The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed 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, 2021, filed with
the United States Securities and Exchange Commission (the "SEC") on August 30,
2021.
Overview
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 new business direction. On April 26, 2016, we formed a
subsidiary, Cell MedX (Canada) Corp., (the "Subsidiary") under the laws of the
Province of British Columbia.
We are a biotech company focused on the discovery, development and
commercialization of therapeutic and non-therapeutic products that promote
general health, pain relief, wellness and alleviate complications associated
with medical conditions including, but not limited to: diabetes, Parkinson's
disease, high blood pressure, neuropathy and kidney function. Our Subsidiary is
engaged in development and manufacturing of therapeutic devices based on our
proprietary eBalance® Technology, which harnesses power of microcurrents and
their effects on human body.
Current uncertainty with respect to continued expansion of the COVID-19 pandemic
We are cognizant of the continued expansion of the COVID-19 pandemic and the
resulting global implications. To date, we have experienced minor disruptions to
our day-to-day operations associated with delayed services resulting from
various COVID-19 restrictions and shortage of manpower experienced by some of
our service providers. We caution that there continues to be a possibility for
increase of the restrictions currently in place, or addition of new restrictions
currently not known to us. The impact of these restrictions on our operations,
if implemented, is currently unknown but could be significant.
Recent Corporate Developments
Update on eBalance® Research and Development Activities
In September 2021, the Company submitted a premarket notification (510K) to the
U.S. Food and Drug Administration (FDA) for the eBalance® Home System and
eBalance® Pro System.
The eBalance® Pro System and eBalance® Home System, are microcurrent
electrotherapy systems intended to administer a specific variety of therapeutic
microcurrent algorithms for temporary relief of pain associated with sore/aching
muscles in the shoulders, waist, back, neck, upper extremities (arms) and lower
extremities (legs) due to strain from exercise or normal household- or
work-related activities, as well as for general relaxation.
The eBalance® Pro System is intended for use by professionals in the clinical
setting and the eBalance® Home System is intended for home use by laypersons.
As of the date of this Quarterly Report on Form 10-Q we continue to work on our
certification with FDA for premarket notification (510K).
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Results of Operations for the Three and Nine Months ended February 28, 2022 and
2021
Our operating results for the three- and nine-month periods ended February 28,
2022 and 2021, and the changes in the operating results between those periods
are summarized in the table below.
Three Months Ended Nine Months Ended
Percentage Percentage
February 28, February 28, Increase/ February 28, February 28, Increase/
2022 2021 (Decrease) 2022 2021 (Decrease)
Sales $ 422 $ 4,374 (90.4)% $ 3,290 $ 7,712 (57.3)%
Cost of goods (308) (2,706) (88.6)% (1,496) (4,063) (63.2)%
Gross margin 114 1,668 (93.2)% 1,794 3,649 (50.8)%
Operating
expenses
Amortization 198 520 (61.9)% 941 1,888 (50.2)%
Consulting
fees 36,917 63,746 (42.1)% 166,025 203,133 (18.3)%
Distribution
expenses - - n/a% - 261 (100.0)%
General and
administrative
expenses 44,755 37,232 20.2% 254,234 150,735 68.7%
Research and
development
costs 30,884 70,145 (56.0)% 98,181 193,820 (49.3)%
Total
operating
expenses 112,754 171,643 (34.3)% 519,381 549,837 (5.5)%
Interest 6,849 9,033 (24.2)% 17,231 23,358 (26.2)%
Net loss $ 119,489 $ 179,008 (33.2)% $ 534,818 $ 569,546 (6.1)%
Revenues
During the three-month period ended February 28, 2022, we recognized $422 in
monthly recurring revenue we received from sales of eBalance® treatment
packages. The cost attributed to this revenue was $308. During the comparative
three-month period ended February 28, 2021, we recognized $4,374 in revenue,
which consisted of $2,286 we received from sales of our eBalance® wellness
devices, and $2,088 from monthly recurring revenue associated with the eBalance®
treatment packages. The cost attributed to this revenue was $2,706.
During the nine-month period ended February 28, 2022, we recognized $3,290 in
revenue, which consisted of $1,200 in revenue from sales of eBalance® devices
and $2,090 we received from monthly recurring revenue associated with the
eBalance® treatment packages. The cost attributed to this revenue was $1,496.
During the comparative nine-month period ended February 28, 2021, we recognized
$7,712 in revenue, which consisted of $2,286 we received from sales of our
eBalance® wellness devices, and $5,426 from monthly recurring revenue associated
with the eBalance® treatment packages. The cost attributed to this revenue was
$4,063.
As of the date of this Quarterly Report on Form 10-Q, we continue research and
further development of our eBalance® Technology and devices based on this
technology. During the summer of 2020, Health Canada granted our eBalance® Home
and Pro Systems Class II medical device licenses, which allow us to market our
eBalance® devices for wellness and pain management. Our certification with U.S.
Food and Drug Administration (FDA) continues to be ongoing; at the time of this
Quarterly Report on Form 10-Q we have submitted a premarket notification (510K)
to the FDA for the eBalance® Home System and eBalance® Pro System, which, when
approved, will allow us to demonstrate that the eBalance® Home System and
eBalance® Pro System are at least as safe and effective as a legally marketed
predicate device available on the market. Once this submission is approved, it
will allow us to start our commercial activity in the USA.
Operating Expenses
During the three-month period ended February 28, 2022, our operating expenses
decreased by 34.3% from $171,643 we incurred during the three months ended
February 28, 2021, to $112,754 we incurred during the three months ended
February 28, 2022. The largest changes were associated with decreased research
and development costs, which, for the three months ended February 28, 2022, were
$30,884, as compared to $70,145 we incurred during the three months ended
February 28, 2021, and consulting fees, which, for the three-month period ended
February 28, 2022, decreased by $26,829, from $63,746 we incurred during the
three-month period ended February 28, 2021, to $36,917 we incurred during the
three-month period ended February 28, 2022. Other significant expenses during
this period included $22,000 in corporate communication fees (February 28, 2021
- $19,500), $5,216 in accounting and audit fees (February 28, 2021 - $4,774),
and $10,500 in management fees (February 28, 2021 - $10,500). Foreign exchange
fluctuation during the period ended February 28, 2022, resulted in a gain of
$7,321, as compared to a gain of $18,777 during the comparative period ended
February 28, 2021.
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On a year-to-date basis, the most significant changes were as follows:
·During the nine-month period ended February 28, 2022, our consulting fees
decreased by $37,108, or 18.3%, from $203,133 we incurred during the nine-month
period ended February 28, 2021, to $166,025 we incurred during the nine-month
period ended February 28, 2022.
·Our research and development costs for the nine-month period ended February 28,
2022, decreased by $95,639, or 49.3%, from $193,820 we incurred during the
nine-month period ended February 28, 2021, to $98,181 we incurred during the
nine-month period ended February 28, 2022. The lower research and development
costs during the nine-month period ended February 28, 2022, were associated with
our decision to suspend further development of the eBalance® devices until such
time that our 510(K) notification to the FDA is finalized and submitted.
·Our general and administrative expenses for the nine-month period ended
February 28, 2022, increased by $103,499, or 68.7%, from $150,735 we incurred
during the nine-month period ended February 28, 2021, to $254,234 we incurred
during the nine-month period ended February 28, 2022. The largest factor that
contributed to this change was associated with fluctuation in foreign exchange
rates, which, during the nine-month period ended February 28, 2022, resulted in
$57,117 loss, as compared to $65,944 gain during the comparative period. Other
factors that affected our general and administrative expenses were associated
with a $1,500 increase to our management fees, which increased from $30,000 we
incurred during the nine-month period ended February 28, 2021, to $31,500 for
the nine-month period ended February 28, 2022; a $2,583 increase to our filing
and regulatory fees, which increased from $22,335 we incurred during the
nine-month period ended February 28, 2021, to $24,918 for the nine-month period
ended February 28, 2022; and a $3,364 increase to our office expenses, which
increased from $6,082 we incurred during the nine-month period ended February
28, 2021, to $9,446 for the nine-month period ended February 28, 2022.
·The increases in general and administrative expenses were in part offset by an
$18,922 decrease to our professional fees, from $22,390 we incurred during the
nine-month period ended February 28, 2021, to $3,468 we incurred during the
nine-month period ended February 28, 2022; a $4,134 decrease to our marketing
and advertising expenses, as we did not incur any such expenditures during the
nine-month period ended February 28, 2022; a $1,597 decrease to our expenditures
on corporate communications, which decreased from $113,082 we incurred during
the nine-month period ended February 28, 2021, to $111,485 we incurred during
the nine-month period ended February 28, 2022; a $1,581 decrease to our
accounting and audit fees, which decreased from $14,797 we incurred during the
nine-month period ended February 28, 2021, to $13,216 for the nine-month period
ended February 28, 2022; and, to a smaller extent, decreases in bank fees, and
travel and entertainment fees, which decreased to $1,023 and $2,061
respectively.
Other Items
During the three-month period ended February 28, 2022, we accrued $6,849
(February 28, 2021 - $9,033) in interest associated with the outstanding notes
payable. On a year-to-date basis, we accrued $17,231 (February 28, 2021 -
$23,358) in interest associated with the outstanding notes payable. Of this
interest, $12,441 (February 28, 2021 - $2,352) represented interest we accrued
on the notes payable to our related parties.
Liquidity and Capital Resources
Working Capital
As at As at Percentage
February 28, 2022 May 31, 2021 Change
Current assets $ 54,695 $ 51,047 7.1%
Current liabilities 1,894,705 1,628,300 16.4%
Working capital deficit $ (1,840,010) $ (1,577,253) 16.7%
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As of February 28, 2022, we had a cash balance of $30,736, a working capital
deficit of $1,840,010 and cash flows used in operations of $356,013 for the
period then ended. During the nine-month period ended February 28, 2022, we
funded our operations with $100,000 received from our private placement
financing, $60,000 from exercise of warrants, and $205,875 we borrowed under
non-arms-length loan agreements accumulating interest at 6% per annum,
compounded monthly, and due on demand.
We did not generate sufficient cash flows from our operating activities to
satisfy our cash requirements for the period ended February 28, 2022. The amount
of cash 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
the outstanding notes and advances payable, or to service our other debt
obligations. If 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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CELL MEDX CORP. 