| BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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. 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. Going
Concern The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the three
months ended June 30, 2021, the Company incurred a net loss of $ 612,235 562,701 The
ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or
raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due.
We estimate as of June 30, 2021, we will have sufficient funds to operate the business for the next three months. Since our existing
cash balances are estimated to be insufficient to fund our currently planned level of operations, we will need additional financing
or other sources of capital 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 or capital, if needed, will
be available or, if available, that it will be on terms that are satisfactory to the Company. We
do not presently have, nor do we expect in the near future to have, significant revenue to fund our business from our operations, and
will need to obtain most of our necessary funding from external sources in the near term. Since inception, the Company has experienced
recurring operating losses and negative operating cash flows, and we have funded our operations primarily through equity and debt financings,
and we expect to continue to rely on these sources of capital in the future. If we raise additional funds by issuing equity or
convertible debt securities, our existing stockholders’ ownership will be diluted, and obtaining commercial loans would increase
our liabilities and future cash commitments. If we 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. COVID-19 The
Company is subject to risks and uncertainties of the COVID-19 pandemic that could adversely impact our business, our liquidity and access
to capital markets and our business development activities. The Company has implemented additional health and safety precautions and
protocols in response to the pandemic and government guidelines. The
extent of the impact of the COVID-19 pandemic has had and will continue to have on the Company is highly uncertain and difficult to predict
and quantify. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results
of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information
that may emerge concerning COVID-19 and the actions taken to contain or treat it, including vaccination efforts, as well as the economic
impact on local, regional, national and international markets. Basis
of Presentation The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary, Vitality Healthtech, Inc. (dissolved in May 2021),
and have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances
and transactions have been eliminated in consolidation. The Company’s fiscal year end is December 31. Use
of Estimates The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates. The more significant estimates and assumptions by management include, among others, assumptions
used in reserves for accounts receivable, assumptions used in valuing equity instruments issued for services, the valuation allowance
for deferred tax assets, and accruals for potential liabilities. Actual results could differ from those estimates. 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 covered by the Federal Deposit Insurance
System. The Company has never suffered a loss due to such excess balances. 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 Option Pricing
model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. 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. Leases The Company determines whether
a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset
during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease
payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement
in determining the present value of unpaid lease payments. The Company had no lease commitments for longer than one year as of June 30,
2021. The laboratory space lease in Rocklin, California ends on March 31, 2022. Stock-Based
Compensation The
Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions
for services. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation, whereby
the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis
over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had
paid cash for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with
classification depending on the nature of the services rendered. The
fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain
assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future
dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based
on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense
recorded in future periods. 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: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
June
30,
2021 2020
Options 5,997,544 6,030,044
Warrants 146,668 946,669
Total 6,144,212 6,976,713 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 The
Company operates in one segment for the development of pharmaceuticals products. 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. Since the Company operates in one segment, all financial information required by “Segment Reporting”
can be found in the accompanying financial statements. Recent
Accounting Pronouncements In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments 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. | 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. 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. Going
Concern The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, during the year
ended March 31, 2021, the Company incurred a net loss of $ 880,851 1,605,076 The
ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and/or
raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due.
We estimate as of March 31, 2021, we will have sufficient funds to operate the business for the next eight months. Since our existing
cash balances are estimated to be insufficient to fund our currently planned level of operations, we likely will need additional financing
or other sources of capital 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 or capital, if needed, will
be available or, if available, that it will be on terms that are satisfactory to the Company. We
do not presently have, nor do we expect in the near future to have, significant revenue to fund our business from our operations, and
will need to obtain most of our necessary funding from external sources in the near term. Since inception, the Company has experienced
recurring operating losses and negative operating cash flows, and we have funded our operations primarily through equity and debt financings,
and we expect to continue to rely on these sources of capital in the future. However, if we raise additional funds by issuing equity
or convertible debt securities, our existing stockholders’ ownership will be diluted, and obtaining commercial loans would increase
our liabilities and future cash commitments. If we 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. COVID-19 The
Company is subject to risks and uncertainties of the COVID-19 pandemic that could adversely impact our business, our liquidity and access
to capital markets and our business development activities. The Company has implemented additional health and safety precautions and
protocols in response to the pandemic and government guidelines. The
extent of the impact of the COVID-19 pandemic has had and will continue to have on the Company is highly uncertain and difficult to predict
and quantify. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results
of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information
that may emerge concerning COVID-19 and the actions taken to contain or treat it, including vaccination efforts, as well as the economic
impact on local, regional, national and international markets. Basis
of Presentation The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Vitality Healthtech, Inc., and
have been prepared in accordance with accounting principles generally accepted in the United States of America. Intercompany balances
and transactions have been eliminated in consolidation. The Company’s fiscal year end is March 31. Use
of Estimates The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates. The more significant estimates and assumptions by management include, among others, assumptions
used in valuing assets acquired in business acquisitions, reserves for accounts receivable, assumptions used in valuing equity instruments
issued for services, the valuation allowance for deferred tax assets, and accruals for potential liabilities. Actual results could differ
from those estimates. 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 covered by the Federal Deposit Insurance
System. The Company has never suffered a loss due to such excess balances. Financial
Assets and Liabilities Measured at Fair Value The
Company follows the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) for fair value measurements.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy
was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
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. The
Company is required to use observable market data if such data is available without undue cost and effort. The
Company believes that because of their short maturity, the carrying amounts of cash, accounts payable and accrued liabilities approximate
fair value. As
of March 31, 2021 and March 31, 2020, the Company’s balance sheet includes no Level 2 liabilities. The following table sets forth
a summary of the changes in the estimated fair value of our embedded derivative liabilities during the years ended March 31, 2021 and
2020: SCHEDULE OF FAIR VALUE OF DERIVATIVE LIABILITIES
Year
ended March
31, 2021 Year
ended March
31, 2020
Fair
value at beginning of period $ - $ 35,710
Net
change in the fair value of derivative liabilities - (35,710 )
Fair
value at end of period $ - $ - 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 Option Pricing
model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. 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. Leases The
Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right
to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments
arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present
value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available
at lease commencement in determining the present value of unpaid lease payments. Stock-Based
Compensation The
Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions
for services. The Company accounts for such grants issued and vesting based on ASC 718, Compensation-Stock Compensation whereby the value
of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the
vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash
for the services. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification
depending on the nature of the services rendered. The
fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain
assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future
dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based
on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense
recorded in future periods. 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: SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
March
31,
2021 2020
Options 5,997,544 6,546,710
Warrants 146,668 1,135,003
Total 6,144,212 7,681,713 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 The
Company operates in one segment for the development of pharmaceuticals products. 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. Since the Company operates in one segment, all financial information required by “Segment Reporting”
can be found in the accompanying financial statements. Recent
Accounting Pronouncements In
June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments 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. |
