completion of our preclinical studies or the commencement and completion of our clinical trials could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.

To date, we have not completed our preclinical animal studies or commenced any clinical trials. Successful completion of such preclinical animal studies and clinical trials is a prerequisite to submitting an NDA to the FDA or a marketing authorization application (MAA) to the EMA. Clinical trials are expensive, difficult to design and implement, can take many years to complete and their outcomes are uncertain. A product candidate can unexpectedly fail at any stage of clinical development. The historic failure rate for product candidates is high due to scientific feasibility, safety, efficacy, changing standards of medical care and other variables. The commencement and completion of clinical trials can be delayed or prevented for a number of reasons, including, among others:

● delays in reaching or failing to reach agreement on acceptable terms with prospective clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different clinical trial sites;

● delays or inability in manufacturing or obtaining sufficient quantity or quality of a product candidate or other materials necessary to conduct clinical trials due to regulatory and manufacturing constraints, including delays or an inability to hire appropriate staff or consultants with requisite expertise in chemistry and manufacturing controls for pharmaceutical products;

● difficulties obtaining IRB, DEA or comparable foreign regulatory authority, or ethics committee approval to conduct a clinical trial at a prospective site or sites;

● challenges in recruiting and enrolling patients to participate in clinical trials, including the size and nature of the patient population, the proximity of patients to clinical trial sites, eligibility criteria for the clinical trial, the nature of the clinical trial protocol, the availability of approved effective treatments for the relevant indication and competition from other clinical trial programs for similar indications;

● severe or unexpected toxicities or drug-related side effects experienced by patients in our clinical trials or by individuals using drugs similar to our product candidates;

● DEA or comparable foreign regulatory authority-related recordkeeping, reporting or security violations at a clinical trial site, leading the DEA, state authorities or comparable foreign regulatory authorities to suspend or revoke the site’s controlled substance license and causing a delay or termination of planned or ongoing clinical trials;

12

● regulatory concerns with cannabinoid products generally and the potential for abuse of those products;

● difficulties retaining patients who have enrolled in a clinical trial who may withdraw due to lack of efficacy, side effects, personal issues or loss of interest;

● ambiguous or negative interim results; or

● lack of adequate funding to continue the clinical trial.

In addition, a clinical trial may be suspended or terminated by us, the FDA, IRBs, ethics committees, data safety monitoring board or other foreign regulatory authorities overseeing the clinical trial at issue or other regulatory authorities due to a number of factors, including, among others:

● failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols;

● inspection of the clinical trial operations, clinical trial sites, or drug manufacturing facilities by the FDA, the DEA, the EMA or other foreign regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a clinical hold;

● unforeseen safety issues, including any safety issues that could be identified in our ongoing toxicology studies;

● adverse side effects or lack of effectiveness; and

● changes in government regulations or administrative actions.

We intend to focus on prodrugs for certain indications, and may fail to capitalize on other product candidates or other indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we are focusing on research programs relating to our proprietary products for certain indications, which concentrates the risk of product failure in the event the products prove to be unsafe, ineffective or inadequate for clinical development or commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that could later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on proprietary research and development programs relating to our products may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for our products, we may relinquish valuable rights to our products through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to our products.

The regulatory approval processes of the FDA, the EMA and other comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

We are not permitted to market our product candidates in the United States or the European Union until we receive approval of an NDA from the FDA or an MAA from the EMA, respectively, or in any foreign countries until we receive the requisite approval from such countries. Prior to submitting an NDA to the FDA or an MAA to the EMA for approval of our product candidates we will need to complete our ongoing preclinical studies, as well as Phase 1, Phase 2 and Phase 3 clinical trials. We are still conducting preclinical studies and have not yet commenced our clinical program or tested any product in humans. We plan to submit NDAs for our products to the FDA upon completion of all requisite clinical trials. Successfully initiating and completing our clinical program and obtaining approval of an NDA or MAA is a complex, lengthy, expensive and uncertain process, and the FDA or EMA may delay, limit or deny approval of our product candidates for many reasons, including, among others, because:

● we may not be able to demonstrate that our product candidates are safe and effective in treating patients to the satisfaction of the FDA or EMA;

13

● the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or EMA for marketing approval;

● the FDA or EMA may disagree with the number, design, size, conduct or implementation of our clinical trials;

● the FDA or EMA may require that we conduct additional clinical trials;

● the FDA or EMA or other applicable foreign regulatory authorities may not approve the formulation, labeling or specifications of our product candidates;

● the contract research organizations, or CROs, and other contractors that we may retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

● the FDA or EMA may find the data from preclinical studies and clinical trials insufficient to demonstrate that our products’ clinical and other benefits outweigh their safety risks;

● the FDA or EMA may disagree with our interpretation of data from our preclinical studies and clinical trials;

● the FDA or EMA may not accept data generated at our clinical trial sites or may disagree with us over whether to accept efficacy results from clinical trial sites outside the United States where the standard of care is potentially different from that in the United States;

● if and when our NDAs or MAAs are submitted to the FDA or EMA, as applicable, the regulatory agency may have difficulties scheduling the necessary review meetings in a timely manner, may recommend against approval of our application or may recommend or require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

● the FDA may require development of a Risk Evaluation and Mitigation Strategy (REMS), which would use risk minimization strategies beyond the professional labeling to ensure that the benefits of certain prescription drugs outweigh their risks, as a condition of approval or post-approval, and the EMA may grant only conditional approval or impose specific obligations as a condition for marketing authorization, or may require us to conduct post-authorization safety studies;

● the FDA, EMA, DEA or other applicable foreign regulatory agencies may not approve the manufacturing processes or facilities of third-party manufacturers with which we contract;

● the DEA or other applicable foreign regulatory agency may establish quotas that limit the quantities of controlled substances available to our manufacturers; or

● the FDA or EMA may change their approval policies or adopt new regulations.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market our products.

Even if our products receive regulatory approval, they may still face future development and regulatory difficulties.

If we obtain regulatory approval for our products, such approval would be subject to extensive ongoing requirements by the DEA, FDA, EMA and other foreign regulatory authorities related to the manufacture, quality control, further development, labeling, packaging, storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information. The safety profile of any product will continue to be closely monitored by the FDA, EMA and other comparable foreign regulatory authorities. If the FDA, EMA or any other comparable foreign regulatory authority becomes aware of new safety information after approval of any of our product candidates, these regulatory authorities may require labeling changes or establishment of a REMS, impose significant restrictions on a product’s indicated uses or marketing, impose ongoing requirements for potentially costly post-approval studies or post-market surveillance, or impose a recall.

14

In addition, manufacturers of therapeutic products and their facilities are subject to continual review and periodic inspections by the FDA, the EMA and other comparable foreign regulatory authorities for compliance with current good manufacturing practices (cGMP) regulations. Our current facilities and full-time staff have never undergone such an inspection, and we currently rely upon outside consultants and advisors to provide guidance on chemistry and manufacturing controls for pharmaceuticals products. Further, manufacturers of controlled substances must obtain and maintain necessary DEA and state registrations and registrations with applicable foreign regulatory authorities, and must establish and maintain processes to ensure compliance with DEA and state requirements and requirements of applicable foreign regulatory authorities governing, among other things, the storage, handling, security, recordkeeping and reporting for controlled substances. If we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

● issue untitled letters or warning letters;

● mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners;

● require us to enter into a consent decree, which can include imposition of various fines, reimbursements for inspection costs, required due dates for specific actions and penalties for noncompliance;

● seek an injunction or impose civil or criminal penalties or monetary fines;

● suspend or withdraw regulatory approval;

● suspend any ongoing clinical trials;

● refuse to approve pending applications or supplements to applications filed by us; or

● require us to initiate a product recall.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and may otherwise have a material adverse effect on our business, financial condition and results of operations.

Our products will be subject to controlled substance laws and regulations; failure to receive necessary approvals may delay the launch of our products and failure to comply with these laws and regulations may adversely affect the results of our business operations.

Our products will contain controlled substances as defined in the federal Controlled Substances Act of 1970 (CSA). Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA classifies controlled substances into five schedules: Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse, have no currently “accepted medical use” in the United States, lack accepted safety for use under medical supervision, and may not be prescribed, marketed or sold in the United States. Pharmaceutical products approved for use in the United States may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest potential for abuse or dependence and Schedule V substances the lowest relative risk of abuse among such substances. Schedule I and II drugs are subject to the strictest controls under the CSA, including manufacturing and procurement quotas, security requirements and criteria for importation. In addition, dispensing of Schedule II drugs is further restricted. For example, they may not be refilled without a new prescription.

15

While cannabis is a Schedule I controlled substance, products approved for medical use in the United States that contain cannabis or cannabis extracts must be placed in Schedules II - V, since approval by the FDA satisfies the “accepted medical use” requirement. If and when our products receive FDA approval, the DEA will make a scheduling determination and place them in a schedule other than Schedule I in order for it to be prescribed to patients in the United States. If approved by the FDA, we expect the finished dosage forms of our products to be listed by the DEA as a Schedule II, III, IV or V controlled substance. Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA. The scheduling process may take additional time after FDA approval, thereby significantly delaying the launch of our products. Furthermore, if the FDA, DEA or any foreign regulatory authority determines that our products may have potential for abuse, it may require us to generate more clinical data than that which is currently anticipated, which could increase the cost and/or delay the launch of our products.

Because our products will contain active ingredients of Cannabis, which are Schedule I substances, to conduct preclinical studies and clinical trials with our products in the United States prior to approval, each of our research sites must submit a research protocol to the DEA and obtain and maintain a DEA researcher registration that will allow those sites to procure necessary materials from suppliers, and to handle and dispense our products. If the DEA delays or denies the grant of a research registration to one or more research sites, the preclinical studies or clinical trials could be significantly delayed, and we could lose and be required to replace clinical trial sites, resulting in additional costs.

We will also need to identify wholesale distributors with the appropriate DEA registrations and authority to distribute our products to pharmacies and other healthcare providers, and these distributors would need to obtain Schedule II through V distribution registrations. The failure to obtain, or delay in obtaining, or the loss of any of those registrations could result in increased costs to us. If our products are Schedule II drugs, pharmacies would have to maintain enhanced security with alarms and monitoring systems and they must adhere to recordkeeping and inventory requirements. Furthermore, state and federal enforcement actions, regulatory requirements, and legislation intended to reduce prescription drug abuse, such as the requirement that physicians consult a state prescription drug monitoring program, may make physicians less willing to prescribe, and pharmacies to dispense, Schedule II products.

We may manufacture the commercial supply of our products, or necessary raw materials, outside of the United States. If our products are approved by the FDA and classified as a Schedule II or III substance, an importer can import for commercial purposes if it obtains from the DEA an importer registration and files an application with the DEA for an import permit for each import. The DEA provides annual assessments/estimates to the International Narcotics Control Board which guides the DEA in the amounts of controlled substances that the DEA authorizes to be imported. The failure to identify an importer or obtain the necessary import authority, including specific quantities, could affect the availability of our products and have a material adverse effect on our business, results of operations and financial condition. In addition, an application for a Schedule II importer registration must be published in the Federal Register, and there is a waiting period for third party comments to be submitted.

Individual states have also established controlled substance laws and regulations. Although state-controlled substance laws often mirror federal law, states may schedule our product candidates in a different manner. While some states automatically schedule a drug based on federal action, other states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement actions and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

16

Product shipment delays could have a material adverse effect on our business, results of operations and financial condition.

The shipment, import and export of our products and raw materials may require import and export licenses. In the United States, the FDA and U.S. Customs and Border Protection, and in other countries, similar regulatory authorities, regulate the import and export of pharmaceutical products that contain controlled substances. Specifically, the import and export process requires the issuance of import and export licenses by the relevant controlled substance authority in both the importing and exporting country. We may not be granted, or if granted, maintain, such licenses from the authorities in certain countries. Even if we obtain the relevant licenses, shipments of our products and materials may be held up in transit, which could cause significant delays and may lead to product batches being stored outside required temperature ranges. Inappropriate storage may damage the product shipment resulting in delays in clinical trials or, upon commercialization, a partial or total loss of revenue from one or more shipments of our products. A delay in a clinical trial or, upon commercialization, a partial or total loss of revenue from one or more shipments of our products could have a material adverse effect on our business, results of operations and financial condition.

Failure to obtain regulatory approval in jurisdictions outside the United States and the European Union would prevent our product candidates from being marketed in those jurisdictions.

In order to market and sell our products in jurisdictions other than the United States and the European Union, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The regulatory approval process outside the United States and the European Union generally includes all of the risks associated with obtaining FDA and EMA approval, but can involve additional testing. We may need to partner with third parties in order to obtain approvals outside the United States and the European Union. In addition, in many countries worldwide, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States and the European Union on a timely basis, if at all. Even if we were to receive approval in the United States or the European Union, approval by the FDA or the EMA does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly, approval by one regulatory authority outside the United States and the European Union would not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA or the EMA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of our product candidates by regulatory authorities in other foreign jurisdictions, the commercial prospects of those product candidates may be significantly diminished and our business prospects could decline.

Healthcare legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates.

In the United States there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities or affect our ability to profitably sell any product candidates for which we obtain marketing approval.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Affordable Care Act, among other things, imposes a significant annual fee on companies that manufacture or import branded prescription drug products. It also contains substantial provisions intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms, any of which could negatively impact our business. A significant number of provisions are not yet, or have only recently become effective, but the Affordable Care Act is likely to continue the downward pressure on pharmaceutical and medical device pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

In addition, other legislative changes have been proposed and adopted since passage of the Affordable Care Act. The Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the fiscal years 2012 through 2021, triggering the legislation’s automatic reduction to several government programs. This included aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If we ever obtain regulatory approval and successfully commercialize our products, these new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

17

We expect that the Affordable Care Act, as well as other healthcare reform measures that have been and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could negatively impact our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may compromise our ability to generate revenue, attain profitability or commercialize our products.

We may seek orphan drug status for our products for the treatment of certain diseases or conditions, but we may be unable to obtain such designation or to maintain the benefits associated with orphan drug status, including market exclusivity, which may cause our revenue, if any, to be reduced.

Regulatory authorities in some jurisdictions, including the United States and European Union, may designate drugs for relatively small patient populations as orphan drugs. The FDA may grant Orphan Drug Designation to drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals annually in the United States, or, if the disease or condition affects more than 200,000 individuals annually in the United States, if there is no reasonable expectation that the cost of developing and making the drug would be recovered from sales in the United States. In the European Union, the EMA’s Committee for Orphan Medicinal Products grants Orphan Drug Designation to promote the development of products that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug.

In the United States, Orphan Drug Designation entitles a party to financial incentives, such as opportunities for grant funding towards clinical trial costs, tax credits for certain research and user fee waivers under certain circumstances. In addition, if a product receives the first FDA approval for the indication for which it has orphan designation, the product is entitled to seven years of market exclusivity, which means the FDA may not approve any other application for the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the product with orphan exclusivity. Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. In the European Union, Orphan Drug Designation also entitles a party to financial incentives such as reduction of fees or fee waivers and ten years of market exclusivity following drug approval. This period may be reduced to six years if the Orphan Drug Designation criteria are no longer met, including where it is shown that the product is sufficiently profitable so that market exclusivity is no longer justified.

As a result, even if our products receive orphan exclusivity, the FDA or EMA can still approve other drugs that have a different active ingredient for use in treating the same indication. Furthermore, the FDA can waive orphan exclusivity if we are unable to manufacture sufficient supply of our products or the EMA could reduce the term of exclusivity if our products are sufficiently profitable.

We may seek orphan drug designation for our products, but exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if the FDA or EMA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. In addition, although we may seek orphan drug designation for our products, we may never receive such designation, or there may be a delay in receiving such designation that would impact our expected timeframe for clinical development.

18

Even if we are able to commercialize our products, the products may not receive coverage and adequate reimbursement from third-party payors, which could harm our business.

The availability of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments. Sales of our products, if approved, will depend substantially on the extent to which the costs of these products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our products. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, established the Medicare Part D program and provided authority for limiting the number of drugs that will be covered in any therapeutic class thereunder. The Medicare Modernization Act, including its cost reduction initiatives, could decrease the coverage and reimbursement rate that we receive for any of our approved products. Furthermore, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Act may result in a similar reduction in payments from private payors.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services (HHS), as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree.

The intended use of a drug product by a physician can also affect pricing. For example, CMS could initiate a National Coverage Determination administrative procedure, by which the agency determines which uses of a therapeutic product would and would not be reimbursable under Medicare. This determination process can be lengthy, thereby creating a long period during which the future reimbursement for a particular product may be uncertain.

Outside the United States, particularly in member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations or the successful completion of health technology assessment procedures with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Certain countries allow companies to fix their own prices for medicines, but monitor and control company profits. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations or prospects could be adversely affected.

19

Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include the following:

● the U.S. federal healthcare Anti-Kickback Statute impacts our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities, by prohibiting, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid;

● federal civil and criminal false claims laws and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent (including through impermissible promotion of our products for off-label uses) or making a false statement or record to avoid, decrease or conceal an obligation to pay money to the federal government;

● the U.S. federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also created federal criminal laws that prohibit knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services;

● HIPAA, and the rules and regulations promulgated thereunder, establish federal standards for maintaining the privacy and security of certain patient health information known as Protected Health Information (PHI). As amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), HIPAA establishes federal standards for administrative, technical and physical safeguards relevant to the electronic transmission of PHI and imposes notification obligations in the event of a breach of the privacy or security of PHI. In addition to adhering to the requirements of HIPAA, entities considered “covered entities” under HIPAA (such as health plans, healthcare clearinghouses, and certain healthcare providers) are required to obtain assurances in the form of a written contract from certain business associates to which they transmit PHI (or who create, receive, transmit or maintain PHI on the covered entity’s behalf) to ensure that the privacy and security of such information is maintained in accordance with HIPAA requirements. HITECH made changes to HIPAA including extending the reach of HIPAA beyond HIPAA covered entities to business associates, increased the maximum civil monetary penalties for violations of HIPAA, and granted enforcement authority to state attorneys general. Failure to comply with HIPAA/HITECH can result in civil and criminal liability, including civil monetary penalties, fines and imprisonment;

● the U.S. federal physician payment transparency requirements under the Affordable Care Act require applicable manufacturers of covered drugs, devices, biologics and medical supplies to report annually to HHS information related to payments and other transfers of value to physicians, certain other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and certain other healthcare providers and their immediate family members and applicable group purchasing organizations; and

● analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and certain other healthcare providers or marketing expenditures. Additionally, state and foreign laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA/HITECH, thus complicating compliance efforts.

20

Comparable laws and regulations exist in the countries within the European Economic Area (EEA). Although such laws are partially based upon European Union law, they may vary from country to country. Healthcare specific, as well as general European Union and national laws, regulations and industry codes constrain, for example, our interactions with government officials and healthcare practitioners, and the handling of healthcare data. Non-compliance with any of these laws or regulations could lead to criminal or civil liability.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our internal control policies and procedures may not protect us from reckless or negligent acts committed by our employees, future distributors, licensees or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

Our products, if approved, may be unable to achieve broad market acceptance and, consequently, limit our ability to generate revenue from new products.

Even when product development is successful and regulatory approval has been obtained, our ability to generate significant revenue depends on the acceptance of our products by physicians and patients. The market acceptance of any product depends on a number of factors, including the indication statement and warnings approved by regulatory authorities in the product label, continued demonstration of efficacy and safety in commercial use, physicians’ willingness to prescribe the product, reimbursement from third-party payors such as government healthcare systems and insurance companies, the price of the product, the nature of any post-approval risk management plans mandated by regulatory authorities, competition, and marketing and distribution support. Any factors preventing or limiting the market acceptance of our product candidates could have a material adverse effect on our business, results of operations and financial condition.

If we receive regulatory approvals, we intend to market our products in multiple jurisdictions where we have limited or no operating experience and may be subject to increased business and economic risks that could affect our financial results.

If we receive regulatory approvals, we plan to market our products in jurisdictions where we have limited or no experience in marketing, developing and distributing our products. Certain markets have substantial legal and regulatory complexities that we may not have experience navigating. We are subject to a variety of risks inherent in doing business internationally, including risks related to the legal and regulatory environment in non-U.S. jurisdictions, including with respect to privacy and data security, trade control laws and unexpected changes in laws, regulatory requirements and enforcement, as well as risks related to fluctuations in currency exchange rates and political, social and economic instability in foreign countries. If we are unable to manage our international operations successfully, our financial results could be adversely affected.

In addition, controlled substance legislation may differ in other jurisdictions and could restrict our ability to market our products internationally. Most countries are parties to the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances, including Cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to us obtaining marketing approval for our products in those countries. These countries may not be willing or able to amend or otherwise modify their laws and regulations to permit our products to be marketed, or achieving such amendments to the laws and regulations may take a prolonged period of time. We would be unable to market our products in countries with such obstacles in the near future or perhaps at all without modification to laws and regulations.

21

Our products will contain controlled substances, the use of which may generate public controversy.

Since our products will contain controlled substances, their regulatory approval may generate public controversy. Political and social pressures and adverse publicity could lead to delays in approval of, and increased expenses for, our products. These pressures could also limit or restrict the introduction and marketing of our products. Adverse publicity from Cannabis misuse or adverse side effects from Cannabis or other cannabinoid products may adversely affect the commercial success or market penetration achievable by our products. The nature of our business attracts a high level of public and media interest, and in the event of any resultant adverse publicity, our reputation may be harmed.

If we fail to protect or enforce our intellectual property rights or secure rights to the intellectual property of others, the value of our intellectual property rights would diminish.

We expect to continue to develop our intellectual property portfolio as we increase our research and development efforts. We may be unable to obtain patents or other protection for any technologies we develop, because such technologies are not coverable by patents or other forms of registered intellectual property, because third parties file patents covering the same claims earlier than we do, or for other reasons. If we are able to obtain issued patents, we cannot predict the degree and range of protection any patents will afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents. Others may obtain patents claiming aspects similar to those covered by our patents and patent applications, which may limit the efficacy of the protections afforded by any patents we may obtain.

Our success will also depend upon the skills, knowledge and experience of our personnel, our consultants and advisors as well as our licensors and contractors. To help protect any proprietary know-how we develop and any inventions for which patents may be unobtainable or difficult to obtain, we expect to rely on trade secret protection and confidentiality agreements. To this end, we expect to require our employees, consultants, advisors and contractors to enter into agreements which prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.

If we infringe the rights of third parties we could be prevented from selling products and forced to pay damages or defend against litigation.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs. In that case, we could be required to:

● obtain licenses from such third parties, which may not be available on commercially reasonable terms, if at all;

● redesign our products or processes to avoid infringement, which may not be feasible;

● stop using the subject matter claimed in the patents held by others;

● pay damages; and/or

● defend litigation or administrative proceedings, which may be costly whether we win or lose, and which could result in a substantial diversion of our valuable management resources.

22

Any of these outcomes could divert management attention and other resources and could significantly harm our operations and financial condition.

We use hazardous materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

Our research and development efforts and our manufacturing processes may involve the controlled storage, use and disposal of certain hazardous materials and waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be eliminated. We may not be able to obtain and maintain insurance on acceptable terms, or at all, to cover costs associated with any such accidental contamination. In the event of such an accident, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of any insurance we may obtain and exceed our financial resources. We may incur significant costs to comply with current or future environmental laws and regulations.

We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.

If we are able to develop and commercialize our proposed products, we could become subject to product liability claims. If we are not able to successfully defend against such claims, we may incur substantial liabilities or be required to limit commercialization of our proposed products. If we are unable to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability, claims could prevent or inhibit the commercialization of products we develop, alone or with corporate collaborators. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.

Government regulation of our products could increase our costs, prevent us from offering certain products or cause us to recall products.

The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products is subject to regulation by one or more federal agencies, and various agencies of the states and localities in which our products are manufactured and sold. These government regulatory agencies may attempt to regulate any of our products that fall within their jurisdiction. Such regulatory agencies may not accept the evidence of safety for any new ingredients that we may want to market, may determine that a particular product or product ingredient presents an unacceptable health risk, may determine that a particular statement of nutritional support that we want to use is an unacceptable drug claim or an unauthorized version of a food “health claim,” may determine that a particular product is an unapproved new drug, or may determine that particular claims are not adequately supported by available scientific evidence. Such a determination would prevent us from marketing particular products or using certain statements of nutritional support on our products. We also may be unable to disseminate third-party literature that supports our products if the third-party literature fails to satisfy certain requirements.

In addition, a government regulatory agency could require us to remove a particular product from the market. Any product recall or removal would result in additional costs to us, including lost revenues from any products that we are required to remove from the market, any of which could be material. Any such product recalls or removals could lead to liability, substantial costs and reduced growth prospects.

If any of our products contain plants, herbs or other substances not recognized as safe by a government regulatory agency, we may not be able to market or sell such products in that jurisdiction. Any such prohibition could materially adversely affect our results of operations and financial condition. Further, if more stringent statutes are enacted, or if more stringent regulations are promulgated, we may not be able to comply with such statutes or regulations without incurring substantial expense, or at all.

23

We are not able to predict the nature of future laws, regulations, repeals or interpretations or to predict the effect additional governmental regulation, if and when it occurs, would have on our business in the future. Such developments could, however, require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, or other new requirements. Any such developments could involve substantial additional costs to us, which we may not be able to fund, and could have a material adverse effect on our business operations and financial condition.

We have material weaknesses in our internal control over financial reporting. If we fail to create effective controls and procedures and an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.

We have material weakness in our internal control over financial reporting and ineffective disclosure controls and procedures, including insufficient segregation of duties in our finance and accounting functions due to limited personnel and insufficient corporate governance policies. These material weaknesses result in ineffective oversight in the establishment and monitoring of required financial and other controls and procedures.

Currently, one person often performs all aspects of our financial reporting process, including, but not limited to, preparing underlying accounting records and systems, posting and recording journal entries and preparing our financial statements. As a result, there is often no review of our financial reporting process, which could 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. These control deficiencies could result in a material misstatement of our interim or annual financial statements that may not be prevented or detected.

Our Board of Directors is currently comprised of four directors, Mr. Michael Cavanaugh, our Chief Executive Officer, Mr. Edward Feighan, Mr. Richard Celeste, and Dr. Anthony Maida III. Our Board of Directors has designated Dr. Maida as a designated audit committee financial expert, and we have established an audit committee that is currently comprised solely of Dr. Maida. Mr. Cavanaugh would not be considered independent for purposes of membership on an audit committee pursuant to Nasdaq Listing Rules. We expect to appoint additional independent directors with experience in finance and accounting and hire additional dedicated finance and accounting staff as we increase our operations, as resources permit and as we identify and recruit qualified candidates for those positions. However, until we have done so, we may be unable to establish or maintain effective internal control over financial reporting. As a result, we may discover additional material weaknesses in our internal control over financial reporting and/or disclosure controls and procedures, which we may not successfully remediate on a timely basis or at all. Any failure to remediate our reported or any future material weaknesses, or to implement required new or improved controls, could cause us to fail to meet our reporting obligations or result in material misstatements in our financial statements. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative impact on the trading price of our common stock. Moreover, as we continue and aim to expand our operations, we will be required to expend significant resources to design, implement and maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. The costs associated with external consultants and internal resources to accomplish these goals are significant and difficult to predict.

Risks Related to Discontinued Operations

We may incur additional charges in connection with our decision to exit the operation of The Control Center business, and any additional costs would adversely impact our cash flows.

During the first quarter of 2019, we decided to exit The Control Center business and discontinued operations and terminated all of the employees related to The Control Center. We also determined that we would not be able to sell The Control Center business to a third party in the immediate future. There may be additional costs incurred in connection with ceasing operations, including potential claims from existing employment agreements and arrangements or otherwise related to terminating employees. Any additional costs would adversely impact our operating results and cash flows, and our stock price could decline.

24

Risks Related to our Common Stock

Our common stock is illiquid and the price of our common stock may be negatively impacted by any negative operational results and factors unrelated to our operations.

Until November 2018, our common stock was quoted on the OTCQB. From and after November 21, 2018, our common stock is now trading on the “grey market,” where trading is moderated by a broker and done between consenting individuals. We have experienced significant fluctuations in the price and trading volume of our common stock, which may be caused by factors relating to our business and operational results and/or factors unrelated to our company, including general market conditions. A sufficient market for our common stock may never develop, in which case it could be difficult for stockholders to sell their stock. The market price of our common stock could continue to fluctuate substantially.

We have received subpoenas in the Securities and Exchange Commission Section 8(e) examination, the consequences of which are unknown.

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 the 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 additional subpoenas for testimony and any supplemental production of documents dated June 5, 2017 and November 14, 2018. The document requests were primarily in connection with this matter. We have complied with all document requests and the Company’s former CEO provided testimony in April 2019. It is possible that we currently are, or may hereafter become a target of the SEC’s investigation. Any such investigation could result in significant legal expenses, the diversion of management’s attention from our business, damage to our business and reputation, and could subject us to a wide range of remedies, including an SEC enforcement action. There can be no assurance that any similar matters will not have a material adverse effect on our financial condition or results of operations.

Trading of our stock is restricted by the SEC’s “penny stock” regulations and certain FINRA rules, which may limit a stockholder’s ability to buy and sell our common stock.

Our securities are covered by certain “penny stock” rules, which impose additional sales practice requirements on broker-dealers who sell low-priced securities to persons other than established customers and accredited investors. For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale, among other things. These rules may affect the ability of broker-dealers and holders to sell our common stock and may negatively impact the level of trading activity for our common stock. To the extent our common stock remains subject to the penny stock regulations, such regulations may discourage investor interest in and adversely affect the market liquidity of our common stock.

The Financial Industry Regulatory Authority (FINRA) has adopted rules that require a broker-dealer, when recommending an investment to a customer, to have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit an investor’s ability to buy and sell our stock and could have an adverse effect on the market for our shares.

If we issue and sell additional shares of our common stock in the future, our existing stockholders will be diluted and our stock price could fall.

Our articles of incorporation authorize the issuance of up to 1,000,000,000 shares of common stock, of which, as of July 12, 2019, 52,290,147 were outstanding and 11,344,708 were reserved for issuance under our stock incentive plan or outstanding options, warrants or other convertible securities. As a result, we have a large number of shares of common stock that are authorized for issuance and are not outstanding or otherwise reserved, and could be issued at the discretion of our Board of Directors. We expect to seek additional financing in the future in order to fund our operations, and if we issue additional shares of common stock or securities convertible into common stock, our existing stockholders will be diluted. Our Board of Directors may also choose to issue shares of our common stock or securities convertible into or exercisable for our common stock to acquire assets or companies, for compensation to employees, officers, directors, consultants and advisors, to fund capital expenditures and to enter into strategic partnerships. Additionally, shares of common stock could be issued for anti-takeover purposes or to delay or prevent changes in control or management of the Company. Our Board of Directors may determine to issue shares of our common stock on terms that our stockholders do not believe enhance stockholder value, or that may ultimately have an adverse effect on our business or the trading price of our common stock. Further, the issuance of any such shares may cause further dilution to the ownership interest of our current stockholders, reduce the book value per share of our common stock and may contribute to a reduction in the market price for our common stock.

25

Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Certain of our executive officers, directors and large stockholders own a significant percentage of our outstanding capital stock. As of July 12, 2019, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned approximately 38.5% of our outstanding shares of common stock. Accordingly, our directors, executive officers and large stockholders have significant influence over our affairs due to their substantial ownership coupled with their positions on our management team and have substantial voting power to approve matters requiring the approval of our stockholders. For example, these stockholders may be able to control or influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.

We are subject to the reporting requirements of federal securities laws, compliance with which involves significant time, expense and expertise.

We are a public reporting company in the United States, and, accordingly, are subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including the obligations imposed by the Sarbanes-Oxley Act of 2002. The ongoing costs associated with preparing and filing annual, quarterly and current reports, proxy statements and other information with the SEC in the ordinary course, as well as preparing and filing audited financial statements, are significant and may cause unexpected increases in operational expenses. Our present management team is relatively small and may be unable to manage the ongoing costs and compliance effectively. It may be time consuming, difficult and costly for us to hire additional financial reporting, accounting and other finance staff in order to build and retain a management team with adequate expertise and experience in operating a public company.

We have never paid dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future.

The continued operation and expansion of our business will require substantial funding. Investors seeking cash dividends in the foreseeable future should not purchase our common stock. We have paid no cash dividends on any of our capital stock to date and we currently intend to retain our available cash to fund the development and growth of our business. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock, which may never occur.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Our corporate headquarters is a leased office located at 1901 Avenue of the Stars, 2^nd Floor, Los Angeles, California 90067. Our office and laboratory space at 5225 Carlson Road, Yuba City, California 95993 requires a lease payment of approximately $2,600 per month under a lease agreement that expires on May 1, 2020. Prior to its closure in June 2019, The Control Center had operated in leased office space located at 8383 Wilshire Boulevard, Suite 228, Beverly Hills, California 90211, which requires a lease payment of approximately $11,500 per month, under a lease agreement that expires on February 28, 2021. We believe our current facilities are adequate to support our corporate strategy over the next 12 months.

26

Item 3. Legal Proceedings

From time to time, we may become involved in litigation that arises in the ordinary course of our business. Neither we nor any of our property is currently subject to any proceedings the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on our financial position or results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has been quoted through various over-the-counter quotation systems at various times since 2009. However, no shares of our common stock traded on any over-the-counter market until March 5, 2012. In November 2018 our common stock ceased being traded on the OTCQB and is now traded on the “Grey Market”, where trading is moderated by a broker and done between consenting individuals at a price they agree on under the symbol “VBIO.” The liquidity of our shares on the “Grey Market” is extremely limited, and prices quoted may not be a reliable indication of the value of our common stock.

The following table sets forth the range of reported high and low closing bid quotations for our common stock for the fiscal quarters indicated as reported by the OTCQB marketplace or another over-the-counter quotation system on which the common stock was then quoted.

	High		Low
Fiscal 2018
First Quarter ended June 30, 2017		2.71		1.83
Second Quarter ended September 30, 2017		2.15		1.42
Third Quarter ended December 31, 2017		2.25		1.32
Fourth Quarter ended March 31, 2018		2.17		1.57
Fiscal 2019
First Quarter ended June 30, 2018		1.81		1.10
Second Quarter ended September 30, 2018		2.25		1.41
Third Quarter ended December 31, 2018		2.11		0.04
Fourth Quarter ended March 31, 2019		0.65		0.45

Transfer Agent

The transfer agent and registrar for our common stock is Island Stock Transfer, Inc., 15500 Roosevelt Blvd., Suite 301, Clearwater, Florida 33760.

27

Holders of Common Stock

As of July 11, 2019, there were 55 holders of record of our common stock.

Dividends

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

On January 18, 2019, the Company entered into an amendment to the August 2018 and October 2018 securities purchase agreements. Pursuant to the amendment, the warrants to purchase the 5.8 million shares of the Company’s common stock were cancelled, and the investors were issued an additional 16,750,000 shares of the Company’s common stock for no additional consideration. The fair value of the additional shares, net of the warrants cancelled, was $7,015,000, and was recorded as a deemed dividend to the investors.

Recent Sales of Unregistered Securities

During the year ended March 31, 2019, we issued a total of 265,000 shares of our common stock to consultants as compensation for services valued at $348,451. 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 consultants have represented that they are accredited investors as defined in Regulation D and that they are acquiring the shares of common stock for their own accounts and not with a view to or for distributing or reselling the shares of common stock and that they have sufficient investment experience to evaluate the risks of the investment. The shares of common stock were issued as restricted securities to our consultants.

Securities Authorized for Issuance under Equity Compensation Plans

On February 3, 2012, our Board of Directors approved and adopted the Stevia First Corp. 2012 Stock Incentive Plan (as amended, the “2012 Plan”), and a majority of stockholders of the Company executed a written consent approving and adopting the 2012 Plan. In February 2013, our Board of Directors approved, and on April 11, 2013, at our 2013 annual stockholder meeting our stockholders approved, an amendment to the 2012 Plan to, among other things, increase the number of shares of our common stock available for issuance thereunder from 5,000,000 to 10,000,000 shares. In March 2014, our Board of Directors approved, and on June 9, 2014, at our 2014 annual stockholder meeting our stockholders approved, a second amendment to the 2012 Plan to increase the number of shares of our common stock available for issuance thereunder from 10,000,000 to 18,000,000 shares. On May 4, 2016, our Board of Directors and stockholders of the Company, holding a majority of the outstanding shares of our common stock, executed joint written consents in lieu of a special meeting approving the amendment of the 2012 Plan by increasing the number of shares of the Company’s Common Stock available for issuance under the 2012 Plan from 1,800,000 (after adjusting for the Reverse Split) to 3,600,000 and adding an evergreen provision that, on January 1 of each year, increases the number of the Company’s common shares available for issuance under the 2012 Plan by a number equal to 10% of the number of shares of Common Stock previously available for issuance under the 2012 Plan (the “Evergreen Provision”).

28

Except as listed in the table below, as of March 31, 2019, we do not have any equity-based plans, including individual compensation arrangements, that have not been approved by our stockholders. The following table provides information as of March 31, 2019 with respect to our equity compensation plans:

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders (1)		3,728,605	$	1.46		752,995
Equity compensation plans not approved by security holders		—	$	—		—
Total		3,728,605	$	1.46		752,995

(1) As of March 31, 2019, 752,995 shares of our common stock remained available for future issuance pursuant to the 2012 Plan.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this annual report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are subject to the “safe harbor” created by these sections. Future filings with the SEC, future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements can be found under the caption “Risk Factors” in Part I, Item 1A, and elsewhere in this annual report. The forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.

The following discussion should be read in conjunction with the financial statements and the accompanying notes for the years ended March 31, 2018 and 2019 appearing elsewhere in this annual report. Our actual results could differ materially from those expressed or implied in any forward-looking statements as a result of various factors, including those set forth under the caption “Risk Factors” in Part I, Item 1A.

Company Overview

We were incorporated in the State of Nevada on June 29, 2007 and commenced operations as a mineral exploration company. 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.” In February 2012, we substantially changed our management team, and began pursuing an agricultural biotechnology business plan.

In May 2016, we received shareholder and board approval for a name change to Vitality Biopharma, Inc., an exchange of one (1) share of the Company’s common stock for each ten (10) shares of common stock outstanding or exercisable under any outstanding warrants or option agreements and 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.

Our common stock is currently traded on the grey market under the symbol “VBIO.” There is only a limited trading market for our common stock.

29

Plan of Operations

Vitality 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 known as cannabosides and through 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 capitalize on their high growth potential.

We believe our organically-developed cannabosides or cannabinoid-glycoside prodrugs will be 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 for composition of matter, method of production and method of use.

We are developing our most promising THC-glycoside (VBX-100) as an oral prodrug for the treatment of IBD and 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 preclinical 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 preclinical development plan, which includes dose range finding studies, GLP toxicology studies, pharmacokinetic studies and other preclinical research, is anticipated to be completed during the 2^nd half of calendar year 2020, subject to the Company securing sufficient additional funding or entering into a strategic partnership. After our satisfactory completion of all of the prerequisite preclinical in vitro and in 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 a strategic 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 greatly improves the water solubility of the CBD molecule.

As a complementary strategy, the Company plans to leverage its research and investing 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 target 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 July 12, 2019, we employed eight full-time employees, including five research professionals working in our office and laboratory space in Yuba City, California. We also have engaged the services of 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.

Critical Accounting Policies

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our financial statements.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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, estimated allowances of uncollectible receivables, estimates inherent in recording purchase price allocations, the fair value of equity instruments issued for services, assumptions used in the valuation of derivative liabilities, and the valuation allowance for deferred tax assets.

30

Stock-Based Compensation

We periodically issue stock options and warrants to employees and non-employees in non-capital raising transactions, for services and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic 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 directors on the date of grant using a Black-Scholes-Merton option-pricing model, and the value of the portion of the award that is ultimately 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 value of the stock compensation is based upon the measurement date as determined at either a) 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 is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

Revenues

Effective April 1, 2018 the Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) which superseded previous revenue recognition guidance. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying the Company’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes and the implementation of ASC 606 did not have a material impact on the Company’s financial statements.

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. 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 settlement of the derivative instrument could be required within 12 months of the balance sheet date.

Recent Accounting Pronouncements

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

Results of Operations

Fiscal Years Ended March 31, 2019 and March 31, 2018

31

The following table sets forth our results of operations for the years ended March 31, 2019 and 2018.

	Year Ended March 31,
	2019			2018
Revenues	$	258,288		$	102,419
Operating Expenses:
Salaries and costs of outpatient services and other costs		454,767			77,943
General and Administrative		3,650,073			2,492,505
Rent - related party		31,200			30,900
Research & development		1,804,365			1,897,817
Impairment of goodwill and intangible assets		7,550,000			-
Loss from operations		(13,232,117	)		(4,396,746	)
Other income (expenses)
Interest expense		(6,782	)		-
Change in fair value of derivative liability		117,332			87,749
Net loss	$	(13,121,567	)	$	(4,308,997	)

During the fiscal year ended March 31, 2019, we generated $258,288 in revenue, compared to sales of $102,419 during the year ended March 31, 2018 (an increase of $155,869).

Our net loss during the fiscal year ended March 31, 2019 was $13,121,567 compared to a net loss of $4,308,997 for the fiscal year ended March 31, 2018 (an increase in net loss of $8,812,570).

During the fiscal year ended March 31, 2019, our salaries and costs of outpatient services and other costs totaled $454,767, compared to $77,943 during the year ended March 31, 2018. During the 2019 fiscal year, we incurred general and administrative expenses in the aggregate amount of $3,650,073 compared to $2,492,505 incurred during the fiscal year ended March 31, 2018 (an increase of $1,157,568). 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 operation of The Control Center, which we acquired in October 2018 and ceased operations in June 2019. Additionally, these costs include those associated with the development of our organizational capabilities as a biotechnology company, including costs such as legal and advisory fees related to intellectual property development. In addition, during the fiscal year ended March 31, 2019, we incurred research and development costs of $1,804,365 compared to $1,897,817 incurred during the fiscal year ended March 31, 2018 (a decrease of $93,452). During the fiscal year ended March 31, 2019, we incurred related party rent totaling $31,200 compared to $30,900 incurred during the fiscal year ended March 31, 2018 (an increase of $300). Also, during the fiscal year ended March 31, 2019, we incurred stock-based compensation totaling $1,121,918 compared to $1,409,229 incurred during the fiscal year ended March 31, 2018 (a decrease of $287,311), which are allocated between general and administrative expenses and research & development expenses during the years ended March 31, 2019 and 2018. During the fiscal year ended March 31, 2019, we also recorded an impairment of the goodwill and intangible assets of The Control Center of $7,550,000. No such impairment was recorded in the fiscal year ended March 31, 2018.

This resulted in a loss from operations of $13,232,117 during the fiscal year ended March 31, 2019 compared to a loss from operations of $4,396,746 during the fiscal year ended March 31, 2018, (an increase of $8,835,371).

During the fiscal year ended March 31, 2019, we recorded net other income in the amount of $110,550, compared to total net other income recorded during the fiscal year ended March 31, 2018 in the amount of $87,749 (an increase of $22,801). During the fiscal year ended March 31, 2019, we incurred interest expense in the amount equal to $6,782 compared to interest expense of $0 during the fiscal year ended March 31, 2018 (an increase of $6,782). We recorded a gain related to the change in fair value of derivatives of $117,332 during the fiscal year ended March 31, 2019, compared to a gain of $87,749 during the fiscal year ended March 31, 2018. This resulted in a net loss of $13,121,567 during the fiscal year ended March 31, 2019 compared to a net loss of $4,308,997 during the fiscal year ended March 31, 2018 (an increase of $8,812,570).

32

During the fiscal year ended March 31, 2019, we also recorded a deemed dividend on issuance of shares in the amount of $7,015,000. No such deemed dividend was recorded during the fiscal year ended March 31, 2018.

The increase in net loss attributable to common stockholders during the fiscal year ended March 31, 2019 compared to the fiscal year ended March 31, 2018 in an amount equal to $15,827,570 is primarily due to: (i) the deemed dividend of $7,015,000, (ii) the impairment of goodwill and intangible assets of $7,550,000 and (iii) higher general and administrative expenses of $1,157,568, primarily related to the operation of The Control Center.

Liquidity and Capital Resources

As of March 31, 2019, we had recorded revenues of $258,288 from sales of products or services. We have incurred losses since inception resulting in an accumulated deficit of $42,181,503 as of March 31, 2019, and further losses are anticipated in the development of our business.

The continuation of our business is dependent upon us raising additional capital and eventually attaining and maintaining profitable operations. We do not have any firm commitments for future capital. 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. We may not be able to obtain additional financing 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 develop our business, we will be forced 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 and our stockholders could lose all of their investment.

As of March 31, 2019, we had total current assets of $6,052,648. Our total current assets as of March 31, 2019 were comprised of cash in the amount of $5,982,741, net accounts receivable of $19,360, and prepaid expenses and other current assets in the amount of $50,547. Our total current liabilities as of March 31, 2019 were $1,054,234, represented primarily by accounts payable and accrued liabilities of $716,671, an advance of $296,653, related party payable of $5,200 and derivative liability of $35,710. The derivative liability is a non-cash item related to our outstanding warrants, as described in Note 3 to our financial statements. As a result, on March 31, 2019, we had a working capital of $4,998,414. We had no long-term liabilities as of March 31, 2019.

Sources of Capital

On August 29, 2018, the Company sold 333,334 shares of its common stock and warrants to purchase 166,667 shares of the Company’s common stock, resulting in proceeds to the Company of $500,000 (“August 2018 Financing”). The common stock and warrants were sold in units, consisting of a share of common stock and a warrant to purchase one half of a share of common stock, at a price of $1.50 per unit, with an exercise price for the warrants of $2.00 per share.

On October 19, 2018, the Company sold 5,666,666 shares of its common stock and warrants to purchase 5,666,666 shares of the Company’s common stock, resulting in net proceeds to the Company of $8,350,000 after deducting fees and expenses of the offering (“October 2018 Financing”). The common stock and warrants were sold in units, consisting of a share of common stock and a warrant to purchase a share of common stock, at a price of $1.50 per unit, with an exercise price for the warrants of $3.00 per share.

On October 19, 2018, the Company also entered into a share exchange agreement with the shareholders of Summit Healthtech, Inc. and issued 6,000,000 shares of the Company’s common stock, valued at $9,000,000, in exchange for all of the outstanding common stock of Summit Healthtech. During the measurement period, which may be up to one year from the acquisition date, the Company cancelled 1,000,000 shares of common stock that had been issued as part of the share exchange agreement.

33

On November 7, 2018, the SEC suspended the trading of the Company’s common stock. The Company’s 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. The Company is actively pursuing the resumption of ordinary course trading status on the OTCQB or a national exchange.

On January 18, 2019, the Company entered into an amendment to the securities purchase agreements from the August 2018 Financing and October 2018 Financing. Pursuant to the amendment, the warrants to purchase the 5,833,333 shares of the Company’s common stock were cancelled, and the investors were issued an additional 16,750,000 shares of the Company’s common stock for no additional consideration. The fair value of the additional shares issued was $9,715,000 and the fair value of the 5,833,333 warrants cancelled was $2,700,000. The difference of $7,015,000 was recorded as a deemed dividend to the investors.

We generated $258,288 in revenue during the fiscal year ended March 31, 2019. After the closing of the revenue generating clinical operations in June 2019, we do not expect to generate any revenue in the near term. We currently have no commitments for any future funding. As of March 31, 2019, we had cash in the amount of $5,982,741. Based on our corporate strategy described above under the heading “Plan of Operations”, our total expenditures for the fiscal year ending March 31, 2020, are expected to be approximately $4,900,000, which is comprised of approximately $3,400,000 of research and development and general operating expenses, and approximately $1,500,000 of strategic partnership investments. Based on our cash balance of $5,982,741 on March 31, 2019, and our estimated total expenditures of approximately $4,900,000 for the 12-month period ending March 31, 2020, we expect to have sufficient funds to operate our business over the next 12 months, and have sole discretion on the amount of cash invested in strategic partnerships, which provides us with an increased ability to manage the Company’s liquidity position. However, our estimate of total expenditures could increase if we encounter unanticipated difficulties. In addition, our estimates of the amount of cash necessary to fund our business may prove to be too low, and we could spend our available financial resources much faster than we currently expect. If we cannot raise the capital necessary to continue to develop our business, we will be forced 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 operations primarily through equity and debt financings in the foreseeable future. However, sources of additional funds may not be available when needed, on acceptable terms, or at all. If we issue equity or convertible debt securities to raise additional funds, our existing stockholders 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 available, 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 and could result in our receipt of only a portion of any revenue that may be generated from a partnered product or business. Moreover, regardless of the manner in which we seek to raise capital, we may incur substantial costs in those pursuits, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other related costs.

Net Cash Used in Operating Activities

We have not generated positive cash flows from operating activities. For the fiscal year ended March 31, 2019, net cash used in operating activities was $3,665,094 compared to net cash used in operating activities of $2,886,476 for the fiscal year ended March 31, 2018. This increase is due to the additional costs associated with the operations of The Control Center. Net cash used in operating activities during the fiscal year ended March 31, 2019 consisted primarily of a net loss of $13,121,567, offset by $1,470,369 related to stock-based compensation, $7,550,000 in goodwill impairment related to the write-down of The Control Center investment, and changes in working capital. Net cash used in operating activities during the fiscal year ended March 31, 2018 consisted primarily of a net loss of $4,308,997, offset by $1,866,903 related to stock-based compensation, and changes in working capital.

34

Net Cash Provided By Investing Activities

During the fiscal year ended March 31, 2019, net cash provided by investing activities was $141,545. Net cash provided by investing activities during the fiscal year ended March 31, 2019 of $141,545, represented the cash acquired from the acquisition of Summit Healthtech, Inc., the parent company of The Control Center. There were no investing activities during the fiscal year ended March 31, 2018.

Net Cash Provided By Financing Activities

During the fiscal year ended March 31, 2019, net cash provided by financing activities was $8,850,000 compared to net cash provided by financing activities of $2,390,000 for the fiscal year ended March 31, 2018. Net cash provided by financing activities during the fiscal year ended March 31, 2019, was primarily attributable to $8,850,000 received from the sale of common stock and warrants. Net cash provided by financing activities during the fiscal year ended March 31, 2018 consisted of $2,390,000 received from the sale of common stock and warrants.

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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

The financial statements required by this item are set forth at the end of this annual report beginning on page F-1 and are incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our principal executive officer and our principal financial officer, our management conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and our principal financial officer concluded that as of March 31, 2019, our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In light of the material weaknesses identified by management, we performed additional analyses and procedures in order to conclude that our financial statements for the year ended March 31, 2019 are fairly presented, in all material respects, in accordance with U.S. generally accepted accounting principles.

35

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 our 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 material weakness in our internal control over financial reporting was identified by management as of March 31, 2019:

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. We do not have sufficient segregation of duties within accounting functions. During the year ended March 31, 2019, we had limited personnel that performed nearly 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, this creates a lack of review over the financial reporting process that would likely 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. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

Lack of written documentation of the Company’s key internal control policies and procedures over financial reporting. The Company is required under Section 404 of the Sarbanes-Oxley Act to have written documentation of key internal controls over financial reporting.

Lack of documented policies and procedures for maintaining legal documents. The Company did not maintain effective controls over certain transactions during the fiscal year as they were not supported by fully executed legal documents.

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these material weaknesses and we intend to consider the results of our remediation efforts and conduct related testing as part of our next year-end assessment of the effectiveness of our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2019 based on the criteria set forth in Internal Control—Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2019, and identified the material weaknesses described above.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

Other than the ongoing remediation efforts identified above, there were no changes in our internal control over financial reporting during the fourth quarter of our 2019 fiscal year that have materially affected, or are 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.

Item 9B. Other Information

None.

36

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Set forth below is certain information regarding our current directors and executive officers:

Name	Position	Age	Director/Executive Officer Since
Edward Feighan (2)(3)	Chairman of the Board of Directors	71	November 2018
Richard Celeste	Director	81	January 2019
Dr. Anthony Maida III (1)(2)(3)	Director	67	March 2012
Michael Cavanaugh	Director and Chief Executive Officer	45	November 2018 / May 2019
Richard McKilligan	Chief Financial Officer and Counsel	55	May 2019

(1) Member of Audit Committee

(2) Member of Compensation Committee

(3) Member of Nominating and Corporate Governance Committee

Business Experience

The following is a brief account of the education and business experience of our current directors and executive officers:

Edward Feighan is currently the Chairman and CEO of Covius LLC, a privately-held firm providing a range of services to the mortgage securitization industry. Mr. Feighan has been an owner and Director of Continental Heritage Insurance Company, an early leader in the cannabis insurance market which provides surety bonds and other insurance solutions to the emerging cannabis markets, for more than twenty years. Previously, Mr. Feighan served as Chairman and CEO of ProCentury Insurance Corporation (NASDAQ: PROS) from its IPO in 2004 until the sale of the company to another public insurance group in 2008. In 1996, Mr. Feighan was the founding CEO of Century Business Services (NYSE: CBZ). Mr. Feighan held elective office in Cleveland, Ohio for twenty consecutive years from 1973 to 1993. After being elected to three terms in the Ohio House of Representatives from 1973 to 1979, Mr. Feighan served a four-year term as a Cuyahoga County Commissioner in the State of Ohio. Subsequently, Mr. Feighan served five terms as a Member of the United States House of Representatives from 1983 to 1993. During those ten years, Mr. Feighan served on the U.S. House Judiciary Committee and Foreign Affairs Committee. Mr. Feighan earned his law degree from Cleveland State University in 1978. The Board believes Mr. Feighan’s extensive operational and executive experience with growth companies pursuing business combination transactions, as well as his fundraising and regulatory insight and public service experience, will provide the Company a critical voice and perspective as the Company continues to develop its business and grow its operations.

Michael Cavanaugh is currently the Chief Investment Officer of Tower 1, an investment firm focused on private and public investments in a variety of industries. In 2018, Mr. Cavanaugh was Managing Director and Chief Financial Officer of Kaulig Companies, a single member family office with interests in private equity, real estate and wealth management. From 2016 to 2018, Mr. Cavanaugh was Managing Director of Conway MacKenzie, a national turnaround consulting firm, where he established and managed the firm’s Cleveland office and provided interim management and restructuring services to distressed and underperforming businesses. From 2006 to 2009 and 2011 to 2015, Mr. Cavanaugh was an executive with Resilience Capital Partners, a private equity firm focused on special situation control equity investments, where he served in several capacities, including Partner and member of the firm’s Investment Committee and as an officer and director of numerous portfolio companies. From 2005 to 2006, Mr. Cavanaugh was an Attorney with Kaye Scholer where he represented clients in mergers and acquisitions. From 1996 to 1999, Mr. Cavanaugh was an investment banker and special situation investor with Merrill Lynch. Mr. Cavanaugh received a B.A. from Columbia University in 1996, an M.B.A. from the University of Michigan Business School in 2003 and a J.D. from the University of Michigan Law School in 2003. Mr. Cavanaugh is an Attorney, Chartered Financial Analyst (CFA) Charterholder, Certified Public Accountant (CPA), Accredited in Business Valuation (ABV) and Certified Turnaround Professional (CTP). Mr. Cavanaugh previously served on the boards of the Cleveland Metropolitan Bar Association from 2016 to 2019, Thermal Solutions Manufacturing from 2012 to 2015, Hynes Industries from 2014 to 2015, Aero Communications from 2012 to 2015, and North Coast Minerals from 2014 to 2015. The Board believes Mr. Cavanaugh’s extensive finance, legal and corporate governance experience and expertise will be valuable to the Company as it continues to develop its business and grow its operations.

37

Richard Celeste is Chair of the Board of Health Effects Institute (Boston), Founding Chair and Member of the Board of the US Olympic Museum (Colorado Springs) and Vice Chair of the Board of Global Communities (Silver Spring MD). In addition, Mr. Celeste serves on the Boards of Battelle for Kids (Columbus OH) and The Gates Family Foundation (Denver). Mr. Celeste served as the Director of the Peace Corps from 1979-1981, as Governor of Ohio from 1983 to 1991, and as the United States Ambassador to India from 1991 to 2001. Mr. Celeste also served as the President of Colorado College from 2002-2011. The Board believes Mr. Celeste’s fundraising and regulatory insight and public service experience, will provide the Company a critical voice and perspective as the Company continues to develop its business and grow its operations.

Dr. Anthony Maida, III joined our Board of Directors in March 2012. Dr. Maida has served on the Board of Directors of Innovate Biopharma, Inc. since January 2018 and currently serves as the Chair of its Audit Committee and as a member of its Nominating and Corporate Governance Committee. Dr. Maida served on the Board of Directors of Spectrum Pharmaceuticals, Inc. (NASDAQ GS: SPPI) from December 2003 until June 2019, where he served as the Chair of its Audit Committee and a member of its Compensation Committee, Placement Committee, Nominating and Corporate Governance Committee and Product Acquisition Committee. He is currently Senior Vice President – Clinical Research (from June 2011) at Northwest Biotherapeutics, Inc., a company focused on the development of therapeutic DC cell based vaccines to treat patients with cancer. Dr. Maida serves as Principal of Anthony Maida Consulting International (since September 1999), providing consulting services to large and small biopharmaceutical firms in the clinical development of oncology products and product acquisitions and to venture capital firms evaluating life science investment opportunities. Recently Dr. Maida was Vice President of Clinical Research and General Manager, Oncology, world-wide (from August 2010 to June 2011) for PharmaNet, Inc. He served as the President and Chief Executive Officer of Replicon NeuroTherapeutics, Inc., a biopharmaceutical company focused on the therapy of patients with tumors (both primary and metastatic) of the central nervous system, where he successfully raised financing from both venture capital and strategic investors and was responsible for all financial and operational aspects of the company, from June 2001 to July 2003. He was also President (from December 2000 to December 2001) of CancerVax Corporation, a biotechnology company dedicated to the treatment of cancer. Dr. Maida also served as Vice President of Finance for Lockheed DataPlan, a subsidiary of Lockheed Corporation and Senior Control for Lockheed Missiles and Space, MSD. He has been a speaker at industry conferences and is a member of the American Society of Clinical Oncology, the American Association for Cancer Research, the Society of Neuro-Oncology, the American Chemical Society and the Society of Immunotherapy of Cancer. Dr. Maida received a B.A. in History from Santa Clara University in 1975, a B.A. in Biology from San Jose State University in 1977, an M.B.A. from Santa Clara University in 1978, an M.A. in Toxicology from San Jose State University in 1986 and a Ph.D. in Immunology from the University of California, Davis, in 2010. We believe that his financial and operational experience in our industry provide important resources to our Board.

Richard McKilligan joined the Company in April 2012 as Controller, Counsel and Secretary. Mr. McKilligan is also a director of Bristol Investment Fund, Ltd. He served as Chief Financial Officer, General Counsel and Secretary of Research Solutions, Inc. from 2007 to 2011 and Chief Compliance Officer and Counsel to Bristol Capital Advisors, LLC from 2006 to 2008. He was an associate with Morgan, Lewis & Bockius, LLP in their New York and London offices from 2000 until January 2006 and an associate with Hunton Andrews Kurth, LLP in their New York office from 1998 to 2000. Mr. McKilligan earned his law degree from Cornell Law School, his MBA from the University of Chicago Booth School of Business and his undergraduate degree in Accountancy from the University of Illinois at Urbana-Champaign. He is a member of the State Bar of California, the New York State Bar Association and the Florida Bar.

Term of Office

In accordance with our Bylaws, our directors are elected at each annual meeting of stockholders and serve until the next annual meeting of stockholders or until their successor has been duly elected and qualified, or until their earlier death, resignation or removal.

38

Committees of the Board of Directors

On August 24, 2012, our Board of Directors established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below.

Audit Committee

The Audit Committee of our Board of Directors consists of only Dr. Maida, who serves as Chairman. Our Board of Directors has determined that the sole member of our Audit Committee is independent within the meaning of applicable SEC rules and Nasdaq Listing Rules, and has determined that Dr. Maida is an audit committee financial expert, as such term is defined in the rules and regulations of the SEC, and is financially sophisticated within the meaning of the Nasdaq Listing Rules. The Audit Committee has oversight responsibilities regarding, among other things: the preparation of our financial statements and our financial reporting and disclosure processes; the administration, maintenance and review of our system of internal controls regarding accounting compliance; our practices and processes relating to internal audits of our financial statements; the appointment of our independent registered public accounting firm and the review of its qualifications and independence; the review of reports, written statements and letters from our independent registered public accounting firm; and our compliance with legal and regulatory requirements in connection with the foregoing. Our Board of Directors has adopted a written charter for our audit committee, which is available on our website: www.vitality.bio.

Compensation Committee

The Compensation Committee of our Board of Directors consists of Mr. Feighan and Dr. Maida, with Mr. Feighan serving as Chairman. Our Board of Directors has also determined that Mr. Feighan and Dr. Maida are independent within the meaning of applicable Nasdaq Listing Rules. The duties of our Compensation Committee include, without limitation: reviewing, approving and administering compensation programs and arrangements to ensure that they are effective in attracting and retaining key employees and reinforcing business strategies and objectives; determining the objectives of our executive officer compensation programs and the specific objectives relating to CEO compensation, including evaluating the performance of the CEO in light of those objectives; approving the compensation of our other executive officers and our directors; administering our as-in-effect incentive-compensation and equity-based plans; and producing an annual report on executive officer compensation for inclusion in our proxy statement, when required and in accordance with applicable rules and regulations. Our Board of Directors has adopted a written charter for our compensation committee, which is available on our website: www.vitality.bio.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee of our Board of Directors consists of Mr. Feighan and Dr. Maida, with Mr. Feighan serving as Chairman. Our Board of Directors has also determined that Mr. Feighan and Dr. Maida are independent within the meaning of applicable Nasdaq Listing Rules. The responsibilities of the Nominating and Corporate Governance Committee include, without limitation: assisting in the identification of nominees for election to our Board of Directors, consistent with approved qualifications and criteria; determining the composition of the Board of Directors and its committees; recommending to the Board of Directors the director nominees for the annual meeting of stockholders; establishing and monitoring a process of assessing the effectiveness of the Board of Directors; developing and overseeing a set of corporate governance guidelines and procedures; and overseeing the evaluation of our directors and executive officers. Our Board of Directors has adopted a written charter for our nominating and corporate governance committee, which is available on our website: www.vitality.bio.

Family Relationships

No family relationships exist between any of the directors or executive officers of the Company.

Code of Business Conduct and Ethics

Our Board of Directors has adopted a Code of Business Conduct and Ethics as described in applicable SEC rules that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as our other employees. The Code of Business Conduct and Ethics is available for review on our website: www.vitality.bio.

39

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such executive officers, directors and 10% stockholders are also required by SEC rules to furnish us with copies of all Section 16(a) reports they file.

To our knowledge, based solely on our review of the copies of such forms received by us or written representations from certain reporting persons that no other forms were required for such persons, we believe that, during our fiscal year ended March 31, 2019, the following persons have failed to file, on a timely basis, the identified reports required by Section 16(a) during the fiscal year ended March 31, 2019:

Name	Number of late reports		Transactions not timely reported		Known failures to file a required form
Robert Brooke		-		-		-
Dr. Avtar Dhillon		-		-		-
Edward Feighan		-		-		-
Michael Cavanaugh		-		-		-
Dr. Anthony Maida		-		-		-
Richard Celeste		1		-		-
Joseph LoConti		2		1		-

Item 11. Executive Compensation

The following table summarizes all compensation recorded by us in each of the fiscal years ended March 31, 2019 and March 31, 2018 for (i) our current principal executive officer and principal financial officer, and (ii) our next most highly compensated executive officer other than our principal executive officer and principal financial officer serving as an executive officer at the end of our 2019 fiscal year and whose total compensation exceeded $100,000 in our 2019 fiscal year (of which there were none).

Summary Compensation Table

Name	Fiscal Year		Salary ($)		Stock Awards (non-cash)			Total ($)
Robert Brooke, Chief Executive Officer (1) (principal executive and financial officer)		2019		184,375		228,555	(2)		412,930
		2018		150,000		238,520	(2)		388,520

(1) As discussed below, Mr. Brooke resigned from the Company and entered into a separation agreement and release with the Company on May 8, 2019.

(2) Includes amortization of an option to purchase 415,000 shares of common stock and a grant of 510,585 shares of restricted commons stock both granted in July 2016 and an option to purchase 50,000 shares of common stock and a grant of 100,000 shares of restricted commons stock both granted in December 2017.

40

Employment Agreements

On January 31, 2012, our Board of Directors appointed Robert Brooke as our Chief Executive Officer, Secretary, Treasurer, and director. On January 31, 2012, we entered into an Executive Employment Agreement with Mr. Brooke. Under the agreement, Mr. Brooke received an initial annual base salary of $100,000 and is eligible to participate in the benefits made generally available to similarly-situated executives. His annual base salary increased to $125,000 in March 2013 and to $150,000 in July 2013. The agreement further provides that if Mr. Brooke is terminated other than for cause, death or disability, he is entitled to receive severance payments equal to six months of his base salary. If Mr. Brooke terminates his employment with us with good reason following a change of control, Mr. Brooke is entitled to receive severance payments equal to 12 months of his base salary. Severance payments will be reduced by any remuneration paid to Mr. Brooke because of Mr. Brooke’s employment or self-employment during the applicable severance period. The Executive Employment Agreement had an initial term of two years. Mr. Brooke resigned and the Company and Mr. Brooke entered into a separation agreement and release on May 8, 2019 (the “Separation Agreement”). Pursuant to the Separation Agreement, Mr. Brooke agreed to release claims against the Company and is entitled to receive a severance payment equal to six-months’ salary, payable in six equal monthly installments of $18,750, and reimbursement of COBRA payments for up to 12 months.

Outstanding Equity Awards at Fiscal Year-End

As of March 31, 2019, Mr. Brooke held an option to purchase 40,000 shares of common stock, 10,000 of which vested and became fully exercisable on each of November 21, 2015, May 21, 2016, November 21, 2016 and May 21, 2017, and an option to purchase 415,000 shares of common stock, 103,750 of which vested and became fully exercisable on each of January 1, 2017, July 1, 2017 and January 1, 2018, and 103,750 of which vested on July 1, 2018, an option to purchase 50,000 shares of common stock, 12,500 of which vested and became fully exercisable on June 27, 2018, and December 27, 2018 and 25,000 of which were cancelled upon his resignation.

Compensation of Directors

We have no formal plan for compensating our directors for service in their capacities as director, although directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors.

Mr. Feighan, Mr. Cavanaugh, Dr. Dhillon and Dr. Maida served as our non-employee directors during the fiscal year ended March 31, 2019. Dr. Avtar Dhillon, the former Chairman of our Board of Directors and of several of our board committees, received total cash compensation of $110,000 for such services during our fiscal year ended March 31, 2019, and Dr. Maida received $32,250 total cash compensation for his services as a director during our fiscal year ended March 31, 2019. Mr. Feighan and Mr. Cavanaugh each received $13,500 total cash compensation for their services as a director during our fiscal year ended March 31, 2019.

Director Compensation Table

The following table shows compensation paid to our non-employee directors during the fiscal year ended March 31, 2019:

Name	Fees earned or paid in cash		Stock awards (non-cash)(1)		All other compensation		Total
Michael Cavanaugh	$	13,500	$	-	$	-	$	13,500
Dr. Avtar Dhillon (1)	$	110,000	$	245,174	$	-	$	355,174
Edward Feighan	$	13,500	$	-		-	$	13,500
Dr. Anthony Maida (1)	$	32,250	$	47,879	$	-	$	80,129

(1) As of March 31, 2019, the aggregate number of stock and option awards held by each of our non-employee directors was as follows: (i) Dr. Avtar Dhillon held stocks award of 1,025,585 shares of our common stock and option awards to purchase 140,000 shares of our common stock, and (ii) Dr. Anthony Maida, III, held a stock award of 10,000 shares of our common stock and option awards to purchase 142,559 shares of our common stock.

41

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information regarding the beneficial ownership of our common stock by (i) each person who, to our knowledge, beneficially owns more than 5% of our common stock, (ii) each of our directors and named executive officers, and (iii) all of our current executive officers and directors as a group. Unless otherwise indicated in the footnotes to the following table, the address of each person named in the table is: c/o Vitality Biopharma, Inc., 1907 Avenue of the Stars, 2^nd Floor, Los Angeles, California 90067. Shares of our common stock subject to options, warrants, convertible notes or other rights currently exercisable or exercisable within 60 days after July 12, 2019, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the person holding such options, warrants, convertible notes or other rights, but are not deemed outstanding for computing the beneficial ownership percentage of any other person.

Name of Beneficial Owner	Number of Shares Beneficially Owned		Percentage Beneficially Owned (1)
Directors and Named Executive Officers:
Dr. Anthony Maida, III (2)		662,559		1.3	%
Edward Feighan (3)		3,440,917		6.6
Michael Cavanaugh (4)		1,629,771		3.1
Richard Celeste (5)		500,000		*
Richard McKilligan (6)		745,234		1.4
Current Directors and Executive Officers as a Group (5 persons)		6,978,481		13.3
Joseph LoConti (7)		13,153,063		25.2	%

*Less than 1%

(1)	Based on 52,290,147 shares of our common stock issued and outstanding as of July 12, 2019. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
(2)	Includes 10,000 shares of restricted common stock granted to Dr. Maida on July 30, 2012, 3,334 of which vested on January 1, 2013, and 3,333 on each of January 1, 2014 and January 1, 2015, an option to purchase 10,000 shares of common stock, 2,500 of which vested and became fully exercisable on each of November 21, 2015, May 21, 2016, November 21, 2016 and May 21, 2017, and an option to purchase 92,559 shares of common stock, 23,140 of which vested and became fully exercisable on each of January 1, 2017, July 1, 2017 and January 1, 2018, and 23,139 of which vested on July 1, 2018, and an option to purchase 50,000 shares of common stock, 25,000 of which vested and became fully exercisable on each of June 27, 2018 and December 27, 2018.
(3)	Includes 502,500 shares of the Company’s common stock acquired in connection with a Securities Purchase Agreement dated October 19, 2018, 100,376 shares of the Company’s common stock acquired in connection with a Share Exchange Agreement dated October 19, 2018, 1,402,813 shares of the Company’s common stock acquired in connection with an amendment dated January 18, 2019 to the Securities Purchase Agreement dated October 19, 2018, and options to purchase 750,000 shares of common stock, 375,000 of which shall vest on the date that the Company’s shareholders approve the increase in the number of shares of the Company’s common stock available to be issued under the Company’s 2012 Stock Incentive Plan (the “Approval Date”), 250,000 of the shares shall vest on the later of the one year anniversary of the Approval Date or May 8, 2020, and 125,000 of the shares shall vest on the later of the one year anniversary of the Approval Date or June 27, 2020. Also includes 167,500 shares of the Company’s common stock acquired by The Feighan Family Fund, LLC (the “Feighan Fund”), an entity beneficially owned by Mr. Feighan in connection with a Securities Purchase Agreement dated October 19, 2018, 50,124 shares of the Company’s common stock acquired by the Feighan Fund in connection with a Share Exchange Agreement dated October 19, 2018, and 467,604 shares of the Company’s common stock acquired by the Feighan Fund in connection with an amendment dated January 18, 2019 to the Securities Purchase Agreement dated October 19, 2018.

42

(4)	Includes 50,000 shares of the Company’s common stock acquired in connection with a Securities Purchase Agreement dated October 19, 2018, 257,500 shares of the Company’s common stock acquired in connection with a Share Exchange Agreement dated October 19, 2018, 572,271 shares of the Company’s common stock acquired in connection with an amendment dated January 18, 2019 to the Securities Purchase Agreement dated October 19, 2018, and options to purchase 750,000 shares of common stock, 375,000 of which shall vest on the Approval Date, 250,000 of the shares shall vest on the later of the one year anniversary of the Approval Date or May 8, 2020, and 125,000 of the shares shall vest on the later of the one year anniversary of the Approval Date or June 27, 2020.
(5)	Includes an option to purchase 500,000 shares of common stock, 250,000 of which shall vest on the Approval Date and 250,000 of the shares shall vest on the later of the Approval Date or May 8, 2020.
(6)	Includes an option to purchase 10,000 shares of common stock, 3,333 of which vested and became fully exercisable on each of January 1, 2013 and 2014 and 3,334 of which vested and became fully exercisable on January 1, 2015, an option to purchase 20,000 shares of common stock, 5,000 of which vested and became fully exercisable on each of July 1, 2015, January 1, 2016, July 1, 2016 and January 1, 2017, an option to purchase 20,000 shares of common stock, 5,000 of which vested and became fully exercisable on each of November 21, 2015, May 21, 2016, November 21, 2016 and May 21, 2017, an option to purchase 370,234 shares of common stock, 92,558 of which vested and became fully exercisable on each of January 1, 2017, July 1, 2017, January 1, 2018 and 92,558 of which vested and became fully exercisable on July 1, 2018, an option to purchase 75,000 shares of common stock, 18,750 of which vested and became fully exercisable on each of June 27, 2018 and December 27, 2018, and 18,750 of which vest on each of June 27, 2019 and December 27, 2019, and an option to purchase 250,000 shares of common stock, 125,000 of which shall vest on the Approval Date, and 125,000 of the shares shall vest on the later of the one year anniversary of the Approval Date or June 27, 2020.
(7)	This information is based solely on Amendment No. 2 to Schedule 13D filed on April 2, 2019. Joseph LoConti has reported the sole power to vote and dispose of 7,022,584 shares of the Company’s common stock and the shared power to vote and dispose of 6,130,479 shares of the Company’s common stock. Mr. LoConti’s address is 200 Park Avenue, Suite 400, Orange Village, Ohio 44122.

Securities Authorized for Issuance under Equity Compensation Plans

Please see the information disclosed under the same heading in Item 5 of this annual report.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Transactions with Related Persons

On April 23, 2012, we entered into a lease agreement with One World Ranches LLC pursuant to which we lease from One World Ranches LLC certain office and laboratory space located at the address of our principal executive offices. That lease agreement commenced on May 1, 2012, was extended from May 1, 2017 to 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.

One World Ranches LLC is jointly-owned by Dr. Avtar Dhillon, the former Chairman of our Board of Directors, and his wife, Diljit Bains. The lease agreement was approved by our Board of Directors while Dr. Avtar Dhillon abstained from voting.

On May 16, 2014, the Company entered into an Asset Purchase Agreement with Percipio to purchase certain assets of Percipio for $50,000. The Company’s Chief Executive Officer, Robert Brooke, owned 20% of Percipio. At March 31, 2019, $10,546 of the purchase price remains unpaid and is included in accounts payable on the accompanying balance sheet. The operations of Percipio ceased on April 30, 2019 and the remaining purchase price was written down to zero.

43

On January 18, 2019, the Company entered into an amendment to the August 2018 and October 2018 securities purchase agreements. Pursuant to the amendment, the warrants issued to Mr. Feighan and Mr. Cavanaugh were cancelled, and they were issued an additional 1,870,417 and 572,291 shares, respectively, of the Company’s common stock for no additional consideration. The fair value of the additional shares, net of the cancelled warrants, was approximately $783,000 and $240,000, respectively, and was recorded as a deemed dividend.

On May 8, 2019 the Company and Mr. Brooke entered into a separation agreement and release on May 8, 2019 (the “Separation Agreement”). Pursuant to the Separation Agreement, Mr. Brooke agreed to release claims against the Company and is entitled to receive a severance payment equal to six-months’ salary, payable in six equal monthly installments of $18,750, and reimbursement of COBRA payments for up to 12 months.

Except as described above, during the fiscal years ended March 31, 2018 and 2019, and through the filing of this annual report, there have been no transactions, and there are no currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related person had or will have a direct or indirect material interest.

Director Independence

Our Board of Directors has determined that Mr. Feighan, Mr. Celeste and Dr. Anthony Maida would qualify as “independent” as that term is defined by Nasdaq Listing Rule 5605(a)(2). Mr. Cavanaugh would not qualify as “independent” because he currently serves as our Chief Executive Officer.

Item 14. Principal Accounting Fees and Services

Independent Registered Public Accounting Firm’s Fee Summary

The following table provides information regarding the fees billed to us by Weinberg & Company, P.A., our independent registered public accounting firm, for services rendered in the fiscal years ended March 31, 2019 and 2018. All fees described below were approved by our Board of Directors:

	For the years ended March 31,
	2019		2018
Audit Fees	$	119,480	$	74,983
Audit-Related Fees		-		-
Tax Fees		23,948		20,966
All Other Fees		-		-
Total Fees	$	143,428	$	95,949

Audit Fees. The fees identified under this caption were for professional services rendered by Weinberg & Company, P.A. for the audit of our annual financial statements. The fees identified under this caption also include fees for professional services rendered by Weinberg & Company, P.A. for the review of the financial statements included in our quarterly reports on Forms 10-Q. In addition, the amounts include fees for services that are normally provided by the auditor in connection with regulatory filings and engagements for the years identified.

Audit-Related Fees. The fees identified under this caption consist of assurance and related services reasonably related to the performance of the audit or review of financial statements and not reported under the caption “Audit Fees”.

Tax Fees. Tax fees consist principally of assistance related to tax compliance and reporting.

All Other Fees. These fees consist primarily of accounting consultation fees related to potential collaborative agreements. We incurred no such fees in during the fiscal years ended March 31, 2019 or 2018.

44

Pre-Approval Policies and Procedures

Our Audit Committee’s charter requires our Audit Committee to pre-approve all audit and permissible non-audit services to be performed for the Company by our independent registered public accounting firm, giving effect to the “de minimis” exception for ratification of certain non-audit services allowed by the applicable rules of the SEC, in order to assure that the provision of such services does not impair the auditor’s independence. Since the establishment of our Audit Committee on August 24, 2012, the Audit Committee approved in advance all services provided by our independent registered public accounting firm. All engagements of our independent registered public accounting firm for 2012 entered into prior to the establishment of the Audit Committee were pre-approved by the Board of Directors.

PART IV

Item 15. Exhibits, Financial Statement Schedules

(a) (1) The financial statements filed as a part of this annual report are as follows:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of March 31, 2019 and 2018	F-3
Consolidated Statements of Operations for the years ended March 31, 2019 and 2018	F-4
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2019 and 2018	F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2019 and 2018	F-6
Notes to Consolidated Financial Statements	F-7

(2) Schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) The exhibits filed with this annual report are set forth in the Exhibit Index included at the end of this annual report, which is incorporated herein by reference.

Item 16. Form 10-K Summary

None

45

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VITALITY BIOPHARMA, INC.
Date: July 15, 2019	By:	/s/ Michael Cavanaugh
		Michael Cavanaugh
		Chief Executive Officer
		(Principal Executive Officer)

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael Cavanaugh as his or her true and lawful attorney-in-fact and agent, each with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this report and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report is signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ Michael Cavanaugh	Chief Executive Officer and Director	July 15, 2019
Michael Cavanaugh	(Principal Executive Officer)
/s/ Edward Feighan	Director	July 15, 2019
Edward Feighan
/s/ Richard Celeste	Director	July 15, 2019
Richard Celeste
/s/ Anthony Maida	Director	July 15, 2019
Dr. Anthony Maida, III

46

EXHIBIT INDEX

2.1	Agreement and Plan of Merger, dated September 14, 2011, by and between Stevia First Corp. and Legend Mining Inc. (Incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 14, 2011.)
3.1.1	Articles of Incorporation of Stevia First Corp. (Incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form S-1 filed with the SEC on August 6, 2008 (File No. 333-152830).)
3.1.2	Articles of Merger, effective October 10, 2011 (Incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 14, 2011.)
3.1.3	Certificate of Change, effective October 10, 2011 (Incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed with the SEC on October 14, 2011.)
3.2.1	Bylaws of Stevia First Corp. (Incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-1 filed with the SEC on August 6, 2008 (File No. 333-152830).)
3.2.2	Certificate of Amendment of Bylaws of Stevia First Corp. (Incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 7, 2012.)
4.1	Form of Series A/B/C Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 26, 2013.)
4.2	Form of Series A/B/C Common Stock Purchase Warrant (Incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015.)
4.3	Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 27, 2017.)
4.4	Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2017.)
10.1#	Executive Employment Agreement, dated January 31, 2012, by and between the registrant and Robert T. Brooke (Incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on February 7, 2012.)
10.2#	Stevia First Corp. 2012 Stock Incentive Plan (Incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on February 7, 2012.)
10.3	Lease Agreement, dated April 23, 2012, by and between the registrant and One World Ranches LLC (Incorporated by reference to Exhibit 10.1 to the registrant’s Annual Report on Form 10-K filed with the SEC on July 13, 2012.)
10.4	Form of Registration Rights Agreement, dated November 1, 2012, by and among the registrant and the signatories thereto (Incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on October 31, 2012.)
10.5#	Amendment No. 1 to the Stevia First Corp, 2012 Stock Incentive Plan (Incorporated by reference to Exhibit 10.19 to the registrant’s Annual Report on Form 10-K filed with the SEC on May 20, 2013.)
10.6#	Amendment No. 2 to Stevia First Corp. 2012 Stock Incentive Plan (Incorporated by reference to Exhibit 10.21 to the registrant’s Annual Report on Form 10-K filed with the SEC on June 30, 2014.).
10.7	Form of Securities Purchase Agreement, dated May 5, 2015, by and among Stevia First Corp. and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015.)

47

10.8	Form of Registration Rights Agreement (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015.)
10.9	Form of Securities Purchase Agreement, dated May 4, 2016, by and among Stevia First Corp. and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 9, 2016.)
10.10	Securities Purchase Agreement, dated June 25, 2013, by and among Stevia First Corp. and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 26, 2013.)
10.11	Amendment to License Agreement, dated October 10, 2013 by and between Stevia First Corp. and Vineland Research and Innovation Centre, Inc. (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 16, 2013.)
10.12	Form of Securities Purchase Agreement, dated May 5, 2015, by and among Stevia First Corp. and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015.)
10.13	Form of Registration Rights Agreement (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 6, 2015.)
10.14	Securities Purchase Agreement, dated July 26, 2017 by and among the registrant and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 27, 2017.)
10.15	Registration Rights Agreement, dated July 26, 2017, by and among the registrant and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 27, 2017.)
10.16	Lease Renewal Agreement, dated May 1, 2017, by and between the registrant and One World Ranches LLC (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 10, 2017.)
10.17	Securities Purchase Agreement, dated December 12, 2017 by and among the registrant and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2017.)
10.18	Registration Rights Agreement, dated December 12, 2017, by and among the registrant and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2017.)
10.19	Securities Purchase Agreement, dated August 29, 2018 by and among Vitality Biopharma, Inc., and the Purchaser listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on September 4, 2018.)
10.20	Securities Purchase Agreement, dated October 19, 2018 by and among Vitality Biopharma, Inc., and the Purchasers listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on October 23, 2018.)
10.21	Securities Exchange Agreement, dated October 19, 2018 by and among Vitality Biopharma, Inc., and the Shareholders listed on the signature pages thereto (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on October 23, 2018.)
10.22	Amendment to Securities Purchase Agreement, dated as of January 18, 2019 by and among Vitality Biopharma, Inc. and the Investors listed on the signature pages thereto (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 22, 2019.)
10.23	Separation Agreement and Release, dated May 8, 2019, by and between the registrant and Robert Brooke. (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 14, 2019.)
10.24#	Third Amendment to Vitality Biopharma, Inc. 2012 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 14, 2019.)
23.1*	Consent of Weinberg & Company, P.A.
23.3*	Power of Attorney (included on the signature page to this Annual Report.)
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities and Exchange Act of 1934
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities and Exchange Act of 1934
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

*	Filed herewith
#	Management contract or compensatory plan or arrangement.

48

Index to Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of March 31, 2019 and 2018	F-3
Consolidated Statements of Operations for the years ended March 31, 2019 and 2018	F-4
Consolidated Statements of Stockholders’ Equity for the years ended March 31, 2019 and 2018	F-5
Consolidated Statements of Cash Flows for the years ended March 31, 2019 and 2018	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors

Vitality Biopharma, Inc.

Los Angeles, California

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vitality Biopharma, Inc. (the “Company”) as of March 31, 2019 and 2018, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Weinberg & Company, P.A.

Los Angeles, California

July 15, 2019

We have served as the Company’s auditor since 2012.

F-2

VITALITY BIOPHARMA, INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2019			March 31, 2018
Assets
Current Assets
Cash	$	5,982,741		$	656,290
Accounts receivable, net		19,360			13,843
Prepaid expense and other current assets		50,547			3,058
Prepaid expenses, related party		-			2,600
Total current assets		6,052,648			675,791
Deposits		22,662			-
Total Assets	$	6,075,310		$	675,791
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities	$	716,671		$	200,475
Accounts payable - related party		5,200			-
Advance		296,653			-
Derivative liability		35,710			153,042
Total liabilities		1,054,234			353,517
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $0.001 per share; 1,000,000,000 shares authorized; 52,290,147 and 24,275,147 shares issued and outstanding, respectively		52,090			24,075
Additional paid-in-capital		47,150,489			22,343,135
Accumulated deficit		(42,181,503	)		(22,044,936	)
Total stockholders’ equity		5,021,076			322,274
Total liabilities and stockholders’ equity	$	6,075,310		$	675,791

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

F-3

VITALITY BIOPHARMA, INC.

CONSOLDIATED STATEMENTS OF OPERATIONS

	Years Ended March 31,
	2019			2018
Revenues	$	258,288		$	102,419
Operating Expenses:
Salaries, costs of outpatient services, and other costs		454,767			77,943
General and administrative		3,650,073			2,492,505
Rent - related party		31,200			30,900
Research and development		1,804,365			1,897,817
Impairment of goodwill and intangible assets		7,550,000			-
Total operating expenses		13,490,405			4,499,165
Loss from operations		(13,232,117	)		(4,396,746	)
Other income (expenses)
Interest expense		(6,782	)		-
Change in fair value of derivative liability		117,332			87,749
Total other income (expense)		110,550			87,749
Net Loss		(13,121,567	)		(4,308,997	)
Deemed dividend on issuance of shares		(7,015,000	)		-
Net loss attributable to common stockholders	$	(20,136,567	)	$	(4,308,997	)
Net loss per share - basic and diluted	$	(0.61	)	$	(0.19	)
Weighted average number of common shares outstanding, basic and diluted		33,001,323			23,121,003

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

F-4

VITALITY BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED MARCH 31, 2019 and 2018

					Additional
	Common Stock				Paid-in-		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, March 31, 2017		22,215,180	$	22,214	$	18,088,093	$	(17,735,939	)	$	374,368
Issuance of stock and warrants		1,599,999		1,600		2,388,400		-			2,390,000
Fair value of common stock issued for services		259,968		261		457,414		-			457,675
Common stock issued to employees with vesting terms		200,000		-		416,063		-			416,063
Fair value of vested stock options		-		-		993,165		-			993,165
Net Loss		-		-		-		(4,308,997	)		(4,308,997	)
Balance, March 31, 2018		24,275,147		24,075		22,343,135		(22,044,936	)		322,274
Shares and warrants issued for cash, net		6,000,000		6,000		8,844,000		-			8,850,000
Shares issued for acquisition (net of 1,000,000 shares cancelled)		5,000,000		5,000		7,495,000					7,500,000
Deemed dividend on issuance of shares		16,750,000		16,750		6,998,250		(7,015,000	)		-
Fair value of common stock issued for services		265,000		265		348,186		-			348,451
Common stock issued to employees with vesting terms		-		-		356,270		-			356,270
Fair value of vested stock options		-		-		765,648		-			765,648
Net Loss		-		-		-		(13,121,567	)		(13,121,567	)
Balance, March 31, 2019		52,290,147	$	52,090	$	47,150,489	$	(42,181,503	)	$	5,021,076

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

F-5

VITALITY BIOPHARMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended March 31,
	2019			2018
Operating activities:
Net loss	$	(13,121,567	)	$	(4,308,997	)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of vested stock options		765,648			993,165
Amortization of common stock issued to employees with vesting terms		348,451			416,063
Fair value of common stock issued for services		356,270			457,675
Depreciation		12,269			-
Impairment of goodwill and intangible assets-provisional		7,550,000			-
Change in fair value of derivative liability		(117,332	)		(87,749	)
Changes in assets and liabilities:
Accounts receivable		4,561			5,355
Prepaid expense - related party		2,600			(2,600	)
Prepaid expense and other current assets		(31,066	)		-
Other assets		(22,662	)		-
Accounts payable and accrued liabilities		285,881			(173,221	)
Accrued compensation – officers and directors		-			(151,667	)
Accounts payable – related party		5,200			(34,500	)
Advance		296,653			-
Net Cash Used in Operating Activities		(3,665,094	)		(2,886,476	)
Investing activities:
Cash acquired in business combination		141,545			-
Net Cash Provided by Investing Activities		141,545			-
Financing activities:
Proceeds from sale of common stock and warrants, net		8,850,000			2,390,000
Net Cash Provided by Financing Activities		8,850,000			2,390,000
Net increase (decrease) in cash		5,326,451			(496,476	)
Cash - Beginning of Period		656,290			1,152,766
Cash - End of Period	$	5,982,741		$	656,290
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	-		$	-
Income taxes	$	-		$	-
Non-Cash Investing and Financing Activities:
Fair value of common stock of $7,500,000 issued in acquisition allocated to:
Current assets	$	168,046			-
Fixed assets		12,269			-
Costs in excess of net assets acquired		7,550,000			-
Current liabilities assumed		(230,315	)		-
Fair value of common stock issued as dividend, net of warrants cancelled		7,015,000			-

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

F-6

VITALITY BIOPHARMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE

FISCAL YEARS ENDED MARCH 31, 2019 AND 2018

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. 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. Currently, we do not have any commercial products and have not yet generated any revenues from our cannabinoid prodrug pharmaceuticals.

In October 2018, the Company acquired Summit Healthtech, Inc., now known as Vitality Healthtech, Inc. and its subsidiary The Control Center, Inc. (collectively, “Summit Healthtech”). Summit Healthtech was formed to establish specialty healthcare clinics focused on treating patients suffering from addiction and dependency issues. In May 2019 the Company decided to close Summit Healthtech due to poor financial and operating performance. Summit Healthtech ceased all operations and closed on June 14, 2019 (See Note 2).

Liquidity

We are currently engaged in the development of cannabinoid prodrug pharmaceuticals, we do not have any commercial products, and have not yet generated significant revenues from sales of products or services. As reflected in the accompanying financial statements, during the year ended March 31, 2019, the Company incurred a net loss of $13,121,567 and used $3,665,094 of cash in our operating activities. During the year ended March 31, 2019, the Company sold a total of 6,000,000 units of common stock and warrants at a purchase price of $1.50 per unit, resulting in net proceeds to the Company of $8,850,000 after deducting fees and expenses of the offering. As of March 31, 2019, we had $5,982,741 of cash on hand, stockholders’ equity of $5,021,076 and had working capital of $4,998,414.

Our total expenditures for the fiscal year ending March 31, 2020, are expected to be approximately $4,900,000, which is comprised of approximately $3,400,000 of research and development and general operating expenses, and approximately $1,500,000 of strategic partnership investments. Given that we have discretion over the amount of cash that we will invest in any strategic partnership or investment and based on the funds we had available on March 31, 2019, we believe that we have sufficient capital to fund our anticipated operating expenses and investment activity for at least one year from the date that the financial statements are issued.

While we believe that our existing cash balances will be sufficient to fund our currently planned level of operations and investment activity, we may require additional financing to fund our planned future operations. Further, these estimates could differ if we encounter unanticipated difficulties, or if our estimates of the amount of cash necessary to operate our business prove to be wrong, and we use our available financial resources faster than we currently expect. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company.

F-7

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Vitality Healthtech, Inc. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 assumptions by management include, among others, estimates inherent in recording purchase price allocation, reserves for accounts receivable, the fair value of equity instruments issued for services, and assumptions used in the valuation of derivative liabilities and the valuation allowance for deferred tax assets.

Revenues

Prior to April 1, 2018, the Company recognized its revenue in accordance with Accounting Standards Codification (ASC) 605, Revenue Recognition , upon the delivery of its services or products when: (1) delivery had occurred or services rendered; (2) persuasive evidence of an arrangement existed; (3) there are no continuing obligations to the customer; and (4) the collection of related accounts receivable was reasonably assured

Effective April 1, 2018, the Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) which superseded previous revenue recognition guidance. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying the Company’s performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes and the implementation of ASC 606 did not have a material impact on the Company’s financial statements.

The Company’s revenue is comprised of the following:

● Pharmaceutical operations - Revenue from products, generally from the sale of diagnostic testing kits and chemicals are recognized when the performance obligation of delivering the product is completed, which usually occurs when the Company ships the products. Revenue from the sale of these products was $107,369 and $102,419 during the years ended March 31, 2019 and 2018, respectively.

● Clinical Operations - Revenue generated from fees for outpatient counselling and services are recognized when patients receive the service. Our contracts with patients generally cover periods ranging from one week to four weeks. Revenue from these services was $150,919 during the year ended March 31, 2019. There were no such revenues during the year ended March 31, 2018.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances as covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.

F-8

Accounts Receivable

The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding.

The allowance for doubtful accounts and returns and discounts is established through a provision reducing the carrying value of receivables. At March 31, 2019 and 2018, the allowance for doubtful accounts and returns and discounts was $30,850 and $30,850, respectively.

Business Combinations

The Company accounts for its business combinations using the purchase method of accounting where the cost is allocated to the underlying net tangible and intangible assets acquired, based on their respective fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value. Additionally, contingent consideration, if any, is recorded at fair value on the acquisition date and classified as a liability. Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities. Determining the fair value of assets acquired, liabilities assumed and noncontrolling interests requires management’s judgment and often involves the use of significant estimates and assumptions.

Goodwill and intangible assets

The Company follows ASC 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts.

Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill.

For the year ended March 31, 2019, the Company recorded impairment of goodwill and intangible assets of $7,550,000 (See Note 2). For the year ended March 31, 2018, the Company did not record any impairment of goodwill and intangible assets.

Financial Assets and Liabilities Measured at Fair Value

The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the balance sheets are categorized by the level of objectivity associated with the inputs used 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:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3	Unobservable inputs based on the Company’s assumptions.

F-9

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.

As of March 31, 2019 and March 31, 2018, the Company’s balance sheet includes Level 3 liabilities comprised of the fair value of embedded derivative liabilities of $35,710 and $153,042, respectively (see Note 3). These embedded derivatives result in Level 3 classification because one or more of the significant inputs are not observable in the market or cannot be derived principally from, or corroborated by, observable market data. The following table sets forth a summary of the changes in the estimated fair value of our embedded derivative during the years ended March 31, 2019 and 2018:

	Year ended March 31, 2019			Year ended March 31, 2018
Fair value at beginning of period	$	153,042		$	240,791
Net change in the fair value of derivative liabilities		(117,332	)		(87,749	)
Fair value at end of period	$	35,710		$	153,042

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 model to value the derivative instruments at inception and on subsequent valuation dates through the March 31, 2019, 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.

Income 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.

Stock-Based Compensation

The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions, for services and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic 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 directors on the date of grant using a Black-Scholes-Merton option-pricing model, and the value of the portion of the award that is ultimately 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 value of the stock compensation is based upon the measurement date as determined at either (a) 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 is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

F-10

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 a 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 as compensation expense ratably over the vesting period.

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 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:

	March 31,
	2019		2018
Options		3,456,710		3,316,710
Warrants		1,135,003		1,164,422
Total		4,591,713		4,481,132

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.

Segments

As of March 31, 2019, the Company operated in two reportable business segments. In accordance with the “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 management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. All financial information required by “Segment Reporting” can be found in Note 11 of the accompanying consolidated financial statements.

Concentrations

For the fiscal year ended March 31, 2019, 14%, 11% and 10% of revenue were generated from our three largest customers. For the fiscal year ended March 31, 2018, 10% of revenue was generated from one customer.

F-11

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases, which was subsequently amended in 2018 by ASU 2018-10, ASU 2018-11 and ASU 2018-20 (collectively, Topic 842). Topic 842 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. Topic 842 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. Topic 842 allows for a cumulative-effect adjustment in the period the new lease standard is adopted and will not require restatement of prior periods. The Company is in the process of evaluating the impact of Topic 842 on the Company’s financial statements and disclosures, though the adoption is expected to result in an increase of approximately $200,000 in the assets and liabilities reflected on the Company’s balance sheets.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features. 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 Company plans to adopt ASU 2017-11 on April 1, 2019. 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 has features other than down round provisions that require the current accounting treatment and classification.

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to nonemployee share-based payment accounting. This ASU simplifies the accounting and reporting for share-based payments issued to nonemployees by expanding the scope of ASC 718, Compensation – Stock Compensation, which currently only includes share-based compensation to employees, to also include share-based payments to nonemployees for goods and services. The standard is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of ASC 606. The Company plans to adopt ASU 2018-07 on April 1, 2019. The adoption of ASU 2018-07 is not expected to have an impact on the Company’s financial statements and related disclosures.

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. ACQUISITION AND IMPAIRMENT OF SUMMIT HEALTHTECH

On October 22, 2018, the Company initially issued 6,000,000 shares of the Company’s common stock valued at $9,000,000 in exchange for all of the outstanding common stock of Summit Healthtech, Inc. and its subsidiary The Control Center, Inc. (collectively, “Summit Healthtech”). The shares were value at $1.50 per share based on a contemporaneous private placement offering price. During the measurement period, which may be up to one year from the acquisition date, the Company cancelled 1,000,000 shares of the Company’s common stock that had been issued as part of the acquisition and accordingly, the total purchase price was adjusted to $7,500,000. In connection with the acquisition, the Company entered into an employment agreement with Dr. Arif Karim, the former owner of The Control Center, pursuant to which Dr. Karim was hired as the Chief Medical Officer of Summit Healthtech for a term of three years, with a base salary of $240,000 per year.

F-12

The Company accounted for the transaction as a business combination in accordance ASC 805 “Business Combinations”. During the period, the Company made a provisional purchase price allocation to reflect the net assets acquired of $180,315 and the net liabilities assumed of $230,315. The excess of the purchase price over identifiable net assets of $7,550,000 was previously recorded as goodwill and intangible assets. At March 31, 2019, the Company determined that projected losses for Summit Healthtech indicated that the fair value of Summit Healthtech was below its carrying value. As a result, 100% of the goodwill and intangible assets of $7,550,000 was recorded as an impairment on the accompanying consolidated statement of operations for the year ended March 31, 2019.

As noted above, in May 2019 the Company determined that it would close Summit Healthtech due to poor financial and operating performance. Costs to close Summit Healthtech, primarily made up of severance and related benefits, totaled approximately $151,500 and will be recognized when incurred. In addition, the employment agreement with Dr. Karim was terminated and the Company is currently negotiating a separation agreement with Dr. Karim.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Summit Healthtech had been completed on April 1, 2017, the beginning of the comparable prior annual reporting period. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations:

	For the years ended March 31
	2019			2018
	(unaudited)			(unaudited)
Revenue	$	717,378		$	876,368
Operating income (loss)		(13,266,648	)		(4,621,362	)
Net income (loss)	$	(22,876,707	)	$	(4,542,117	)
Net income (loss) per share	$	(0.69	)	$	(0.20	)

3. DERIVATIVE LIABILITY

In May 2015, the Company issued certain warrants which included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder. In addition, the warrants contained 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. As such the Company determined that the warrant fundamental transaction clause and exercise price created a derivative. In accordance with the FASB authoritative guidance, the fair value of the warrants was recognized as a derivative instrument and is re-measured at the end of 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 year ended March 31, 2018, the Company recorded a decrease in derivative liability of $87,749. At March 31, 2018, the balance of the derivative liabilities was $153,042. During the year ended March 31, 2019, the Company recorded a decrease in derivative liability of $117,332, and at March 31, 2019, the balance of derivative liabilities was $35,710.

At March 31, 2019 and March 31, 2018, the derivative liabilities were valued using a probability weighted Black-Scholes-Merton pricing model with the following assumptions:

	March 31, 2019			March 31, 2018
Conversion feature:
Risk-free interest rate		2.63	%		1.73-2.27	%
Expected volatility		177	%		121	%
Expected life (in years)		1.13 years			2.15 years
Expected dividend yield		-			-
Fair Value:
Warrant liability	$	35,710		$	153,042

F-13

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.

4. STOCKHOLDERS’ EQUITY

Sale of common stock and warrants for cash

During the year ended March 31, 2019, the Company entered into securities purchase agreements pursuant to which the Company sold a total of 6,000,000 units of common stock and warrants at a purchase price of $1.50 per unit, resulting in net proceeds to the Company of $8,850,000 after deducting fees and expenses of the offering. Each unit consisted of one share of common stock and a warrant to purchase between one-half of one share and one share of common stock. Accordingly, 6,000,000 shares of common stock and warrants to purchase 5,833,333 shares of common stock were issued. 166,667 of the warrants had an exercise price of $2.00 per share, and 5,666,666 of the warrants had an exercise price of $3.00 per share. The warrants vested immediately and expire in five years. On January 18, 2019, the Company amended the securities purchase agreements. Pursuant to the amendments, the warrants to purchase the 5,833,333 shares of the Company’s common stock were cancelled, and the investors were issued an additional 16,750,000 shares of the Company’s common stock for no additional consideration. The fair value of the 16,750,000 shares issued was $9,715,000 and the fair value of the 5,833,333 warrants cancelled was $2,700,000. The difference of $7,015,000 was recorded as a deemed dividend to the investors.

During the year ended March 31, 2018, the Company sold a total of 1,599,999 units of common stock and warrants at a purchase price of $1.50 per unit, resulting in proceeds to the Company of $2,390,000. Each unit consisted of one share of common stock and a warrant to purchase one-half of one share of common stock. Accordingly, 1,599,999 shares of common stock and warrants to purchase 800,001 shares of common stock were issued. Each warrant has an exercise price of $2.00 per share, was immediately exercisable, and expires in three years.

Common stock issued for acquisition

On October 19, 2018, the Company issued 6,000,000 shares of the Company’s common stock in exchange for all of the outstanding common stock of Summit Healthtech (See Note 2). In February 2019 and June 2019, the Company cancelled a total of 1,000,000 shares of the Company’s common stock that had been issued as part of the share exchange agreement.

Common stock issued to employees with vesting terms

The Company has issued shares of common stock to employees and directors that vest over time. Shares of restricted stock granted are subject to forfeiture to the Company or other restrictions that will lapse in accordance with a vesting schedule determined by our Board. The fair value of these stock awards is based on the market price of the Company’s common stock on the dates granted, and are amortized over vesting terms ranging up to three years. In the event a recipient’s employment or service with the Company terminates, any or all of the shares of common stock held by such recipient that have not vested as of the date of termination under the terms of the restricted stock agreement are forfeited to the Company in accordance with such restricted grant agreement.

In July 2016, the Company issued an aggregate of 1,436,170 shares of its common stock to an officer and a director of the Company, with aggregate fair value of $718,000 at the grant date, and which vested over a period of 2.5 years. During the year ended March 31, 2018, the Company issued additional 200,000 shares of its common stock to the same officer and director, with a fair value of $362,000 at grant date, and which vested over a period of 14 months. At March 31, 2018, the total shares granted to the officer and director were 1,636,170 shares.

F-14

During the year ended March 31, 2018, of the total 1,636,170 shares granted to the officer and director, 718,085 shares vested. The remaining 918,085 shares vested during the current year ended March 31, 2019.

The total fair value of the 1,636,170 shares of common stock granted was $1,080,000 and is recognized as stock compensation expense ratably over the vesting terms. During the years ended March 31, 2019 and 2018, total stock-based compensation recognized on the shares granted was $348,451 and $416,063, respectively. At March 31, 2019, there was no unvested compensation related to these awards.

The following table summarizes restricted common stock activity:

	Number of shares			Fair value of shares
Non-vested shares, April 1, 2017		1,436,170		$	718,000
Granted		200,000			362,000
Vested		(718,085	)		(309,183	)
Forfeited		-			-
Non-vested shares, April 1, 2018		918,085		$	770,817
Granted		-			-
Vested		(918,085	)		(770,817	)
Forfeited		-			-
Non-vested shares, March 31, 2019		-		$	-

Common stock issued for services

During the year ended March 31, 2019, the Company issued a total of 265,000 shares of common stock to consultants as payment for services and recorded expenses of $348,451 based on the fair value of the Company’s common stock at the issuance date.

During the year ended March 31, 2018, the Company issued a total of 259,968 shares of common stock to three consultants as payment for services and recorded expense of $457,675 based on the fair value of the Company’s common stock at the issuance dates.

5. STOCK OPTIONS

A summary of the Company’s stock option activity during the fiscal years ended March 31, 2018 and 2019 is as follows:

	Shares			Weighted Average Exercise Price
Balance at April 1, 2017		2,820,489		$	1.27
Granted		570,000			1.76
Exercised		-
Expired		(48,779	)		0.55
Cancelled		(25,000	)		0.96
Balance outstanding at March 31, 2018		3,316,710		$	1.40
Granted		200,000			1.87
Exercised		-
Expired		(60,000	)		2.00
Cancelled		-
Balance outstanding at March 31, 2019		3,456,710		$	1.46
Balance exercisable at March 31,2019		3,075,044		$	1.19

At March 31, 2019, the 3,456,710 outstanding stock options had no intrinsic value.

F-15

A summary of the Company’s stock options outstanding and exercisable as of March 31, 2019 is as follows:

	Number of Options		Weighted Average Exercise Price		Weighted Average Grant-date Stock Price
Options Outstanding, March 31, 2019		1,664,542	$	0.50	$	0.50
		128,000	$	0.96	$	0.96
		130,000	$	1.00	$	10.00
		677,500	$	1.50-1.95	$	1.50-1.95
		687,500	$	2.00 – 2.79	$	2.00 – 2.79
		123,334	$	3.10 – 3.80	$	3.10 – 3.80
		45,834	$	4.00 – 4.70	$	4.00 – 4.70
		3,456,710
Options Exercisable, March 31, 2019		1,664,542	$	0.50	$	0.50
		128,000	$	0.96	$	0.96
		130,000	$	1.00	$	10.00
		345,834	$	1.50-1.95	$	1.50-1.95
		637,500	$	2.00 – 2.79	$	2.00 – 2.79
		123,334	$	3.10 – 3.80	$	3.10 – 3.80
		45,834	$	4.00 – 4.70	$	4.00 – 4.70
		3,075,044

Stock options issued during the year ended March 31, 2019

During the year ended March 31, 2019, the Company granted an aggregate of 200,000 options to purchase shares of the Company’s common stock with exercise prices ranging from $1.62 to $1.95 per share to two employees, that expire ten years from the date of grant. The options issued have a vesting period of three years. 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 117.91% and 119.34%, (ii) discount rate between 2.79% and 2.98%, (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 $324,000.

Stock options issued during the year ended March 31, 2018

During the year ended March 31, 2018, 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 1.81% and 2.28%, (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 $727,500.

During the year ended March 31, 2018, the Company also granted one consultant options to purchase 100,000 shares of the Company’s common stock, with an exercise price of $2.00 per share, that expire in ten years from date of grant, and have vesting period of 24 months. The fair value of these options granted to the consultant was estimated using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate of 121.20% (ii) discount rate of 2.62%, (iii) zero expected dividend yield, and (iv) expected life of 6 years. The total fair value of the option grants to the consultant at their grant date was approximately $143,000. The Company re-measures any non-vested options to non-employees to fair value at the end of each reporting period. At March 31, 2018, the fair value of the options was approximately $143,000.

During the years ended March 31, 2019 and 2018, total stock-based compensation expense related to vested stock options was $765,648 and $993,165, respectively. At March 31, 2019, the remaining unamortized cost of the outstanding stock-based awards was approximately $430,000 and will be amortized on a straight-line basis over a weighted average remaining vesting period of 2 years.

F-16

6. WARRANTS

A summary of warrants to purchase common stock issued during the fiscal years ended March 31, 2018 and 2019 is as follows:

	Shares			Weighted Average Exercise Price
Balance outstanding at April 1, 2017		372,421		$	2.79
Granted		800,001			2.00
Exercised		-			-
Expired/Cancelled		(8,000	)		3.40
Balance outstanding at March 31, 2018		1,164,422		$	2.19
Granted		5,833,333			2.97
Exercised		-			-
Expired/Cancelled		(5,862,752	)	$	2.98
Balance outstanding and exercisable at March 31, 2019		1,135,003		$	2.19

At March 31, 2019, the 1,135,003 outstanding stock warrants had no intrinsic value.

Stock warrants issued during the year ended March 31, 2019

In August 2018 and October 2018, we issued warrants to purchase an aggregate of 5,833,333 shares of the Company’s common stock with exercise prices ranging from $2.00 to $3.00 per share (see Note 4). These warrants were cancelled in January 2019.

Stock warrants issued during the year ended March 31, 2018

In conjunction with the sale of common stock during the year ended March 31, 2018 (See Note 4), the Company granted to investors warrants to purchase up to 800,001 shares of the Company’s common stock. The warrants are exercisable immediately, have an exercise price of $2.00 per share, and expire on the three-year anniversary of the date of issuance.

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.

7. ADVANCE

In July 2018, we received an advance from a third party for $296,653. The nature of the advance was not specified at the time and the third party has failed to respond to our requests for additional information on the advance. At March 31, 2019, the Company has recorded this as an advance and it is included in current liabilities on the accompanying financial statements.

8. INCOME TAXES

The Company has no tax provision for any period presented due to its history of operating losses. Significant components of deferred income tax assets and liabilities at March 31, 2019 and 2018 are presented below. Management has determined that their realization is not likely to occur and accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to zero.

At March 31, 2019, we had federal net operating loss carryforwards, or NOLs, of approximately $12,600,000 that are available to offset future federal taxable income and will expire in the years through 2040. Included in these numbers are loss carry-forwards that maybe subject to Section 382 NOL limitations. At March 31, 2019, we had state NOLs of approximately $12,700,000 that will expire if unused through 2040.

F-17

Significant components of the Company’s deferred tax assets and liabilities are as follows as of:

	March 31,
	2019			2018
Deferred income tax assets:
Net operating loss carryforwards	$	3,200,000		$	3,600,000
Share-based compensation		2,900,000			2,700,000
Research credits		40,000			42,000
Other, net		10,000			27,000
		6,150,000			6,369,000
Less: Valuation allowance		(6,150,000	)		(6,369,000	)
Net deferred income tax assets (liabilities)	$	-		$	-

Reconciliation of the effective income tax rate to the U.S. statutory rate is as follows:

	Year Ended
	March 31,
	2019			2018
Federal Statutory tax rate		(21	)%		(31	)%
State tax, net of federal benefit		(7	)%		(6	)%
		(28	)%		(37	)%
Valuation allowance		28	%		37	%
Effective tax rate		-	%		-	%

The Company adopted accounting rules which address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under these rules, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. These accounting rules also provide guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of March 31, 2019, no liability for unrecognized tax benefits was required to be recorded. The Company has a policy of recognizing tax related interest and penalties as additional tax expense when incurred. During the years ended March 31, 2019 and 2018, the Company did not recognize any interest and penalties.

9. RELATED PARTY TRANSACTIONS

On April 23, 2012, the Company entered into a lease agreement (the “Carlson Lease”) with One World Ranches LLC, which is jointly-owned by Dr. Avtar Dhillon, the former Chairman of the Board of Directors of the Company, and his wife. The Carlson Lease began on May 1, 2012 and was extended from May 1, 2017 to 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 Carlson Lease for the years ended March 31, 2019 and 2018 were $20,800 and $33,500, respectively.

On May 16, 2014, the Company entered into an Asset Purchase Agreement with Percipio Biosciences, Inc. (“Percipio”), a Delaware corporation, to purchase certain assets of Percipio for $50,000. The Company’s former Chief Executive Officer, Robert Brooke, owned 20% of Percipio. At March 31, 2019, $10,500 of the purchase price remains unpaid and is included in accounts payable on the accompanying balance sheet.

Included in the deemed dividend of $7,015,000 (see Note 4) recorded on January 18, 2019, was $1,022,975 related to 2,442,708 shares of the Company’s common stock that we issued to two directors of the Company.

F-18

10. COMMITMENTS AND CONTINGENCIES

SEC Subpoena

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 additional subpoenas for testimony and any supplemental production of documents dated June 5, 2017 and November 14, 2018. The document requests were primarily in connection with this matter. We have complied with all document requests and the Company’s former CEO provided testimony in April 2019.

Lease

The Control Center, which we acquired in October 2018 (see Note 2) leased its office in Beverly Hills, California under a non-cancellable operating lease that expires in February 2021. The aggregate lease expense for the year ended March 31, 2019 was $59,812.

As of March 31, 2019, the Company’s future minimum rental payments for the office premises due under the non-cancellable operating lease are as follows:

Year ending March 31:
2020	$	135,132
2021		139,862
Thereafter		-
Total	$	274,994

11. SEGMENT INFORMATION

ASC 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about services categories, business segments and major customers in financial statements. The Company has two reportable segments that are based on the following business units: Research & Development and Clinical Operations. In accordance with the “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 management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. The Company operates two reportable business segments:

● Clinical Operations – specialty healthcare clinic focused on treating patients suffering from addiction and dependency

● Pharmaceutical Operations – research and development primarily related to the Company’s cannabinoid pharmaceuticals

F-19

The Company had no inter-segment sales for the periods presented. Summarized financial information concerning the Company’s reportable segments is shown as below:

By Categories

	For the year ended March 31, 2019 (Unaudited)
	Clinical Operations			Pharmaceutical Operations			Corporate			Total
Revenues	$	150,919		$	107,369		$	-		$	258,288
Cost of revenues		368,126			86,641			-			454,767
General and Administrative		639,472			248,342			2,762,259			3,650,073
Research and Development		-			1,804,365			-			1,804,365
Net loss		(856,679	)		(2,031,979	)		(10,232,907	)		(13,121,567	)
Total assets		117,255			27,626			5,930,429			6,075,310
Capital expenditures for long-lived assets	$	-		$	-		$	-		$	-

	For the year ended March 31, 2018 (Unaudited)
	Clinical Operations		Pharmaceutical Operations			Corporate			Total
Revenues	$	-	$	102,419		$	-		$	102,419
Cost of revenues		-		77,943			-			77,943
General and Administrative		-		195,677			2,296,828			2,492,505
Research and Development				1,897,817						1,897,817
Net loss		-		(2,069,018	)		(2,239,979	)		(4,308,997	)
Total assets		-		33,949			641,842			675,791
Capital expenditures for long-lived assets	$	-	$	-		$	-		$	-

12. SUBSEQUENT EVENTS

In May 2019, the Company’s Board of directors approved an amendment to the Company’s 2012 Stock Incentive Plan to increase the maximum number of shares issuable thereunder to 10,791,600.

In May 2019 and June 2019, we issued options to purchase 3,250,000 shares of our common stock to two employees and three directors with a fair value of $1.2 million on the grant dates. These options have an exercise price of $0.30 to $0.35 per share, expire ten years from the date of issuance, and vest immediately. The fair value of these options was estimated using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate of 176.5%, (ii) discount rate of 1.7% to 2.3%, (iii) zero expected dividend yield, and (iv) expected life of 5 years.

F-20