CELL MEDX CORP.

CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

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

F-1

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

F-2

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

F-3

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

F-4

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

FEBRUARY 28, 2017

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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, 2016, filed with the United States Securities and Exchange Commission (the “SEC”) on September 13, 2016.

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 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 pressure.

On November 26, 2014, we formed a subsidiary, Avyonce Cosmedics Inc., (“Avyonce”) under the laws of the Province of British Columbia. Avyonce’s main business activity was channelled towards the resale and marketing of spa technology and equipment to the worldwide beauty and wellness industry. We divested of Avyonce in January of 2017, to allow us to concentrate our efforts on our core business.

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 period ended February 28, 2017, the Company, with the assistance of Nutrasource Diagnostics Inc., has secured the main research facility in Hamilton, Ontario, completed an investigational protocol as well as Informed Consent and Ethics Board submission documentation, in an anticipation to enter regulated clinical trials (the “Study”). The Company received Health Canada’s approval to commence the Study on January 12, 2017. The approval from the Ethics Review Board was received on January 30, 2017.

With all required approvals in place, Dr. Richard Tytus, the Lead Investigator on the Study, and his team at Hamilton Medical Research Group commenced screening for qualified subjects in late February of 2017. As of the day of this Quarterly Report on Form 10-Q, the group of study participants had been increased to 37, with 29 subjects having started their three-month eBalance therapy.

The intent of the Study is to assess the impact of three months of eBalance therapy as an adjunct treatment, on HbA1c in Type 1 and Type 2 diabetics. The secondary endpoints of the Study will observe changes from baseline and medical history in the following;

·

Insulin sensitivity

·

Diabetic neuropathy

·

Diabetic foot pain and numbness

·

Wound healing

·

Blood pressure

·

Kidney function

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Any other changes reported by patients

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Recent Corporate Developments

The following corporate developments occurred during the quarter ended February 28, 2017, and up to the date of the filing of this report:

Change in Management

On January 23, 2017, Ms. Jean Arnett resigned as our Vice President, Corporate Strategy and as our director. Ms. Arnett’s resignation was not caused by any disagreement with the Company, whether related to our operations, policies, practices or otherwise. To fill the vacancy the board of directors appointed Bradley Hargreaves, our current VP, Technology and Operaitons, as a director.

Divestiture of Avyonce Cosmedics Inc.

On January 23, 2017, our board of directors approved the divestiture of Avyonce.  To complete the divestiture, the Company has orally agreed to transfer Avyonce to Ms. Jean Arnett for nominal consideration. For accounting purposes, the divestiture was made effective as of December 31, 2016. Upon transferring Avyonce to Ms. Arnett, the Company and Avyonce agreed to forgive all intercompany debt outstanding at December 31, 2016, which translated into USD$63,503 (CAD$85,265). The decision to divest Avyonce was made in order to allow the Company to better concentrate on upcoming observational clinical studies of its eBalance Technology, while simultaneously continuing the development of therapeutic and non-therapeutic devices based on the eBalance Technology.

Loan Agreements

During the quarter ended February 28, 2017, we entered into a number of loan agreements for a total of $141,697, of which CAD$40,000 were lent to us by Mr. Richard Jeffs, our major shareholder. The loans bear interest at 6% per annum, compounded monthly, are unsecured and payable on demand.

eBalance Pro Wellness Devices

During the quarter ended February 28, 2017, we received additional 20 eBalance Pro wellness devices. The Company plans to use several of these devices in its observations and in the Study as well as to obtain all  required regulatory approvals.

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Revenues

Our revenue during the three and nine-month periods ended February 28, 2017, and during the comparative period ended February 29, 2016, consisted of sales of consumables for the spa industry. Due to the current concentration on research and development of our eBalance Technology and devices based on this technology, as well as divestiture of Avyonce, we do not expect to have significant operating revenue in the foreseeable future.

Operating Expenses

During the three-month period ended February 28, 2017, our operating expenses increased by 1.9% from $288,414 incurred during the three months ended February 29, 2016, to $293,891 incurred during the three months ended February 28, 2017. Relatively comparable results were affected by $141,569 reduction in stock-based compensation, mainly due to the vesting terms of the options granted during our Fiscal 2015 and 2016, which was offset by increases in general and administrative expenses of $88,642, which increased from $32,737 incurred during the nine-month period ended February 29, 2016, to $121,379 we incurred during the nine-month period ended February 28, 2017; $37,139 increase in research and development fees associated with our Clinical Study; and $20,594 increase in amortization expense we recorded on equipment that we are using for our research and further development of our Technology.

During the nine-month period ended February 28, 2017, our operating expenses decreased by 55.6% from $1,790,897 incurred during the nine months ended February 29, 2016, to $794,850 incurred during the nine months ended February 28, 2017. The most significant year-to-date changes were as follows:

·

Our research and development fees for the nine-month period ended February 28, 2017, decreased by $401,560, from $594,367 we incurred during the nine months ended February 29, 2016 to $192,807 we incurred during the nine months ended February 28, 2017. The higher research and development fees during the comparative period were directly attributed to $496,345 we recorded as fair value of options to acquire up to 2,500,000 shares of our common stock which we granted to Ms. Arnett and Mr. Hargreaves in connection with our acquisition from them of the eBalance Technology pursuant to our Technology Purchase Agreement, as amended.

·

Our stock-based compensation for the nine-month period ended February 28, 2017, decreased by $670,232, from $770,888 we incurred during the nine months ended February 29, 2016 to $100,656 we incurred during the nine months ended February 28, 2017. The stock-based compensation included $89,056 (2015 - $216,512) in fair market value of the options we granted to Dr. Sanderson pursuant to his consulting agreement with us, and $11,600 (2015 - $554,376) in fair market value of the options we granted to Mr. McEnulty pursuant to his option agreement with us.

·

During the nine-month period ended February 28, 2017, our consulting fees decreased by $38,292, from $262,302 we incurred during the nine months ended February 29, 2016, to $224,010 we incurred during the nine months ended February 28, 2017. The decrease was mainly associated with a change in consulting arrangements with Ms. Arnett and Mr. Hargreaves - the vendors of our eBalance Technology.

·

Our general and administrative fees for the nine-month period ended February 28, 2017, increased by $63,422, or 41.3%, from $153,420 we incurred during the nine months ended February 29, 2016 to $216,842 we incurred during the nine months ended February 28, 2017. The largest factors that contributed to this increase were associated with an increase in our corporate communication fees of $65,750, travel fees of $25,888, loss on foreign exchange of $7,259 and filing and regulatory fees of $1,585. These increases were in part offset by decreases in rent fees of $19,635 accounting and audit fees of $6,282, salaries and wages of $6,992, and professional fees of $2,321.

·

During the nine-month period ended February 28, 2017, we recorded $60,535 in amortization on our equipment used in observations and research and development. During the comparative period ended February 29, 2016, our amortization expense was $9,920.

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Other Items

·

During the nine-month period ended February 28, 2017, we accrued $22,827 (2016 - $19,953) in interest associated with the outstanding notes payable. Of this interest, $6,186 (2016 - $4,953) was accrued on notes payable we issued to Mr. Jeffs, our major shareholder.

·

During the nine-month period ended February 29, 2016, we recorded $2,979 in a gain on sale of equipment which we sold to Mr. Hargreaves for total proceeds of $19,301. We did not have similar transactions during the nine-month period ended February 28, 2017.

·

During the nine-month period ended February 28, 2017, we recorded $22,636 (2016 - $Nil) 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.

·

During the nine-month period ended February 28, 2017, we recorded $805,353 (2016 - $Nil) 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.

As of February 28, 2017, we had a cash balance of $9,140, a working capital deficit of $1,027,827 and cash flows used in operations of $560,130 for the period then ended. During the nine-month period ended February 28, 2017, we funded our operations with $357,500 we received from subscriptions to the units of our common stock, we issued as part of our Offering, $104,129 (CAD$136,500) we received from Mr. Jeffs, our major shareholder, and with $186,336 we received from non-related parties. 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, 2017. The amount of cash that we have generated from our operations to date is significantly less than our current debt obligations, including our debt obligations under our remaining notes payable. 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.  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.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

None

Item 4. Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2017. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified in Securities and Exchange Commission’s rules and forms due to lack of segregation of duties.

During the quarter ended February 28, 2017, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

There is a high degree of risk associated with investing in our securities.  Prospective investors should carefully read this Quarterly Report on Form 10-Q and consider the following risk factors when deciding whether to purchase our securities.

The risk factors outlined below are some of the known, substantial, material and potential risks that could adversely affect our business, financial condition, operating results and common share value. We cannot assure that we will successfully address these or any unknown risks and a failure to do so can have a negative impact on your investment.  We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.

Risks Associated with our Company and our Industry

We operate in a highly competitive market. We face competition from large, well established medical device manufacturers and pharmaceutical companies in the market for treating and managing diabetes and related ailments.  Many of these companies are very well accepted by health practitioners and have significant resources, and we may not be able to compete effectively.

The market for devices and therapies for treating and managing diabetes and related ailments is intensely competitive, subject to rapid change and significantly affected by new product introductions. We compete indirectly with large pharmaceutical and medical device companies, such as Bayer Corp., Becton Dickinson Corp., LifeScan Inc., a division of Johnson & Johnson, MediSense Inc. and TheraSense Inc. These competitors’ products are based on traditional healthcare model and are well accepted by health practitioners and patients. If these companies decide to penetrate our target market they could threaten our position in the market.

We are subject to numerous governmental regulations which can increase our costs of developing our eBalance Technology and products based on this technology.

Our products may be subject to rigorous regulation by the FDA, Health Canada and numerous international, supranational, federal, and state authorities. The process of obtaining regulatory approvals to market a medical device can be costly and time-consuming, and approvals might not be granted for future products, or additional indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to obtain approvals for, our products, or new indications and uses, could result in delayed realization of product revenues, reduction in revenues, and in substantial additional costs. In addition, no assurance can be given that we will remain in compliance with applicable FDA, Health Canada and other regulatory requirements once approval or marketing authorization has been obtained for a product. These requirements include, among other things, regulations regarding manufacturing practices, product labeling, and advertising and post-marketing reporting, including adverse event reports and field alerts due to manufacturing quality concerns.

Changes in the health care regulatory environment may adversely affect our business.

A number of the provisions of the U.S. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and its amendments changed access to health care products and services and established new fees for the medical device industry. Future rulemaking could increase rebates, reduce prices or the rate of price increases for health care products and services, or require additional reporting and disclosure. We cannot predict the timing or impact of any future rulemaking.

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Competitors' intellectual property may prevent us from selling our products or have a material adverse effect on our future profitability and financial condition.

Competitors may claim that our Technology infringes upon their intellectual property. Resolving an intellectual property infringement claim can be costly and time consuming and may require us to enter into license agreements. We cannot guarantee that we would be able to obtain license agreements on commercially reasonable terms. A successful claim of patent or other intellectual property infringement could subject us to significant damages or an injunction preventing the manufacture, sale or use of our product. Any of these events could have a material adverse effect on our profitability and financial condition.

Our research and development efforts may not result in the development of commercially successful products based on our eBalance Technology, which may hinder our profitability and future growth.

Our eBalance Technology is currently in the research and development stage as are our planned products incorporating this technology.  In order to develop commercially marketable products, we will be required to commit substantial efforts, funds, and other resources to research and development. A high rate of failure is inherent in the research and development of new products and technologies. We must make ongoing substantial expenditures without any assurance that our efforts will be commercially successful. Failure can occur at any point in the process, including after significant funds have been invested. Planned products may fail to reach the market or may only have limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or infringement of the intellectual property rights of others.

Even if we successfully develop marketable products or commercially develop our current technology, we may be quickly rendered obsolete by changing customer preferences, changing industry standards, or competitors' innovations.

Innovations may not be accepted quickly in the marketplace because of, among other things, entrenched patterns of clinical practice or uncertainty over third-party reimbursement. We cannot state with certainty when or whether our products under development will be launched, whether we will be able to develop, license, or otherwise acquire new products, or whether any products will be commercially successful. Failure to launch successful new products or new indications for existing products may cause our products to become obsolete, causing our revenues and operating results to suffer.

New products and technological advances by our competitors may negatively affect our results of operations.

Our products face intense competition from our competitors. Competitors' products may be safer, more effective, more effectively marketed or sold, or have lower prices or superior performance features than our products. We cannot predict with certainty the timing or impact of the introduction of competitors' products.

Significant safety concerns could arise for our products, which could have a material adverse effect on our revenues and financial condition.

Healthcare products typically receive regulatory approval based on data obtained in controlled clinical trials of limited duration. Following regulatory approval, these products will be used over longer periods of time in many patients. Investigators may also conduct additional, and perhaps more extensive, studies. If new safety issues are reported, we may be required to amend the conditions of use for a product. For example, we may be required to provide additional warnings on a product's label or narrow its approved intended use, either of which could reduce the product's market acceptance. If serious safety issues arise with our product, sales of the product could be halted by us or by regulatory authorities. Safety issues affecting suppliers' or competitors' products also may reduce the market acceptance of our products.

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Inability to attract and maintain key personnel may cause our business to fail.

Success depends on the acquisition of key personnel.  We will have to compete with other companies both within and outside the healthcare industry to recruit and retain competent employees and consultants.  If we cannot maintain qualified personnel to meet the needs of our anticipated growth, we could face material adverse effects on our business and financial condition.

We are recently formed, lack an operating history and to date have generated only minimal revenues.  If we cannot increase our revenues to start generating profits, our investors may lose their entire investment.

We are a recently formed company and to date have generated only minimal revenues through sales of Spa equipment and services through our wholly owned subsidiary, Avyonce, which we divested of in January of 2017. No profits have been made to date and if we fail to make any then we may fail as a business and an investment in our common stock will be worth nothing.  We have a very limited operating history and thus our progress as well as potential future success cannot be reasonably estimated.  Success has yet to be proven. We have yet to prove our eBalance Technology through clinical trials and we have yet to develop any products through which we would be able to start generating revenue. Financial losses should be expected to continue in the near future and at least until such time that we enter commercial production of devices based on the eBalance Technology, of which there is no assurance.  As a new business we face all the risks of a ‘start-up’ venture including unforeseen costs, expenses, problems, and management limitations and difficulties.  Since inception, we have accumulated deficit of $4,898,094 and there is no guarantee, that we may ever be able to turn a profit or locate additional opportunities, hire additional management and other personnel.

We need to acquire additional financing or our business will fail.

We must obtain additional capital or our business will fail. In order to continue development of our eBalance Technology and to successfully complete clinical trials, we must secure more funds. Currently, we have very limited resources and have already accumulated a net loss. Financing may be subject to numerous factors including investor sentiment, acceptance of our technology and so on.  We currently have no arrangements for additional financing.  We may also have to borrow large sums of money that require substantial capital and interest payments.

Risks related to our stock

We expect to raise additional capital through the offering of more shares, which will result in dilution to our current shareholders.

Raising additional capital through future offerings of common stock is expected to be necessary for our Company to continue.  However there is no guarantee that we will be successful in raising additional capital. Issuance of additional stock will increase the total number of shares issued and outstanding resulting in decrease of the percentage interest held by each of our shareholders.

There is a limited market for our common stock meaning that our shareholders may not be able to resell their shares.

Our common stock currently has a limited market which may restrict shareholders’ ability to resell their stock or use their stock as collateral. Thus, the shareholders may have to sell their shares privately which may prove very difficult. Private sales are more difficult and often give lower than anticipated prices.

Should a larger public market develop for our stock, future sales of shares may negatively affect their market price.

Even if a larger market develops, the shares may be sparsely traded and have wide share price fluctuations.  Liquidity may be low despite there being a market, making it difficult to get a return on the investment.  The price also depends on potential investor’s feelings regarding the results of our operations, the competition of other companies’ shares, our ability to generate future revenues, and market perception about future of microcurrent technologies.

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Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.

Because our securities constitute "penny stocks" within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the quotation price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:

·

contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;

·

contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;

·

contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;

·

contains a toll-free telephone number for inquiries on disciplinary actions;

·

defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and

·

contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

We have not paid nor anticipate paying cash dividends on our common stock.

We have not declared any dividends on our common stock during the past two fiscal years or at any time in our history.  The Nevada Revised Statutes (the “NRS”), provide certain limitations on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:

(a)

we would not be able to pay our debts as they become due in the usual course of business; or

(b)

except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.

We do not expect to declare any dividends in the foreseeable future as we expect to spend any funds legally available for the payment of dividends on the development of our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

13

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SIGNATURES

Pursuant to the requirements 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.

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