Update (August 29, 2016) Equity | Healthcare / Biotechnology

Vitality Biopharma, Inc. (OTCQB: VBIO), Target Price: $2.00 We are updating our coverage of Stevia First Corp to reflect the company’s shift in strategy and its July 2016 name change to Vitality Biopharma, Inc. (OTCQB: VBIO, “Vitality Biopharma”). The Vitality Biopharma brand reflects a pivot by management to focus its efforts on the development of cannabinoids for the treatment of serious neurological and inflammatory disorders. Initially, Vitality Biopharma has identified multiple sclerosis and inflammatory bowel disease as target markets. These represent large market opportunities, with approximately 1.4mn Americans living with inflammatory bowel disease and more than 400,000 Americans suffering from MS. Concurrent with the company’s official name change to Vitality Biopharma, the company also completed a 10:1 reverse split and updated its ticker to OTCQB: VBIO. In our view, the market potential for the company’s new line of cannabinoid prodrugs represents a large and attractive opportunity if VBIO management is able to execute on its regulatory and commercialization plans over the next several years. We are updating our price target to $2.00 reflecting the new share count and strategic focus.

Investment Highlights Stevia First becomes Vitality Biopharma, enters cannabinoid prodrugs market In July 2016 Stevia First changed the name of its parent company to Vitality Biopharma, Inc. In a letter to investors, management explained the move by both acknowledging that its commercialization efforts for stevia had proven to be more difficult and take longer than originally expected, and also highlighting that it had identified a large new market in which it could leverage significant technologies developed in its pursuit of stevia: cannabinoid pharmaceutical prodrugs. Specifically, Vitality Biopharma discovered that stevia UGT enzymes could be used to enable the production of a new class of cannabinoid prodrugs. The market for legal marijuana / cannabis is growing; IMS Health estimate legal marijuana sales at $2.57 billion in 2014, while the synthetic cannabinoid market was pegged at $133mn.

Updating price target to $2.00 We are updating our price target to reflect a reverse split undertaken by the company as well as new assumptions for the value of the cannabinoid and businesses. We see Vitality Biopharma as a company that offers both high risk and high growth potential as it targets the fast-growing emerging market for cannabinoid pharmaceutical prodrugs. Stock Details (8/19/16) OTCQB:

VBIO

Sector / Industry

Healthcare / Biotech

Price target

$2.00

Recent share price

$0.65

Shares o/s (mn)

12.0

Market cap (in $mn)

7.9

52-week high/low

$2.25 / $0.30

Source: Thomson Reuters, SeeThruEquity Research

Key Financial ($mn, unless specified) FY14A Revenues

FY15A

FY16A

0.0

0.2

0.2

Adj. EBITDA

(3.6)

(3.8)

(2.7)

EBIT

(3.6)

(3.8)

(2.7)

Net Income

(4.2)

(4.0)

(0.1)

(0.69)

(0.57)

(0.02)

FY16A

EPS ($) Source: SeeThruEquity Research

Key Ratios FY14A

FY15A

Gross margin (%)

NM

50.6

39.8

Operating Margin (%)

NM (1,548.8)

(1,104.0)

EBITDA margin (%)

NM (1,548.8)

(1,095.9)

Net margin (%)

NM (1,647.8)

(56.9)

P/Revenue (x)

NM

32.2

31.9

EV/EBITDA (x)

NM

(2.0)

(2.8)

EV/Revenue (x)

NM

30.6

30.3

Source: SeeThruEquity Research

Share Price Performance ($, LTM)

Initially targeting MS, inflammatory bowel disease Vitality Biopharma has already internally produced more than 20 novel cannabinoid glycosides, or cannabosides, using this process. These act as part of a class of medications known as “prodrugs,” which are essentially compounds administered in an inactive form but that become a pharmacologically active once they are metabolized. There are many advantages to Vitality Biopharma’s approach to the cannabinoid market using prodrugs, including better targeting, better dosing, a lower risk regulatory pathway, and the ability to leverage the clinical investigation history of the reference drug. Vitality Biopharma will initially be focused on developing prodrug therapeutics with multiple sclerosis and inflammatory bowel disease as target markets, and is expected to commence Phase 1 / Phase 2 trials in each of these areas in 2017E.

2.00

1.50

1.00

0.50

0.00 Aug-15

Nov-15

Feb-16

May-16

Source: Bloomberg

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

1|Page

Aug-16

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

Stevia First pivots, changes name to Vitality Biopharma as it enters the market for cannabinoid pharmaceuticals •

Stevia First parent company becomes Vitality Biopharma: On July 20, 2016, Stevia First changed completed a restructuring process in which the company changed its parent company name to Vitality Biopharma, and also completed a 10:1 reverse stock split. On August 17, 2016, the company completed this process and changed its ticker to OTCQB: VBIO. Along with the ticker symbol change, a new CUSIP number of 92849B107 has been assigned to Vitality Biopharma’s common stock. As of August 16, 2016, there were 12.0mn shares outstanding, as well as warrants, which, if exercised, would result in the issuance of an additional 7.9mn shares.

•

Leveraging bioprocessing expertise in new market: In a letter to investors in May outlining the decision to expand into the cannabinoid prodrug market, CEO Robert Brooks stated that the company had identified a large opportunity to apply the bioprocessing tools that had been developed for the stevia market to create a new library of cannabinoid molecules, including what he termed “all of the most hotly pursued cannabinoids that are currently being investigated as pharmaceutical drugs.”

•

The key to this decision is the company’s 2015 realization that it can biosynthesize cannabinoid glycosides (“cannabosides”) with much of the technology it had used in the stevia business, as illustrated below in a graphic provided by the company, through a process called enzyme biosynthesis. Vitality Biopharma management realized the process could be used to create novel cannabinoid prodrugs, and quickly began filing patent applications covering composition of matter claims for prodrugs of the cannabinoids that have shown to be the most medically important, such as a THC, CBD and CBDV.

Source: company investor materials

•

Vitality Pharma management has stated that it has already internally produced more than 20 novel cannabinoid glycosides, or cannabosides, which act as part of a class of medications known as “prodrugs.” Prodrugs are compounds which are administered in an inactive form but become a pharmacologically active drug once they are metabolized. These prodrugs are proprietary to Vitality Biopharma, and management stated that the company has already filed for “broad intellectual property protection” covering composition of matter of “all of the most significant cannabinoids known today.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

2|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

Differentiated approach to large markets well suited to cannabinoids •

Expanding into cannabinoid prodrug pharmaceutical market: Vitality Biopharma is now primarily focused on developing proprietary cannabinoid pharmaceuticals to treat serious neurological and inflammatory conditions, such as multiple sclerosis and inflammatory bowel disease. These represent large markets, with approximately 1.4mn Americans affected by inflammatory bowel disease and 400,000 Americans affected by MS. Vitality Biopharma will also explore other potential indications, but we expect management to focus on these first two initially, given existing data supporting potential medical benefits from cannabinoids in these indications. Vitality Biopharma will continue to seek to monetize its work in stevia. We would expect it to seek to find a commercial partner / licensing partner to target this market given that its leadership will be focused on the large opportunity for cannabinoids.

•

Large market opportunity. In our view, there appears to be growing momentum for therapeutic solutions derived from cannabinoids. As a result of legal restrictions and related factors, much of the therapeutic potential of cannabinoids has yet to be explored; however, Vitality Biopharma management has identified that this trend is changing, noting that in fact many clinical trials have been performed recently that have shown cannabinoids, and particularly cannabidiol, to have therapeutic benefits in a number of areas, including for inflammatory bowel disease, neuropathic pain, and muscle spasticity in MS.

•

These and other medical applications add up to a large market opportunity. Synthetic cannabinoid drug sales were estimated at $133mn in 2014 by IMS Health, and legal marijuana sales were expected to rise from $2.57 billion in 2014 to $10.2 billion in the future, according to data accumulated by the company.

Initial Planned indications for Vitality BioPharma are MS and Inflammatory Bowel Disease •

As stated earlier in this analysis, Vitality Biopharma will initially target MS and inflammatory bowel disease. These represent large opportunities in which cannabinoids have been shown to have beneficial effects. Indeed, approximately indication 80% of MS patients suffer from muscle spasticity, and Visiongain predicts that 2017E drug revenues for treatment of inflammatory bowel disease will top $9 billion. Vitality Biopharma’s lead candidates, VB100 and VB210, are outlined in the following table.

•

Clinical Status, Next Steps: Vitality Biopharma’s management team believes that it should be able bring its candidates to market relatively quickly, and has stated its intention to pursue a 505(b)(2) abbreviated approval pathway.

•

The company is currently completing pharmacokinetic studies and designing a Phase 1 / Phase 2 studies for Inflammatory Bowel Disease and progressive MS, as well as additional preclinical efficacy trials to support clinical development of cannabosides. The studies are expected to commence in 2017.

Additional risks •

Readers of this update should note that there are significant new risks associated with the new strategy employed by Vitality Biopharma, in addition to the risks noted in our initiation of coverage. With its new focus, Vitality Biopharma is now exposed to risks related to the time consuming, expensive and difficult to predict FDA regulatory approval process, as well as regulations related to controlled substances. This is in addition to existing company risks, which include a need to raise capital, potential for dilution from capital raising activities, and competition, among other risk factors.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

3|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

RECENT FINANCIAL SUMMARY Figure 1.

Income Statement Summary

Figures in $ unless specified Total Revenue YoY Change Direct Operating Costs YoY Change Gross Profit Gross Profit Margin General & Administrative YoY Change Research & Development YoY Change Other Total Operating Expenses YoY Change Operating Income (Loss) Operating Margin Interest & Other Pre-Tax Income (Loss) Income Taxes Net Income Basic & Diluted EPS Avg. Basic & Diluted Shares in period

1Q16

1Q15

46,377 -25.1% 25,119 54.2% 21,258 45.8% 327,874 -55.79% 110,315 26.72% 6,900 445,089 -52.45% -423,831 -913.88% -15,574 -439,405 0 -439,405 -0.15 10,069,358

61,915 24,033 38.8% 37,882 61.2% 741,596 183,525 10,900 936,021 -898,139 -1450.60% 1,113,733 215,594 0 215,594 -0.15 7,568,760

Source: Company Earnings Release, SeeThruEquity Research

ADDITIONAL NOTES

2Q16 results reflect transition status at VBIO •

Vitality Biopharma reported revenues of 46,377 in FY1Q17, down 25% from $61,915 in FY1Q16. The company stated that this is likely to be a baseline level for quarterly revenues in its quarterly filings with the SEC. We are not forecasting a significant change to this level in the short run as Vitality Biopharma is development stage pharmaceutical company and its Management stated in its May 2016 letter to investors that it believes it can still derive value from the stevia business.

•

EPS review: Vitality Biopharma reported a GAAP net loss of ($439,405), or ($0.15) per share. The company also reported a net loss per share of ($0.15) in 1Q16.

•

Balance Sheet: Vitality Biopharma ended the quarter with cash on hand of $20,481 and total assets of $69,212, versus total liabilities of $582,555. The company used $339,982 of cash in operating activities during the quarter.

•

Vitality Biopharma’s audited financial statements include an explanatory paragraph raising doubt as to its ability to continue as a going concern. In our view it is clear Vitality Biopharma will require substantial new capital inflows to execute its operating plans. We have assumed the company has access to $5mn in new capital over the next twelve months.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

4|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

Updating price target to $2.00 to reflect new focus, share count •

We are updating our price target for VBIO at this time to reflect the company’s new focus on developing cannabinoid prodrugs, as well the new share count of 12mn.

•

The new valuation is based on a discounted flow methodology, which assumes that Vitality Biopharma is able to market cannabinoid prodrugs for MS by the end of 2022E and by 2023E for inflammatory bowel disease. It also assumes the company finds a commercial partner for its stevia business by the end of 2017, with a license and royalty agreement. Although we believe Vitality Biopharma is developing a pipeline for a number of indications, we did not include these in our analysis other than assuming a perpetual growth rate of 5% at the end of our forecast period. $000

FY17E

FY18E

FY19E

FY20E

FY21E

FY22E

FY25E

FY26E

FY27E

VB200 for MS

Phase 1/2

Phase 2

Phase 3

Phase 3

FDA

FDA/Mkt

Market

Market

Market

VB100 for IBD

Phase 1/2

Phase 2

Phase 3

Phase 3

FDA

FDA

Market

Market

Market

(1,440)

(1,334)

(902)

(166)

222

145

4,826

10,551

17,481

EBIT Less: Tax

0

0

0

0

0

0

579

2,110

3,496

NOPLAT

(1,440)

(1,334)

(902)

(166)

222

145

4,247

8,440

13,985

(962)

(800)

(300)

250

450

0

0

0

0

10

20

37

95

167

223

265

297

322

Working capital D&A Capex FCFF Discount factor Probability Factor PV of FCFF

(10)

(50)

(125)

(280)

(400)

(400)

(400)

(400)

(400)

(2,403)

(2,164)

(1,290)

(102)

439

(32)

4,112

8,338

13,907

0.93

0.82

0.72

0.64

0.56

0.50

0.44

0.39

0.34

0.60

0.60

0.60

0.60

0.60

0.60

0.60

0.60

0.60

(1,336)

(1,063)

(560)

(39)

149

(10)

1,087

1,947

Sum of PV of FCFF

2,869 3,043

Terminal cash flow

178,074

PV: Terminal cash flow

36,735

Enterprise value

39,778

Less: Debt

0

Add: Cash

100

Equity value

39,878

Basic shares (mn)

12.0

Warrants (mn)

7.9

Fair value per share ($)

Summary conclusions

2.00

Key assumptions

DCF FV ($ per share)

3.40 Beta

Recent price ($ per share)

1.17 Cost of equity

Upside (downside) WACC

2.0 14.0%

190.2% Cost of debt (post tax)

10.2%

14.0% Terminal Growth Rate

5.0% Source: SeeThruEquity Research

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

5|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

Management Team Robert Brooke, CEO, Co-founder Former hedge fund analyst at Bristol Capital for over 50 direct healthcare investments; Experienced biotech entrepreneur, Founder of Genesis, now Lion Biotech (NASDAQ:LBIO), Co-Founder of Intervene Immune. B.S. in Electrical Eng., Georgia Tech; M.S. in Biomedical Eng., UCLA. Avtar Dhillon, MD, Chairman & Co-founder Chairman, Inovio Pharmaceuticals, Oncosec Medical, and Arch Therapeutics. Raised $200M in public markets over last 10 years. Former venture capitalist and family physician for over 10 years. Richard McKilligan, JD, MBA, Controller Ex-Morgan, Lewis, & Bockius LLP, State Bars in CA and NY, CPA (inactive). JD from Cornell, MBA from Univ of Chicago, BS in Accounting from University of Illinois. Stephen Snyder, President and Director Brandon Zipp, PhD, Director of R&D, Scientific Co-founder 10 years research experience with glucosyltransferase enzymes. Developer of UGT biosynthesis platform. Ph.D., Biochem & Molecular Biology, Univ. of California Davis. Anthony Maida, PhD, MBA, Director, Chair of Audit Committee Senior Vice President, Clinical Research, Northwest Bio. MBA, MA in Toxicology, PhD in Immunology

Scientific Advisory Board & Collaborators Ben Barres, MD, PhD Stanford University, Chair, Neurobiology Dept., Professor of Neurobiology, Developmental Biology, and Neurology. Paul Tesar, PhD Case Western Reserve University, Associate Professor, Department of Genetics, Professor of Innovative Therapeutics. Stephen-Miller, PhD Northwestern University, Judy Gugenheim Research Professor of Microbiology-Immunology. Yasmin Hurd, PhD Mount Sinai Hospital, Professor of Psychiatry, Neuroscience, Pharmacology & Systems Therapeutics. Brian Popko, PhD University of Chicago, Jack Miller Professor of Neurological Diseases.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

6|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

About Vitality Biopharma, Inc. Vitality Biopharma is dedicated to unlocking the power of cannabinoids for the treatment of serious neurological and inflammatory disorders. For more information, visit: www.vitality.bio.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

7|Page

Vitality Biopharma, Inc. Equity | Technology / Healthcare Info Svcs. August 29, 2016

Contact Amit Tandon SeeThruEquity www.seethruequity.com (646) 495-0939 [email protected]

Disclosure This research report has been prepared and distributed by SeeThruEquity, LLC (“SeeThruEquity”) for informational purposes only and does not constitute an offer, solicitation or recommendation to acquire or dispose of any investment or to engage in any transaction. This report is based solely on publicly-available information about the company featured in this report which SeeThruEquity considers reliable, but SeeThruEquity does not represent it is accurate or complete, and it should not be relied upon as such. All information contained in this report is subject to change without notice. This report does not constitute a personal trading recommendation or take into account the particular investment objectives, financial situation or needs of an individual reader of this report, and does not provide all of the key elements for any reader to make an investment decision. Readers should consider whether any information in this report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties, many of which are beyond the company’s control. Actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain industry, economic, regulatory or other factors. SeeThruEquity is not a FINRA registered broker-dealer or investment adviser and does not provide investment banking services. SeeThruEquity does not accept or receive fees or other compensation for preparing its research reports. SeeThruEquity has not been retained or hired by the company featured herein or by any other party to prepare this report. In some but not in all instances, SeeThruEquity and/or its officers, directors or affiliates may receive compensation from companies featured in its reports for non report-related services which may include charges for presenting at SeeThruEquity investor conferences, distributing press releases and performing certain other ancillary services. The company featured in this report paid SeeThruEquity its standard fee described below for distributing a press release on this report. Such compensation is received on the basis of a fixed fee and made without regard to the opinions and conclusions in its research reports. The fee to present at SeeThruEquity conferences is no more than seven thousand dollars, and the fee for distributing press releases is no more than fifteen hundred dollars. The fees for performing certain other ancillary services vary depending on the company and service provided but generally do not exceed five thousand dollars. In no event is a company on which SeeThruEquity has issued a report required to engage it with respect to these non report-related services. SeeThruEquity and/or its affiliates may have a long equity position with respect to a non-controlling interest in the publicly traded shares of companies featured in its reports, and follows customary internal trading restrictions pending the release of its reports. SeeThruEquity’s professionals may provide verbal or written market commentary that reflects opinions that are contrary to the opinions expressed in this report. This report and any such commentary belong to SeeThruEquity and are not attributable to the company featured in its reports or other communications. The price and value of a company’s shares referred to in this report may fluctuate. Past performance by one company is not indicative of future results by that company or of any other company covered by a report prepared by SeeThruEquity. This report is being disseminated primarily electronically and, in some cases, in printed form. An electronic report is made simultaneously available to all recipients. The information contained in this report is not incorporated into the contents of our website and should be read independently thereof. Please refer to the Disclosures section of our website for additional details. Copyright 2011-2016 SeeThruEquity, LLC. No part of this material may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of SeeThruEquity, LLC.

© 2011-2016 SeeThruEquity, LLC. Important disclosures appear at the back of this report.

8|Page