The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited interim consolidated financial
statements, the notes to those financial statements and other financial
information appearing elsewhere in this document. In addition to historical
information, the following discussion and other parts of this document contain
forward-looking statements that reflect plans, estimates, intentions,
expectations and beliefs. Actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those set forth
in the "Risk Factors" in Part II, Item 1A of this Quarterly Report.
The discussion provided in this Quarterly Report should be read in conjunction
with our Annual Report on Form 10-K for the year ended May 31, 2017, filed with
the United States Securities and Exchange Commission (the "SEC") on August 29,
We were incorporated as Plandel Resources, Inc. under the laws of the State of
Nevada on March 19, 2010. On March 24, 2014, we changed our name to Sports
Asylum, Inc. and on September 30, 2014, we changed our name to Cell MedX Corp.
to reflect our current business direction.
On November 25, 2014, we completed the acquisition of a proprietary method for
the application of bioelectric signaling to treat diabetes and related ailments
(the "eBalance Technology"). With our acquisition of the eBalance Technology,
we have shifted our business direction to the discovery, development and
commercialization of therapeutic and non-therapeutic products that promote
general wellness and alleviate complications associated with medical conditions
including, but not limited to, diabetes, Parkinson's disease, and high blood
On April 26, 2016, we formed a subsidiary, Cell MedX (Canada) Corp., ("Cell MedX
Canada") under the laws of the Province of British Columbia, in anticipation of
increased business activity in Canada.
Update on Observational Clinical Study
During the nine-month period ended February 28, 2018, Hamilton Medical Research
Group, under the guidance of Dr. Richard Tytus, the lead investigator of the
clinical study (the "Clinical Study"), Cell MedX Corp. commissioned through
Nutrasource Diagnostics Inc. ("Nutrasource"), has completed the Clinical Study
and prepared a final clinical report which was submitted to Health Canada for
final approval on January 19, 2018.
The objective of the Trial was to assess eBalance therapy as an adjunct
treatment for diabetes and related complications in Type 1 and Type 2 diabetics
over three months. The secondary endpoints of the Trial observed changes from
baseline in the following;
Diabetic foot pain and numbness
Any other changes reported by patients
All 30 subjects (100%) taking part in the Trial followed through to completion.
The treatment was considered safe for the purposes of the Trial. There were no
significant treatment-related adverse events or negative abnormalities in
routine hematology, biochemistry, vital signs or physical findings for the
duration of the Trial.
The Trial resulted in several encouraging trends spanning a vast array of areas
including HbA1c and secondary efficacy endpoints as noted above.
Type I diabetes is an auto-immune disorder which causes the pancreas to produce
little or no insulin and leads to high blood glucose levels. Type II diabetes
occurs as a result of decreased insulin effectiveness or production which also
leads to high blood glucose levels. During the Trial, the effectiveness of the
Company's eBalance therapy as an adjunct treatment for diabetes and related
complications in Type 1 and Type 2 diabetics was assessed over 3 months.
In non-diabetics, insulin rises sharply after a meal, attaches to a receptor on
the surface of muscle tissue, allows glucose to rapidly enter and then
dissipates. In Type 2 diabetic, insulin is less able to stimulate the entry of
glucose into muscle tissue, leading to high blood glucose levels and sustained
elevated levels of insulin.
When hemoglobin ("Hb") in the red blood cells combines with glucose, it is
referred to as "glycated hemoglobin" or "HbA1c". The amount of glucose that
combines with Hb is directly proportional to the total amount of sugar that is
in the blood at that time. Measuring HbA1c can provide an estimate of average
glucose levels over the 8 to 12 week life span of red blood cells.
The results of the Trial shows that after three months of eBalance treatments,
average fasting blood glucose levels declined by 12.3% from 10.5 to 9.2
millimoles per litre. Plasma insulin declined by 46.7% from 168 to 78 picomoles
per litre. These results indicate that, on average, the blood glucose uptake was
increased and that less insulin was required to achieve that uptake. HbA1c
levels declined by 0.16% from 8.36% to 8.20%. A longer double-blind, placebo
controlled study may be conducted in the future to determine if the HbA1c levels
would be further reduced over a period of time that is longer than the life span
of red blood cells.
After seven weeks of treatments, systolic pressure, the higher amount of
pressure in the arteries during the contraction of the heart muscle, declined by
9.6% from 142 to 128 millimeters of mercury and stabilized at the lower level
through to the end of the study. During the same period, diastolic pressure, the
pressure in the arteries when the heart muscle is between beats, and which is
usually represented by a lower number, declined by 10.4% from 78 to 70
millimeters of mercury and also remained at the lower level. The Company has
been encouraged to undertake further studies on subjects with higher blood
pressures to determine if a proportional effect is obtained.
Pain and numbness
Neuropathy is nerve damage that can occur with diabetes as a result of high
blood glucose levels and high blood pressure. The damage most often affects the
extremities and causes pain, tingling or numbness in the hands, arms, legs and
feet. Only two subjects suffered from pain at the beginning of the Trial and
both reported feeling either less pain or reduced coldness or numbness in their
extremities. These findings support the Company's in-house informal observation
and testing results with a number of people who have used eBalance device.
Future studies may recruit subjects who are experiencing pain and loss of
Kidney function (Nephropathy)
Nephropathy is damage caused to the small blood vessels in the kidneys by high
blood glucose levels and high blood pressure that prevents them from functioning
properly or even causes them to fail completely. When the blood vessels in the
kidneys are injured, the kidneys cannot clean the blood properly. The body will
retain more water and salt than it should, which can result in weight gain and
edema. The decrease in eGFR (estimated glomerular filtration rate) observed in
the Trial and a reduction in edema seen in our informal testing may warrant
further investigation to assess the effect of eBalance treatments on kidney
function in diabetics.
Recent Corporate Developments
The following corporate developments occurred during the quarter ended February
28, 2018, and up to the date of the filing of this report:
Product Development Agreement
On October 16, 2017, we entered into a production development agreement (the
"Development Agreement") with Western Robotics Ltd. ("Western Robotics") with an
objective to enhance our eBalance Pro Wellness device based on the Company's
eBalance microcurrent technology and new findings that became evident as part of
the Clinical Study and the Company's ongoing in-house observations. The Company
agreed to pay Western Robotics CAD$250,000 as non-refundable engineering fee, of
which CAD$125,000 (USD$97,010) has been paid as of the date of this Quarterly
Report on Form 10-Q.
Change in Management
On December 1, 2017, we entered into a management consulting agreement (the
"Agreement") with Dr. Terrance Owen. Under the terms of the Agreement, Dr. Owen
will act as the Company's Chief Executive Officer for the term of one year,
expiring on November 30, 2018, and renewing automatically for consecutive 1-year
terms. Dr. Owen will be paid a consulting fee of CAD$16,666 per month.
Dr. Owen obtained a BSc (Honours) in Biology from the University of Victoria, an
MSc in Biology from the University of New Brunswick, a PhD in Zoology from the
University of British Columbia, and an MBA from Simon Fraser University.
From December 1980 to April 2002 Dr. Owen was the President and a director of
Helix Biotech, a laboratory providing DNA identity testing services for
paternity, immigration, and forensic cases. From July 1995 to June 1998 Dr. Owen
was the President, a director and a co-founder of Helix BioPharma Corp, listed
on the TSX Venture Exchange (TSX:HBP), a generic pharmaceutical company. From
2000 to 2013, Dr. Owen was the President, CEO, director and co-founder of ALDA
Pharmaceuticals Corp., an infection control company now named Vanc
Pharmaceuticals Inc. (TSX-V:VANC). Dr. Owen was also a co-founder of Champion
Pain Care Corporation (OTCQB:CPAI) and was appointed as its CEO from October
2013 to June 2015, as a Director from October 2013 to February 2017, and as CFO
from March 2015 to February 2017.
On December 1, 2017, Mr. McEnulty, our director and former Chief Executive
Officer, tendered his resignation from his position as CEO. Mr. McEnulty will
continue to serve on the Company's board of directors and as its President.
On March 23, 2018, the Company's board of directors appointed Dr. George Adams
to the Board of Directors.
Dr. Adams brings to the Company a wealth of expertise in successfully developing
and rolling out various medical devices to global markets. Dr. Adams is
currently a Director and Chief Executive Officer of VentriPoint Diagnostics Ltd.
(TSXV:VPT). Dr. Adams is a scientist and a serial entrepreneur with extensive
public market experience. His previous positions include CEO of Amorfix Life
Sciences (TSX:AMF), Chairman of Sernova Corp (TSXV:SVA) and President and CEO of
the UT Innovations Foundation. Prior to this, Dr. Adams held research and
executive positions with Boston Scientific Inc., Pfizer Inc., Corvita Canada
Inc., University of Ottawa and Canadian Red Cross.
Dr. Adams has been instrumental in founding over 32 companies and has been a
director of 10 venture capital funds, 10 start-up companies and two Centres of
Excellence. Dr. Adams was awarded a World Economic Foundation Technology Pioneer
for 2007 and TBI Company of the year in 2009. Dr. Adams has 124 scientific
publications and is a reviewer for major scientific journals, federal granting
agencies and Centres of Excellence. Dr. Adams obtained his BASc and MASc from
the University of Waterloo and his PhD in Blood and Cardiovascular Disease, from
We have not finalized the compensation package for Dr. Adams, however, the
management anticipates the compensation will commensurate with that received by
other directors, including participation in grants of stock options.
Units issued on conversion of deposits
On February 7, 2018, we agreed to convert the CAD$75,000 deposit we received on
distribution contract into 240,000 units of our common stock at a price of $0.25
per unit consisting of one common share and one share purchase warrant entitling
the holder to purchase one additional common share for a period of three years
after closing at an exercise price of $0.50 per share if exercised during the
first year, $1.00 per share if exercised during the second year, and $1.50 per
share if exercised during the third year.
Non-brokered Private Placement Financing
On March 19, 2018, the Company announced that the Company's management arranged
a non-brokered private placement offering (the "Offering") set at a price of
$0.10 per Unit for up to 10,000,000 Units for total gross proceeds of
Each Unit sold under the Offering will consist of one common share and one share
purchase warrant (the "Warrant") priced at $0.25 which will expire on the second
year anniversary of the date of issuance of the Warrant. Each Warrant can be
exercised into one common share, subject to acceleration to 30 calendar days
should common shares of the Company trade at $0.50 or greater for 10 consecutive
The Units will be issued pursuant to the provisions of Regulation S of the
United States Securities Act of 1933, as amended (the "Act") to the persons who
are not residents of the United States and are otherwise not "U.S. Persons" as
that term is defined in Rule 902(k) of Regulation S of the Act.
The Units to U.S. Persons will be issued pursuant to the provisions of Rule
506(b) of Regulation D of the Act who qualify as "accredited investors" as that
term is defined under Regulation D of the Act.
We are planning to use the proceeds from the Offering to fund our current
business operations and to continue the ongoing development of a third
generation of our eBalance Pro Device.
Results of Operations for the Three and Nine Months ended February 28, 2018 and
Our operating results for the three- and nine-month periods ended February 28,
2018, and 2017, and the changes in the operating results between those periods
are summarized in the table below.
Three Months Ended Nine
February 28, February 28, Increase / February 28, February 28, Increase /
2018 2017 (Decrease) 2018 2017 (Decrease)
Sales $ - $ 516 (100.0)% $ - $ 6,220 (100.0)%
Cost of goods
sold - 460 (100.0)% - 4,051 (100.0)%
Gross margin - 56 (100.0)% - 2,169 (100.0)%
Amortization 37,461 24,014 56.0% 115,018 60,535 90.0%
Consulting fees 64,483 73,263 (12.0)% 709,364 224,010 216.7%
expenses 79,779 121,379 (34.3)% 167,840 216,842 (22.6)%
costs 111,171 52,782 110.6% 200,165 192,807 3.8%
compensation 1,541 22,453 (93.1)% 108,472 100,656 7.8%
expenses 294,435 293,891 0.2% 1,300,859 794,850 63.7%
expense - 8,906 (100)% - 22,636 (100.0)%
Interest 1,376 1,836 (25.1)% 9,617 22,827 (57.9)%
debt - - n/a - 805,353 (100.0)%
Net loss $ (295,811) $ (304,577) (2.9)% $ (1,310,476) $ (1,643,497) (20.3)%
We did not generate any revenue during the three- and nine-month periods ended
February 28, 2018. Our revenue during the comparative periods ended February 28,
2017, consisted of sales of consumables for the spa industry. Due to the current
concentration on the research and development of our eBalance Technology and
devices based on this technology, as well as the divestiture of Avyonce
Cosmedics Inc. ("Avyonce"), our former subsidiary, in Fiscal 2017, we do not
expect to have significant operating revenue in the foreseeable future.
During the three-month period ended February 28, 2018, our operating expenses
increased by 0.2% from $293,891 incurred during the three months ended February
28, 2017, to $294,435 incurred during the three months ended February 28, 2018.
The largest factor contributing to the operating expenses was associated with
$111,171 we spent on the research and development of our third generation
eBalance Pro Device, representing a 110.6% increase as compared to $52,782 we
spent on the research and development during a three-month period ended February
28, 2017. The second largest expense item was associated with our general and
administrative costs of $79,779, a 34.3% decrease as compared to $121,379 we
spent on general and administrative fees during the three-month period ended
February 28, 2017. Our consulting fees represented the third largest expense
category for the three-month period ended February 28, 2018.
During the nine-month period ended February 28, 2018, our operating expenses
increased by 63.7% from $794,850 incurred during the nine months ended February
28, 2017, to $1,300,859 incurred during the nine months ended February 28, 2018.
The most significant changes were as follows:
During the nine-month period ended February 28, 2018, our consulting fees
increased by $485,354, from $224,010 we incurred during the nine-month period
ended February 28, 2017 to $709,364 we incurred during the nine months ended
February 28, 2018. The increase was mainly associated with a fair market value
of the options to acquire up to 1,750,000 shares of our common stock we granted
to our consultants for business development services.
Our research and development fees for the nine-month period ended February 28,
2018, increased by $7,358, from $192,807 we incurred during the nine-month
period ended February 28, 2017, to $200,165 we incurred during the nine months
ended February 28, 2018. The higher research and development fees during the
current period were associated with our development agreement with Western
Robotics, whom we engaged to assist us with enhancement of our eBalance Pro
Wellness device. We paid Western Robotics $97,010 (CAD$125,000), and agreed to
pay further CAD$125,000 upon approval and completion of the third generation
eBalance Pro Device.
Our stock-based compensation for the nine-month period ended February 28, 2018,
increased by $7,816, from $100,656 we incurred during the nine months ended
February 28, 2017, to $108,472 we incurred during the nine months ended February
28, 2018. The stock-based compensation included $89,556 (2017 - $Nil) in fair
market value of the options to acquire up to 300,000 shares of our common stock
we granted to Ms. Silina pursuant to the stock option agreement with her, and
$18,916 (2017 - $89,056) in fair market value of the options to acquire up to
2,400,000 shares of our common stock we granted to Dr. Sanderson pursuant to his
option agreement with us. The stock-based compensation for the nine-month period
ended February 28, 2017, also included $11,600 in fair market value of the
options to acquire up to 2,500,000 shares of our common stock we granted to Mr.
McEnulty pursuant to the stock option agreement with him.
Our general and administrative fees for the nine-month period ended February 28,
2018, decreased by $49,002, or 22.6%, from $216,842 we incurred during the
nine-month period ended February 28, 2017, to $167,840 we incurred during the
nine months ended February 28, 2018. The largest factors that contributed to
this change were associated with decreased corporate communication fees of
$4,669 (2017 - $92,823), travel and entertainment expenses of $10,195 (2017 -
$25,358), and professional fees of $10,176 (2017 - $16,926). These decreases
were in part offset by increased management fees of $81,130 (2017 - $41,400), as
a direct result of us appointing a new CEO and director, Mr. Owen, and by
increased accounting and audit fees of $10,654 (2017 - $4,940). Our foreign
exchange expense increased by 20,973 to $23,107, as compared to $2,134 we
incurred during the nine-month period ended February 28, 2017.
During the nine-month period ended February 28, 2018, we recorded $115,018 in
amortization on our equipment we use in observations and research and
development. During the comparative period ended February 28, 2017, our
amortization expense was $60,535. The increased amortization resulted from the
change in the estimated useful life of the underlying equipment from three to
During the nine-month period ended February 28, 2018, we accrued $9,617 (2017 -
$22,827) in interest associated with the outstanding notes payable. Of this
interest, $4,456 (2017 - $6,186) was accrued on notes payable we issued to Mr.
Jeffs, a major shareholder.
During the nine-month period ended February 28, 2017, we recorded $22,636 in
accretion expense which resulted from the difference between the 6% stated
interest rate and the 77.51% implied interest rate we used to determine the fair
value of the proceeds we received pursuant to the $50,000 term loan with Mr.
Jeffs. The term loan was fully accreted as at March 3, 2017, as such, we did not
record any accretion expense during the nine-month period ended February 28,
During the nine-month period ended February 28, 2017, we recorded $805,353 in
loss on settlement of debt when our debt holders chose to convert $1,006,691
owed to them into units of our common stock as part of the non-brokered private
placement financing we closed on October 12, 2016 (the "Offering"). The loss
resulted from the difference between the conversion price, being $0.15 per unit,
and the fair market value of our common stock on the closing of the Offering,
being $0.27 per share. We did not record any loss on settlement of debt
associated with the debt restructure we finalized on October 12, 2017.
Liquidity and Capital Resources
As at As at
February 28, May 31, Percentage
2018 2017 Change
Current assets $ 84,127 $ 100,157 (16.0)%
Current liabilities 1,001,324 1,463,055 (31.6)%
Working capital deficit $ (917,197) $ (1,362,898) (32.7)%
As of February 28, 2018, we had a cash balance of $24,048, a working capital
deficit of $917,197 and cash flows used in operations of $418,664 for the period
then ended. During the nine-month period ended February 28, 2018, we funded our
operations with $370,000 we received from subscriptions to the units of our
common stock, which we issued on October 12, 2017, $19,318 (CAD$25,000) we
received from Mr. Jeffs, a major shareholder, and $6,000 we received from an
unrelated party. See "Net Cash Provided By Financing Activities".
We did not generate sufficient cash flows from our operating activities to
satisfy our cash requirements for the period ended February 28, 2018. The amount
of cash that we have generated from our operations to date is significantly less
than our current debt obligations. There is no assurance that we will be able to
generate sufficient cash from our operations to repay the amounts owing under
these notes and advances payable, or to service our other debt obligations.
we are unable to generate sufficient cash flow from our operations to repay the
amounts owing when due, we may be required to raise additional financing from
other sources. The outcome of these matters cannot be predicted with any
certainty at this time and raises substantial doubt that we will be able to
continue as a going concern.
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