UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended November 30, 2020
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Commission File Number: 000-54500
Cell MedX Corp.
(Exact name of registrant as specified in its charter)
Nevada |
|
38-3939625 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
incorporation or organization) |
|
Identification No.) |
123 W. Nye Ln, Suite 446 Carson City, NV |
|
89706 |
(Address of principal executive offices) |
|
(Zip code) |
(844) 238-2692
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
|
Accelerated filer [ ] |
Non-accelerated filer [ ] |
|
Smaller Reporting Company [X] |
|
|
Emerging Growth Company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act.) Yes [ ] No [X]
The number of shares of the Registrants common stock, par value $.001 per share, outstanding as of January 14, 2020 was 59,388,564.
CONTENTS
ii
PART I - FINANCIAL INFORMATION
The accompanying unaudited condensed consolidated interim financial statements of Cell MedX Corp. as at November 30, 2020, have been prepared by the Companys management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
Operating results for the three- and six-month periods ended November 30, 2020, are not necessarily indicative of the results that can be expected for the year ending May 31, 2021.
As used in this Quarterly Report, the terms we, us, our, Cell MedX, and the Company mean Cell MedX Corp. and its subsidiary, Cell MedX (Canada) Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars.
1
CELL MEDX CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US DOLLARS)
(Unaudited)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-1
CELL MEDX CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN US DOLLARS)
(Unaudited)
Three Months Ended
November 30,
Six Months Ended
November 30,
2020
2019
2020
2019
Revenue
Sales
$
1,871
$
757
$
3,338
$
12,100
Distribution rights
-
9,480
-
18,438
Cost of goods sold
988
522
1,357
5,897
Gross margin
883
9,715
1,981
24,641
Operating expenses
Amortization
632
545
1,368
813
Consulting fees
62,447
61,728
139,387
150,999
Distribution expenses
-
19,173
261
35,620
General and administrative expenses
80,723
132,080
113,503
218,642
Research and development costs
38,538
95,894
123,675
156,607
Total operating expenses
182,340
309,420
378,194
562,681
Other items
Interest
(7,879)
(3,783)
(14,325)
(10,735)
Net loss
(189,336)
(303,488)
(390,538)
(548,775)
Foreign currency translation income (loss)
(7,227)
453
(64,109)
(6,488)
Comprehensive loss
$
(196,563)
$
(303,035)
$
(454,647)
$
(555,263)
Net loss per common share
Basic and diluted
$
(0.00)
$
(0.01)
$
(0.01)
$
(0.01)
Weighted average number of shares outstanding
Basic and diluted
59,388,564
55,075,636
58,054,426
51,139,321
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-2
CELL MEDX CORP.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(EXPRESSED IN US DOLLARS)
(Unaudited)
Obligation
Additional
Accumulated
Other
Common Stock
to Issue
Paid-in
Deficit
Comprehensive
Shares
Amount
Shares
Capital
Reserves
Accumulated
Income (Loss)
Total
Balance - May 31, 2019
44,282,749
$
44,283
$
-
$
5,109,866
$
14,400
$
(6,956,822)
$
15,714
$
(1,772,559)
Shares issued for cash
4,050,000
4,050
-
481,950
-
-
-
486,000
Shares issued on exercise of warrants
-
-
374,148
-
-
-
-
374,148
Net loss for the three months
ended August 31, 2019
-
-
-
-
-
(245,287)
-
(245,287)
Translation to reporting currency
-
-
-
-
-
-
(6,941)
(6,941)
Balance August 31, 2019
48,332,749
$
48,333
$
374,148
$
5,591,816
$
14,400
$
(7,202,109)
$
8,773
$
(1,164,639)
Shares issued on exercise of warrants
7,482,960
7,483
(374,148)
366,665
-
-
-
-
Net loss for the three months
ended November 30, 2019
-
-
-
-
-
(303,488)
-
(303,488)
Translation to reporting currency
-
-
-
-
-
-
453
453
Balance - November 30, 2019
55,815,709
$
55,816
$
-
$
5,958,481
$
14,400
$
(7,505,597)
$
9,226
$
(1,467,674)
Balance - May 31, 2020
55,915,709
$
55,916
$
80,000
$
5,988,153
$
366,493
$
(8,049,520)
$
38,614
$
(1,520,344)
Shares issued for cash
988,000
988
(80,000)
246,012
-
-
-
167,000
Shares issued on exercise of options
2,484,855
2,485
-
121,758
-
-
-
124,243
Net loss for the three months
ended August 31, 2020
-
-
-
-
-
(201,202)
-
(201,202)
Translation to reporting currency
-
-
-
-
-
-
(56,882)
(56,882)
Balance August 31, 2020
59,388,564
$
59,389
$
-
$
6,355,923
$
366,493
$
(8,250,722)
$
(18,268)
$
(1,487,185)
Net loss for the three months
ended November 30, 2020
-
-
-
-
-
(189,336)
-
(189,336)
Translation to reporting currency
-
-
-
-
-
-
(7,227)
(7,227)
Balance - November 30, 2020
59,388,564
$
59,389
$
-
$
6,355,923
$
366,493
$
(8,440,058)
$
(25,495)
$
(1,683,748)
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-3
CELL MEDX CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
(Unaudited)
Six Months Ended
November 30,
2020
2019
Cash flows used in operating activities
Net loss
$
(390,538)
$
(548,775)
Adjustments to reconcile net loss to net cash used in operating activities
Accrued interest on notes payable
14,325
10,735
Amortization
1,368
813
Unrealized foreign exchange
(48,686)
(2,909)
Non-cash IR fees
11,000
-
Changes in operating assets and liabilities
Inventory
2,070
(3,293)
Other current assets
29,937
11,849
Accounts payable
24,776
58,529
Accrued liabilities
(24,545)
2,823
Unearned revenue
-
(244)
Due to related parties
66,520
(8,898)
Net cash used in operating activities
(313,773)
(479,370)
Cash flows used in investing activities
Acquisition of equipment
(1,574)
(2,463)
Net cash used in investing activities
(1,574)
(2,463)
Cash flows from financing activities
Advances payable
-
15,000
Proceeds from notes payable
125,773
197,650
Proceeds from subscription to shares
167,000
486,000
Net cash provided by financing activities
292,773
698,650
Effects of foreign currency exchange on cash
(732)
1,002
Increase (decrease) in cash
(23,306)
217,819
Cash, beginning
45,090
57,172
Cash, ending
$
21,784
$
274,991
Non-cash financing transactions:
Exercise of warrants for debt
$
-
$
374,148
Exercise of options for debt
$
124,243
$
-
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
F-4
CELL MEDX CORP.
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2020
(Unaudited)
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
Cell MedX Corp. (Cell MedX, or the Company) was incorporated under the laws of the State of Nevada. On April 26, 2016, the Company formed a subsidiary, Cell MedX (Canada) Corp. (Cell MedX Canada) under the laws of the province of British Columbia. Cell MedX is a biotech company focusing on the discovery, development and commercialization of therapeutic and non-therapeutic products that promote general wellness.
Unaudited Interim Financial Statements
The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the SEC). They do not include all information and footnotes required by GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended May 31, 2020, included in the Companys Annual Report on Form 10-K, filed with the SEC on September 15, 2020. The interim unaudited condensed consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three- and six-month periods ended November 30, 2020, are not necessarily indicative of the results that may be expected for the year ending May 31, 2021.
Going concern
The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of November 30, 2020, the Company has not achieved profitable operations and has accumulated a deficit of $8,440,058. Continuation as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet obligations and pay its liabilities arising from normal business operations when they come due and ultimately upon its ability to achieve profitable operations. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that the Company will be able to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Management intends to obtain additional funding by borrowing funds from its directors and officers, issuing promissory notes, and/or private placement of common stock.
Risks related to the rapid expansion of the COVID-19 pandemic
The Company is cognizant of the rapid expansion of the COVID-19 pandemic and the resulting global implications. To date, the Company has experienced minor disruptions to the Companys day-to-day operations associated with delayed services resulting from various COVID-19 restrictions and shortage of man power experienced by some of the Companys service providers. The Company cautions that there continues to be a possibility for increase of the restrictions currently in place, or addition of new restrictions currently not known to the Company. The impact of these restrictions on the Companys operations, if implemented, is currently unknown but could be significant.
F-5
NOTE 2 - RELATED PARTY TRANSACTIONS
Amounts due to related parties, other than advances and notes payable to related parties (Note 7) at November 30, 2020, and at May 31, 2020:
November 30, 2020
May 31, 2020
Due to the Chief Executive Officer (CEO)
$
109,200
$
103,200
Due to the Chief Financial Officer (CFO)
7,966
9,533
Due to/(from) the Vice President (VP), Technology and Operations
(3,424)
34,219
Due to a company controlled by the Chief Operating Officer (COO)(1)
618,122
n/a
Due to a major shareholder
-
86,786
Due to a company controlled by the COO and major shareholder
2,250
n/a
Due to a company of which the COO is a director of
123
n/a
Due to related parties
$
734,237
$
233,738
(1)John da Costa was appointed Director and Chief Operating Officer of the Company on June 8, 2020, as of that date any company controlled by Mr. Da Costa is considered to be a related entity.
The amounts due to related parties are unsecured, due on demand and bear no interest.
During the six-month periods ended November 30, 2020 and 2019, the Company had the following transactions with related parties:
November 30, 2020
November 30, 2019
Management fees incurred to the CEO
$
6,000
$
21,600
Management fees incurred to the CFO
13,500
6,000
Consulting fees incurred to the VP, Technology and Operations
22,337
22,593
Consulting fees incurred to the company controlled by the COO
77,378
n/a
Royalty incurred to the company of which the COO is a director of
53
n/a
Total transactions with related parties
$
119,268
$
50,193
NOTE 3 - INVENTORY
As at November 30, 2020, the inventory consisted of eBalance® devices and accessories held for sale valued at $29,290 (May 31, 2020 - $29,405) and work in progress, that included unfinished eBalance® devices and supplies required for manufacturing valued at $23,761 (May 31, 2020 - $22,481).
NOTE 4 - OTHER CURRENT ASSETS
As at November 30, 2020, other current assets consisted of $14,325 in prepaid expenses (May 31, 2020 - $44,021) and $6,423 in receivables associated with GST Cell MedX Canada paid on taxable supplies (May 31, 2020 - $16,346).
NOTE 5 - EQUIPMENT
Changes in the net book value of the equipment at November 30, 2020 and May 31, 2020 are as follows:
November 30, 2020
May 31, 2020
Book value, beginning of the period
$
1,836
$
1,281
Changes during the period
1,574
2,463
Amortization
(1,368)
(1,846)
Foreign exchange
96
(62)
Book value, end of the period
$
2,138
$
1,836
F-6
NOTE 6 - REVENUE
During the six-month period ended November 30, 2020, the Companys revenue consisted of monthly subscriptions to eBalance® microcurrent treatments. During the comparative six-month period ended November 30, 2019, the Companys revenue consisted of sales of its eBalance® devices, and the fees associated with the rights to the wholesale distribution of eBalance® devices pursuant to a letter of intent the Company entered into on June 6, 2019, which granted a potential distributor rights to all Mainland China, not including Hong Kong. Following are the details of revenue and associated costs:
Three months ended
November 30,
Six months ended
November 30,
2020
2019
2020
2019
Sales of eBalance® devices
$
-
$
757
$
-
$
12,100
Monthly subscriptions
1,871
-
3,338
-
Cost of eBalance® devices and services
(958)
(434)
(1,304)
(4,485)
Royalty payable
(30)
(88)
(53)
(1,412)
Distribution rights
-
9,480
-
18,438
Gross margin
$
883
$
9,715
$
1,981
$
24,641
NOTE 7 - NOTES AND ADVANCES PAYABLE
The tables below summarize the short-term loans and advances outstanding as at November 30, 2020, and May 31, 2020:
As at November 30, 2020
Principal
Outstanding
Interest Rate
per Annum
Accrued
Interest(6)
Total Book
Value
$
327,650
6%
Convertible(1)
$
21,039
$
348,689
141,065
6%
Non-convertible(2)
5,942
147,007
7,045
6%
Related party(3)
552
7,597
35,606
6%
Related party(4)
2,789
38,395
15,426
6%
Related party(3)
369
15,795
40,440
0%
Related party advances(5)
-
40,440
48,250
0%
Advances(5)
-
48,250
$
615,482
$
30,691
$
646,173
As at May 31, 2020
Principal
Outstanding
Interest Rate
per Annum
Accrued
Interest(6)
Total Book
Value
$
327,650
6%
Convertible(1)
$
10,731
$
338,381
28,630
6%
Non-convertible(2)
3,464
32,094
6,625
6%
Related party(3)
308
6,933
35,606
6%
Related party(4)
1,654
37,260
87,769
0%
Advances(5)
-
87,769
$
486,280
$
16,157
$
502,437
(1) Convertible Loans Payable
During the year ended May 31, 2020, in order to support its daily operations and to secure required working capital, the Company entered into several short-term convertible loan agreements with two lenders for a total of $327,650 in exchange for unsecured notes payable due on demand and accumulating interest at 6% annual interest compounded monthly. Pursuant to the loan agreements, the lenders may convert any portion of principal and/or interest accrued thereon into restricted units of common stock in the capital of the Company on the terms and at a conversion price of the then-current private placement offering. The conversion rights were assessed to have $Nil value.
During the six-month period ended November 30, 2020, the Company recorded $10,308 in interest on the convertible loans payable (2020 - $2,668).
F-7
(2) Non-convertible Loans Payable
During the six-month period ended November 30, 2020, the Company entered into several short-term loan agreements with two lenders for a total of $111,000 in exchange for unsecured notes payable due on demand and accumulating interest at 6% annual interest compounded monthly. As at November 30, 2020, the Company owed a total of $147,007 (2020 - $32,094) under 6% unsecured loan agreements.
During the six-month period ended November 30, 2020, the Company recorded $2,303 in interest on these loans (2020 - $951).
(3) Related Party Loans Payable
As at November 30, 2020, the Company owed a total of $7,597 (2020 - $6,933) under unsecured loan agreement with Mr. Jeffs, the Companys major shareholder. During the six-month period ended November 30, 2020, the Company recorded $219 in interest on the loan with Mr. Jeffs. (2020 - $2,425).
On July 9, 2020, the Company entered into a loan agreement for $14,773 (CAD$20,000) with a related party. The loan bears interest at 6% per annum compounded monthly, is unsecured, and payable from the first proceeds of warrants that may be exercised subsequent to the money being lent under the loan agreement or on July 9, 2021, whichever comes first. During the six-month period ended November 30, 2020, the Company recorded $360 in interest on the principal (2020 - $Nil).
(4) Unsecured Line of Credit with Related Party
On December 27, 2018, the Company entered into an agreement with Mr. Jeffs for an unsecured line of credit of up to $250,000 (the Credit Line). The funds advanced under the Credit Line accumulate interest at a rate of 6% per annum compounded monthly and are payable on demand. On August 28, 2019, Mr. Jeffs applied $250,000, the Company owed under the Credit Line to exercise the warrants the Company granted to Mr. Jeffs in consideration for the Credit Line and acquired 5,000,000 shares of the Companys common stock at $0.05 per share.
As at November 30, 2020, the Company owed Mr. Jeffs $38,395 under the Credit Line (2020 - $37,260), which continues to accumulate interest at 6% per annum compounded monthly. During the six-month period ended November 30, 2020, the Company recorded $1,135 in interest on principal outstanding under the Credit Line (2020 - $4,691).
(5) Advances Payable
As at November 30, 2020, the Company owed a total of $88,690 (2020 - $87,769) for advances the Company received in its fiscal 2019 and 2020 years. The advances are non-interest bearing, unsecured, and payable on demand. Of the total amount advanced, $3,870 was owed to Da Costa Management Corp, a company owned by John da Costa, who was appointed the Companys COO and Director on June 8, 2020 (2020 - $3,639), $11,570 (2020 - $10,880) was owed to Brek Technologies Inc., a company controlled by Mr. da Costa and Mr. Jeffs (Note 2), and $25,000 (2020 - $25,000) was owed to Mr. David Jeffs, the CEO and President of Live Current Media, Inc., of which Mr. da Costa is director of.
(6) Interest Expense
During the six-month period ended November 30, 2020, the Company recorded a total of $14,325 (2020 - $10,736) in interest expense associated with its liabilities under the notes and advances payable.
NOTE 8 - SHARE CAPITAL
On July 30, 2020, the Company issued 988,000 units of its common stock for gross proceeds of $247,000, of which $80,000 were received during the year ended May 31, 2020. Each unit consisted of one common share of the Company and one warrant allowing its holder to acquire an additional common share at $0.35 until January 30, 2021, and at $0.50 per share from January 30, 2021 to July 30, 2022.
On August 13, 2020, the Company issued 1,250,000 shares of its common stock to Ms. Arnett, the Companys 10% shareholder, on the exercise of 1,250,000 options at $0.05 per option. Ms. Arnett chose to apply $62,500 the Company owed to her on account of past services against the exercise price of the shares. Ms. Arnett transferred the remaining $24,712 the Company owed to her as at August 13, 2020, to Mr. Hargreaves, the Companys director of VP; Technology and Operations, in a private transaction.
F-8
On August 13, 2020, the Company issued 1,234,855 shares of its common stock to Mr. Hargreaves, the Companys VP; Technology and Operations, on the exercise of 1,234,855 shares at $0.05 per option. Mr. Hargreaves chose to apply $61,743 the Company owed to him against the exercise price of the shares.
Options
The changes in the number of stock options outstanding during the six-month period ended November 30, 2020, and for the year ended May 31, 2020, are as follows:
Six months ended
November 30, 2020
Year ended
May 31, 2020
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
Options outstanding, beginning
7,050,000
$
0.24
7,050,000
$
0.24
Options exercised
(2,484,855)
$
0.05
-
$
n/a
Options expired
(1,015,145)
$
0.34
-
$
n/a
Options outstanding, ending
3,550,000
$
0.35
7,050,000
$
0.24
Details of options outstanding and exercisable as at November 30, 2020, are as follows:
At November 30, 2020, the weighted average remaining contractual life of the stock options outstanding was 1.14 years.
Warrants
The changes in the number of warrants outstanding during the six-month period ended November 30, 2020, and for the year ended May 31, 2020, are as follows:
Six months ended
November 30, 2020
Year ended
May 31, 2020
Number of
warrants
Weighted
average
exercise price
Number of
warrants
Weighted
average
exercise price
Warrants outstanding, beginning
18,864,605
$
0.94
20,297,565
$
0.78
Warrants issued
988,000
$
0.35/$0.50
6,050,000
$
0.38
Warrants exercised
-
$
n/a
(7,482,960)
$
0.05
Warrants expired
(1,480,000)
$
1.50
-
$
n/a
Warrants outstanding, ending
18,372,605
$
0.86
18,864,605
$
0.94
F-9
Details of warrants outstanding as at November 30, 2020, are as follows:
At November 30, 2020, the weighted average life of the warrants was 0.86 years.
F-10
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 condensed consolidated interim 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, 2020, filed with the United States Securities and Exchange Commission (the SEC) on September 15, 2020.
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, Parkinsons 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 rapid expansion of the COVID-19 pandemic
We are cognizant of the rapid 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 man power 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.
Update on eBalance® Research and Development Activities
At the end of February 2020, we completed an audit required for certification of our quality management systems (QMS) under Stage 2 Medical Device Single Audit Program (MDSAP) and under ISO 13485:2016 standard. The audit was carried out by BSI Group Canada Inc. (BSI) and included the following:
-The effectiveness of our QMS incorporating the applicable regulatory requirements outlined by ISO13485:2016 standard and as required under MDSAP;
-Product/process-related technologies;
-Adequate technical documentation for our eBalance® device in relation to ISO13485:2016 standard and MDSAP; and
-Our ability to comply with these requirements.
The assessment report was finalized in mid-March 2020, and on March 31, 2020, we received Certificate No. FM 716345, certifying that the Company operates a Quality Management System which complies with the requirements of ISO 13485:2016 for design, development and manufacture of microcurrent therapeutic devices for wellness and pain relief, and on June 2, 2020, received a certificate #MDSAP 716274.
Following the receipt of ISO and MDSAP certificates, we filed two separate applications for Class II Medical Device Licenses for the eBalance® Pro System and the eBalance® Home System with Health Canada. On July 17, 2020, Health Canada issued a Class II Medical Device License #104925 for our eBalance® Home System, and on August 18, 2020, issued a Class II Medical Device License #105044 for our eBalance® Pro System.
2
Prior to selling our eBalance® Home and Pro Systems for the treatment in the United States, we will be required to apply for an approval from the FDA. As of the date of this Quarterly Report on Form 10-Q we are in the process of completing the necessary documentation and testing required for the 510(K) submission to the FDA.
Extension of Investor Outreach Program with Think Ink Marketing
On September 23, 2020, we signed an extension agreement with Think Ink Marketing Data & Email Services, Inc. (Think Ink) to continue providing public relations services in an effort to increase public awareness of the Company and our products, services and securities. The agreement is for twelve months with either party having the right to terminate upon thirty-day notice.
Think Ink is a California-based marketing firm established in 1991 that provides its customers with a complete range of marketing services that span both digital and direct mail venues. The Company has budgeted up to $25,000 per month for the services of Think Ink including banner and native ads.
Results of Operations for the Three and Six Months ended November 30, 2020 and 2019
Our operating results for the three- and six-month periods ended November 30, 2020 and 2019, and the changes in the operating results between those periods are summarized in the table below.
Three Months Ended
Six Months Ended
November 30, 2020
November 30, 2019
Percentage
Increase/
(Decrease)
November 30, 2020
November 30, 2019
Percentage
Increase/
(Decrease)
Sales
$
1,871
$
757
147.2%
$
3,338
$
12,100
(72.4)%
Distribution rights
-
9,480
(100.0)%
-
18,438
(100.0)%
Cost of goods
(988)
(522)
89.3%
(1,357)
(5,897)
(77.0)%
Gross margin
883
9,715
(90.9)%
1,981
24,641
(92.0)%
Operating expenses
Amortization
632
545
16.0%
1,368
813
68.3%
Consulting fees
62,447
61,728
1.2%
139,387
150,999
(7.7)%
Distribution expenses
-
19,173
(100.0)%
261
35,620
(99.3)%
General and administrative expenses
80,723
132,080
(38.9)%
113,503
218,642
(48.1)%
Research and development costs
38,538
95,894
(59.8)%
123,675
156,607
(21.0)%
Total operating expenses
182,340
309,420
(41.1)%
378,194
562,681
(32.8)%
Interest
7,879
3,783
108.3%
14,325
10,735
33.4%
Net loss
$
189,336
$
303,488
(37.6)%
$
390,538
$
548,775
(28.8)%
Revenues
During the three-month period ended November 30, 2020, we recognized $1,871 in revenue, which consisted of monthly recurring revenue associated with the eBalance® treatment packages. The cost attributed to this revenue was $988.
During the three-month period ended November 30, 2019, we recognized $757 in revenue, which consisted of sales of our eBalance® wellness devices to end-users. The cost attributed to this revenue was $522.
During the six-month period ended November 30, 2020, we recognized $3,338 in revenue, which consisted of monthly recurring revenue associated with the eBalance® treatment packages. The cost attributed to this revenue was $1,357.
During the six-month period ended November 30, 2019, we recognized $12,100 in revenue, which consisted of sales of our eBalance® wellness devices to end-users. The cost attributed to this revenue was $5,897 and included $3,713 in manufacturing costs of eBalance® devices, and $1,412 in royalties we accrued on the sales.
On June 6, 2019, we entered into a letter of intent for the wholesale distribution rights to all Mainlined China, not including Hong Kong (the LOI). As part of the LOI the potential distributor (the Distributor) paid a non-refundable fee of $25,000, of which $18,438 we recorded as revenue from distribution rights for the six-month period ended November 30, 2019 ($9,480 for the three-month period ended November 30, 2019). During the three- and six-month periods ended November 30, 2020, we did not generate any revenue from distribution rights.
3
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 FDA continues to be ongoing; at the time of this Quarterly Report on Form 10-Q we are compiling required documentation for a 510(K) premarket submission, which allows us to demonstrate that the eBalance® device is at least as safe and effective as a legally marketed 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 November 30, 2020, our operating expenses decreased by 41.1% from $309,420 we incurred during the three months ended November 30, 2019, to $182,340 we incurred during the three months ended November 30, 2020. The most significant expenses during this period included $51,319 in corporate communication fees (November 30, 2019 - $83,181), $38,538 we incurred in research and development fees (November 30, 2019 - $95,894), $62,447 in consulting fees (November 30, 2019 - $61,728), $5,012 in accounting and audit fees (November 30, 2019 - $15,925), and $10,500 in management fees (November 30, 2019 - $13,800). During the comparative three-month period ended November 30, 2019 we incurred $19,173 in distribution expenses paid or accrued to our sales representatives, expense that we did not incur in the current period.
On a year-to-date basis, the most significant changes were as follows:
·During the six-month period ended November 30, 2020, our consulting fees decreased by $11,612, or 7.7%, from $150,999 we incurred during the six-month period ended November 30, 2019, to $139,387 we incurred during the six-month period ended November 30, 2020. Larger consulting fees during the comparative period ended November 30, 2019, were associated with $25,000 we paid for consultation on setting up our distribution channels in China.
·Our research and development fees for the six-month period ended November 30, 2020, decreased by $32,932, or 21%, from $156,607 we incurred during the six-month period ended November 30, 2019, to $123,675 we incurred during the six-month period ended November 30, 2020. The lower research and development fees during the six-month period ended November 30, 2020, were associated with the conclusion of the work associated with Health Canada certifications, and reduced work load associated with our 510(K) submission to the FDA. In addition, we continued minor developments of the eBalance® systems.
·Our general and administrative fees for the six-month period ended November 30, 2020, decreased by $105,139, or 48.1%, from $218,642 we incurred during the six-month period ended November 30, 2019, to $113,503 we incurred during the six-month period ended November 30, 2020. The largest factor that contributed to this change was associated with fluctuation in foreign exchange rates, which, during the six-month period ended November 30, 2020, resulted in $47,167 gain, as compared to $540 gain during the comparative period; our expenditures on corporate communications decreased by $45,937 to $93,582 we recorded during the six-month period ended November 30, 2020, as compared to $139,519 we incurred during the six-month period ended November 30, 2019. Other factors that affected our general and administrative fees were associated with a $12,902 decrease to our accounting and audit fees, which decreased from $22,925 we incurred during the six-month period ended November 30, 2019, to $10,023 for the six-month period ended November 30, 2020. Our management fees decreased by $8,100 from $27,600 we incurred during the six-month period ended November 30, 2019 to $19,500 we incurred during the six-month period ended November 30, 2020, the decrease resulted from renegotiation of monthly management fees with the Companys CEO and the CFO. In addition, during the current period, we incurred $1,227 in marketing and advertising fees as opposed to $5,785 we incurred during the six-month period ended November 30, 2019. These decreases were in part offset by $14,471 in professional fees which we incurred during the six-month period ended November 30, 2020, the expense we did not incur in the comparative period.
4
·During the six-month period ended November 30, 2020, we incurred $261 in distribution expenses we paid or accrued to our sales representatives (November 30, 2019 - $35,620). Based on our agreements with the sales representatives, we agreed to pay CAD$350 as commission for each eBalance® device they sell. In order to allow our sales representatives to establish their customer base, during the six-month period ended November 30, 2019, we were paying a monthly fee of CAD$5,000 to each sales representative. Due to a delay in securing Health Canada Class II device licenses, we suspended our agreements with sales representatives in January 2020. As of the date of this Quarterly Report on Form 10-Q we have suspended discussions on re-engagement of the sales representatives.
Other Items
Liquidity and Capital Resources
Working Capital
As at
November 30,
2020
As at
May 31,
2020
Percentage
Change
Current assets
$
95,583
$
157,343
(39.3)%
Current liabilities
1,781,469
1,679,523
6.1%
Working capital deficit
$
(1,685,886)
$
(1,522,180)
10.8%
As of November 30, 2020, we had a cash balance of $21,784, a working capital deficit of $1,685,886 and cash flows used in operations of $313,773 for the period then ended. During the six-month period ended November 30, 2020, we funded our operations with $167,000 received from our private placement financing, and $125,773 we borrowed under 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 November 30, 2020. 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.
Cash Flows
Three months ended
November 30,
2020
November 30,
2019
Cash flows used in operating activities
$
(313,773)
$
(479,370)
Cash flows used in investing activities
(1,574)
(2,463)
Cash flows provided by financing activities
292,773
698,650
Effects of foreign currency exchange on cash
(732)
1,002
Net increase (decrease) in cash during the period
$
(23,306)
$
217,819
5
Net Cash Used in Operating Activities
Net cash used in operating activities during the six months ended November 30, 2020, was $313,773. This cash was primarily used to cover our cash operating expenses of $412,531 and to decrease our accrued liabilities by $24,545. These uses of cash were offset by $66,520 increase in amounts due to related parties, $29,937 decrease in other current assets, $24,776 increase in our accounts payable, and by a $2,070 decrease in inventory.
Net cash used in operating activities during the six months ended November 30, 2019, was $479,370. This cash was primarily used to cover our cash operating expenses of $540,136, to increase our inventory by $3,293, and to decrease our unearned revenue and amounts due to related parties by $244 and $8,898, respectively. These uses of cash were offset by $11,849 decrease in other current assets, and by $58,529 and $2,823 increases in our accounts payable and accrued liabilities, respectively.
Non-cash transactions
During the six-month period ended November 30, 2020, our net loss was affected by the following expenses that did not have any impact on cash used in operations:
·$14,325 (2020 - $10,735) in interest we accrued on the outstanding notes payable. Of this interest, $1,354 (2020 - $7,095) was accrued on the notes payable we issued to Mr. Jeffs;
·$48,686 (2020 - $2,909) in unrealized foreign exchange gain, which resulted from fluctuations of Canadian dollar in relation to US dollar, our functional and reporting currencies;
·$1,368 (2020 - $813) in amortization of equipment we acquired for our manufacturing operations and for our office; and
·$11,000 (2020 - $Nil) in non-cash investor relations expenses which were associated with fair market value of the shares we issued to our consultant for investor relation services in April 2020.
Net Cash Used in Investing Activities
During the six-month period ended November 30, 2020, we purchased office equipment for $1,574 (2020 - $2,463).
Net Cash Provided by Financing Activities
During the six-month period ended November 30, 2019, we received $197,650 under convertible loan agreements, which are payable on demand and accumulate interest at 6% per annum. At discretion of the lenders, the full amount due under the loans can be converted into the units of our common stock at the then-current price of private placement financing. In addition, we received a total of $15,000 in non-interest-bearing advances which are payable on demand. In addition to the funds received as part of debt financing, we issued 4,050,000 units of our common stock for total proceeds of $486,000. We did not incur any share-issuance costs associated with the units issued as part of the private placement financing.
Going Concern
The notes to our unaudited condensed consolidated financial statements as at November 30, 2020, disclose our uncertain ability to continue as a going concern. Our current business operations are in an early development stage and as such, we were able to generate only minimal revenue from the operations. Our research and development as well as marketing plans for the near future will require large capital expenditures, which we are planning to mitigate through equity or debt financing, or by requiring upfront deposits from our potential distributors, once we begin commercial production of our eBalance® devices.
6
As at November 30, 2020, we had accumulated a deficit of $8,440,058 since inception and increased sales will be required to fund and support our operations. Our continuation as a going concern depends upon the continued financial support of our shareholders, our ability to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations. Our unaudited condensed consolidated interim financial statements do not give effect to any adjustments that would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in our financial statements.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies
An appreciation of our critical accounting policies is necessary to understand our financial results. These policies may require management to make difficult and subjective judgments regarding uncertainties, and as a result, such estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. We have applied our critical accounting policies and estimation methods consistently.
Changes in and Disagreements with Accountants on Accounting Procedures and Financial Disclosure
None.
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 November 30, 2020. 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 Commissions rules and forms due to lack of segregation of duties.
During the quarter ended November 30, 2020, 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.
7
None.
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 the current uncertainty with respect to rapid expansion of the COVID-19 pandemic
We are cognizant of the rapid 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 man power 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.
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.
8
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.
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.
9
To date we have generated only minimal revenues. If we cannot increase our revenues to start generating profits, our investors may lose their entire investment.
To date we have generated only minimal revenues. 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 and 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. We continue to 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 $8,440,058 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 carry out our planned clinical and observational 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 investors 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.
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.
10
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
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
11
None.
Exhibit |
|
|
Number |
|
Description of Document |
|
Articles of Incorporation (2) |
|
|
Articles of Merger - Sports Asylum, Inc. and Plandel Resources, Inc.(3) |
|
|
Articles of Merger - Cell MedX Corp. and Sports Asylum, Inc.(3) |
|
|
Bylaws (1) |
|
|
Specimen Stock Certificate (1) |
|
|
Technology Purchase Agreement dated October 16, 2014 among Cell MedX Corp., Jean Arnett, and Brad Hargreaves.(4) |
|
|
First Amendment Agreement dated October 28, 2014 to that Technology Purchase Agreement dated October 16, 2014 among Cell MedX Corp., Jean Arnett, and Brad Hargreaves.(5) |
|
|
Second Amendment Agreement dated November 13, 2014 to that Technology Purchase Agreement dated October 16, 2014 among Cell MedX Corp., Jean Arnett, and Brad Hargreaves.(6) |
|
|
Stock Option Agreement dated August 5, 2015 among Cell MedX Corp. and Frank E. McEnulty.(7) |
|
|
Stock Option Agreement dated August 24, 2017 among Cell MedX Corp. and Yanika Silina(8) |
|
|
Stock Option Agreement dated August 24, 2017 among Cell MedX Corp. and Da Costa Management Corp.(8) |
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Stock Option Agreement dated August 24, 2017 among Cell MedX Corp. and John Giovanni Di Cicco.(8) |
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Intellectual Property Royalty Agreement between Cell MedX Corp. and Brek Technologies Inc., dated for reference September 6, 2018.(9) |
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Royalty Agreement between Cell MedX Corp. and Mr. Richard Norman Jeffs, dated for reference September 6, 2018.(9) |
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Credit Line Agreement dated December 27, 2018, between Richard Norman Jeffs and Cell MedX Corp.(10) |
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Distribution Agreement between Cell MedX Corp. and Live Current Media, Inc., dated for reference March 21, 2019. (11) |
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Loan Agreement and Note Payable dated September 4, 2019, among Cell MedX Corp. and Longview Investment Limited (12) |
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Loan Agreement and Note Payable dated September 6, 2019, among Cell MedX Corp. and Rain Communications Corp. (12) |
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Loan Agreement and Note Payable dated September 16, 2019, among Cell MedX Corp. and Longview Investment Limited(12) |
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Loan Agreement and Note Payable dated September 19, 2019, among Cell MedX Corp. and Rain Communications Corp. (12) |
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Loan Agreement and Note Payable dated September 20, 2019, among Cell MedX Corp. and Longview Investment Limited(12) |
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Loan Agreement and Note Payable dated October 30, 2019, among Cell MedX Corp. and Longview Investment Limited (12) |
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Loan Agreement and Note Payable dated October 30, 2019, among Cell MedX Corp. and Rain Communications Corp. (12) |
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Loan Agreement and Note Payable dated December 3, 2019, among Cell MedX Corp. and Longview Investment Limited (13) |
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Loan Agreement and Note Payable dated January 6, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
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Loan Agreement and Note Payable dated January 9, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
12
Exhibit |
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Number |
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Description of Document |
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Loan Agreement and Note Payable dated January 31, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
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Buyback agreement between Live Current Media Inc. and Cell MedX Corp., dated January 29, 2020.(14) |
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Loan Agreement and Note Payable dated February 17, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
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Loan Agreement and Note Payable dated March 4, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
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Loan Agreement and Note Payable dated March 25, 2020, among Cell MedX Corp. and Longview Investment Limited(13) |
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Loan Agreement and Note Payable dated April 13, 2020, among Cell MedX Corp. and Longview Investment Limited(15) |
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Loan Agreement dated July 3, 2020, among Cell MedX Corp. and David Jeffs. (15) |
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10.29 |
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Loan Agreement and Note Payable dated August 31, 2020, among Cell MedX Corp. and Tradex Capital Corp.(15) |
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Loan Agreement and Note Payable dated September 2, 2020, among Cell MedX Corp. and Rain Communications Corp. |
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Loan Agreement and Note Payable dated October 26, 2020, among Cell MedX Corp. and Rain Communications Corp. |
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Code of Ethics(3) |
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Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101 |
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The following materials from this Quarterly Report on Form 10-Q for the three- and six-month periods ended November 30, 2020 and 2019 formatted in XBRL (extensible Business Reporting Language): |
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(1) Unaudited Condensed Consolidated Balance Sheets at November 30, 2020 and as at May 31, 2020. |
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(2) Unaudited Condensed Consolidated Statements of Operations for the three- and six-month periods ended November 30, 2020 and 2019. |
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(3) Unaudited Condensed Consolidated Statement of Stockholders Deficit as at November 30, 2020 and 2019. |
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(4) Unaudited Condensed Consolidated Statements of Cash Flows for the six-month periods ended November 30, 2020 and 2019. |
(1)Filed as an exhibit to the Companys Registration Statement on Form S-1 filed with SEC on July 13, 2010
(2)Filed as an exhibit to the Companys Amendment No. 1 to Registration Statement on Form S-1 filed with SEC on October 13, 2010
(3)Filed as an exhibit to the Companys Quarterly Report on Form 10-Q filed with the SEC on October 9, 2014
(4)Filed as an exhibit to the Companys Current Report on Form 8-K filed with SEC on October 17, 2014
(5)Filed as an exhibit to the Companys Current Report on Form 8-K filed with SEC on November 3, 2014
(6)Filed as an exhibit to the Companys Current Report on Form 8-K filed with SEC on November 18, 2014
(7)Filed as an exhibit to the Companys Current Report on Form 8-K filed with the SEC on August 11, 2015
(8)Filed as an exhibit to the Companys Quarterly Report on Form 10-Q filed with the SEC on October 17, 2017
(9)Filed as an exhibit to the Companys Annual Report on Form 10-K filed with the SEC on September 13, 2018
(10)Filed as an exhibit to the Companys Current Report on Form 8-K filed with the SEC on December 31, 2018
(11)Filed as an exhibit to the Companys Current Report on Form 8-K filed with the SEC on March 27, 2019
(12)Filed as an exhibit to the Companys Quarterly Report on Form 10-Q filed with the SEC on January 14, 2020
(13)Filed as an exhibit to the Companys Quarterly Report on Form 10-Q filed with the SEC on April 14, 2020
(14)Filed as an exhibit to the Companys Current Report on Form 8-K filed with the SEC on January 31, 2020
(15)Filed as an exhibit to the Companys Annual Report on Form 10-K filed with the SEC on September 15, 2020
13
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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Cell MedX Corp. |
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Date: January 14, 2021 |
By: |
/s/ Frank McEnulty |
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Frank McEnulty |
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Chief Executive Officer and Director |
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(Principal Executive Officer) |
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Date: January 14, 2021 |
By: |
/s/Yanika Silina |
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Yanika Silina |
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Chief Financial Officer and Director |
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(Principal Accounting Officer) |
14
LOAN
AGREEMENT
September 2, 2020
Rain Communications Corp. (the Lender) with an address at 1130 West Pender Street, Unit 820, Vancouver, BC V6E 4A4, advanced USD$6,000 (the Principal Sum) to Cell MedX Corp. (the Borrower) of 123 W. Nye Ln, Suite 446, Carson City, NV 89706. The Lender advanced the funds on September 2, 2020.
The Borrower agrees to repay the Principal Sum on demand, together with interest calculated and compounded monthly at the rate of 6% per year (the Interest) calculated from September 2, 2020 (the Effective Date). The Borrower is liable for repayment of the Principal Sum, accrued Interest, and any additional costs that the Lender incurs in trying to collect the amount owed to him under the terms of this Loan Agreement.
The Borrower will evidence the debt and its repayment of the Principal Sum and the Interest with a promissory note in the attached form.
LENDER |
BORROWER |
Rain Communications Corp. |
Cell MedX Corp. |
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Per: |
Per: |
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/s/ Raph Biggar |
/s/ Yanika Silina |
Raph Biggar, President |
Yanika Silina, CFO |
PROMISSORY NOTE
Principal Amount: USD$6,000 |
September 2, 2020 |
FOR VALUE RECEIVED Cell MedX Corp., (the Borrower) promises to pay on demand to the order of Rain Communications Corp. (the Lender) the sum of $6,000 lawful money of the United States of America (the Principal Sum) together with the Interest accrued on the Principal Sum calculated from September 2, 2020 (Effective Date) both before and after maturity, default and judgment at the Interest Rate as defined below.
For the purposes of this promissory note, Interest Rate means 6 per cent per year. Interest at the Interest Rate must be calculated and compounded monthly not in advance from and including the Effective Date (for an effective rate of 6.2% per annum calculated monthly), and is payable together with the Principal Sum when the Principal Sum is repaid.
The Borrower may repay the Principal Sum, and the Interest in whole or in part at any time.
The Borrower waives presentment, protest, notice of protest and notice of dishonour of this promissory note.
BORROWER
Cell MedX Corp.
Per:
/s/ Yanika Silina
Yanika Silina, CFO
LOAN
AGREEMENT
October 26, 2020
Rain Communications Corp. (the Lender) with an address at 1130 West Pender Street, Unit 820, Vancouver, BC V6E 4A4, advanced USD$40,000 (the Principal Sum) to Cell MedX Corp. (the Borrower) of 123 W. Nye Ln, Suite 446, Carson City, NV 89706. The Lender advanced the funds on October 26, 2020.
The Borrower agrees to repay the Principal Sum on demand, together with interest calculated and compounded monthly at the rate of 6% per year (the Interest) calculated from October 26, 2020 (the Effective Date). The Borrower is liable for repayment of the Principal Sum, accrued Interest, and any additional costs that the Lender incurs in trying to collect the amount owed to him under the terms of this Loan Agreement.
The Borrower will evidence the debt and its repayment of the Principal Sum and the Interest with a promissory note in the attached form.
LENDER |
BORROWER |
Rain Communications Corp. |
Cell MedX Corp. |
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Per: |
Per: |
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/s/ Raph Biggar |
/s/ Yanika Silina |
Raph Biggar, President |
Yanika Silina, CFO |
PROMISSORY NOTE
Principal Amount: USD$40,000 |
October 26, 2020 |
FOR VALUE RECEIVED Cell MedX Corp., (the Borrower) promises to pay on demand to the order of Rain Communications Corp. (the Lender) the sum of $40,000 lawful money of the United States of America (the Principal Sum) together with the Interest accrued on the Principal Sum calculated from October 26, 2020 (Effective Date) both before and after maturity, default and judgment at the Interest Rate as defined below.
For the purposes of this promissory note, Interest Rate means 6 per cent per year. Interest at the Interest Rate must be calculated and compounded monthly not in advance from and including the Effective Date (for an effective rate of 6.2% per annum calculated monthly), and is payable together with the Principal Sum when the Principal Sum is repaid.
The Borrower may repay the Principal Sum, and the Interest in whole or in part at any time.
The Borrower waives presentment, protest, notice of protest and notice of dishonour of this promissory note.
BORROWER
Cell MedX Corp.
Per:
/s/ Yanika Silina
Yanika Silina, CFO
CELL MEDX CORP.
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Frank McEnulty, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ending November 30, 2020, of Cell MedX Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: January 14, 2021
/s/ Frank McEnulty
Frank McEnulty
Chief Executive Officer
(Principal Executive Officer)
CELL MEDX CORP.
CERTIFICATIONS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Yanika Silina, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the period ending November 30, 2020, of Cell MedX Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: January 14, 2021
/s/ Yanika Silina
Yanika Silina
Chief Financial Officer
(Principal Accounting Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cell MedX Corp. (the Company) on Form 10-Q for the period ending November 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: January 14, 2021
/s/ Frank McEnulty
Frank McEnulty
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Cell MedX Corp. (the Company) on Form 10-Q for the period ending November 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: January 14, 2021
/s/Yanika Silina
Yanika Silina
Chief Financial Officer
(Principal Accounting Officer)