The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited condensed consolidated
financial statements, the notes to those financial statements and other
financial information appearing elsewhere in this document. In addition to
historical information, the following discussion and other parts of this
document contain forward-looking statements that reflect plans, estimates,
intentions, expectations and beliefs. Actual results could differ materially
from those discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to, those set
forth in the "Risk Factors" in Part II, Item 1A of this Quarterly Report.
The discussion provided in this Quarterly Report should be read in conjunction
with our Annual Report on Form 10-K for the year ended May 31, 2022, filed with
the United States Securities and Exchange Commission (the "SEC") on April 7,
2023.
Overview
We were incorporated under the laws of the State of Nevada on March 19, 2010. On
April 26, 2016, we formed our wholly owned subsidiary, Cell MedX (Canada) Corp.,
(the "Subsidiary") under the laws of the Province of British Columbia.
We are a biotech company focused on the discovery, development and
commercialization of therapeutic and non-therapeutic products that promote
general health, pain relief, wellness and alleviate complications associated
with medical conditions including, but not limited to: diabetes, Parkinson's
disease, high blood pressure, neuropathy and kidney function. Our Subsidiary is
engaged in development and manufacturing of therapeutic devices based on our
proprietary eBalance® Technology, which harnesses power of microcurrents and
their effects on human body.
Recent Corporate Developments
BCSC Cease Trade Order
On October 11, 2022, the British Columbia Securities Commission (the "BCSC")
issued a cease trade order in respect of the securities of the Company for
failing to timely file its Annual Information Form (AIF), annual audited
financial statements for the fiscal year ended May 31, 2022, and the related
management's discussion and analysis (collectively, the "Canadian Filings"). The
Company's inability to file the required Canadian Filings is due to the Company
having insufficient funds to complete the audit of its annual financial
statements. The Company had filed its Canadian Filings on April 7, 2023, and
hopes to file its required quarterly filings under applicable United States
securities laws, as soon as it is possible. However, at this time, the Company
is unable to provide any further guidance on its ability to make the required
quarterly filings.
Delisting from OTCQB Market Tier
Our securities currently trade on the "Expert Market" tier operated by OTC
Markets. Quotes on the Expert Market are "Unsolicited Only" and are restricted
from public viewing. The Company is currently in default of Section 2.2 of the
OTCQB Standards relating to the Company's ongoing disclosure obligations due to
the late filing of its annual report for the year ended May 31, 2022, and for
non-filing of the quarterly reports for the interim periods ended August 31,
2022, November 30, 2022, and February 28, 2023. The Company is currently
working to complete and file the required reports.
Update on eBalance® Research and Development Activities
Due to the Company's financial situation, the Company was forced to suspend
further research of the eBalance® Technology, including the FDA's Pre-Market
Approval process for 510(k) clearance, and is at risk of defaulting on its
Health Canada Class II Medical Device System Certification licenses that were
issued for both eBalance® Home and eBalance® Pro Systems.
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Results of Operations for the Three Months ended August 31, 2022 and 2021
Our operating results for the three-month periods ended August 31, 2022 and
2021, and the changes in the operating results between those periods are
summarized in the table below.
Three Months Ended
Percentage
August 31, August 31, Increase/
2022 2021 (Decrease)
Sales $ 516 $ 1,197 (56.9)%
Cost of goods (797) (325) 145.2%
Gross margin (281) 872 (132.2)%
Operating expenses
Amortization - 540 (100.0)%
Consulting fees 23,665 64,814 (63.5)%
General and administrative expenses 98,215 134,089 (26.8)%
Research and development costs
22,843 35,841 (36.3)%
Total operating expenses 144,723 235,284 (38.5)%
Interest 9,681 4,940 96.0%
Net loss $ 154,685 $ 239,352 (35.4)%
Revenues
During the three-month period ended August 31, 2022, we recognized $516 in
revenue, which consisted of monthly recurring revenue associated with the
eBalance® treatment packages. The cost attributed to this revenue was $797.
During the three-month period ended August 31, 2021, we recognized $1,197 in
revenue from monthly recurring revenue associated with the eBalance® treatment
packages. The cost attributed to this revenue was $325.
Operating Expenses
During the three-month period ended August 31, 2022, our operating expenses
decreased by 38.5% from $235,284 we incurred during the three months ended
August 31, 2021, to $144,723 we incurred during the three months ended August
31, 2022. The most significant changes were as follows:
·During the three-month period ended August 31, 2022, our consulting fees
decreased by $41,149, or 63.5%, from $64,814 we incurred during the three-month
period ended August 31, 2021, to $23,665 we incurred during the three-month
period ended August 31, 2022.
·Our research and development fees for the three-month period ended August 31,
2022, decreased by $12,998, or 36.3%, from $35,841 we incurred during the
three-month period ended August 31, 2021, to $22,843 we incurred during the
three-month period ended August 31, 2022. The lower research and development
fees during the three-month period ended August 31, 2022, were associated with
our decision to suspend further development of the eBalance® devices due to lack
of funding and unfavorable financial position.
·Our general and administrative fees for the three-month period ended August 31,
2022, decreased by $35,874, or 26.8%, from $134,089 we incurred during the
three-month period ended August 31, 2021, to $98,215 we incurred during the
three-month period ended August 31, 2022. The largest factor that contributed to
this change was associated with out expenditures on corporate communications,
which decreased by $48,526 to $7,949 we recorded during the three-month period
ended August 31, 2022, as compared to $56,475 we incurred during the three-month
period ended August 31, 2021. This reduction was associated with lack of funding
and overall unfavorable financial position. Our filing and regulatory fees
decreased by $5,255 to $4,875, and loss on foreign exchange decreased by $6,559
to $40,823. These decreases were in part offset by $27,000 increase to our
management fees, which were associated with engagement of our new CEO.
Other Items
During the three-month period ended August 31, 2022, we accrued $9,681 (August
31, 2021 - $4,940) in interest associated with the outstanding notes payable.
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Liquidity and Capital Resources
Working Capital
Percentage
As at As at Increase/
August 31, 2022 May 31, 2022 (Decrease)
Current assets $ 28,576 $ 41,344 (30.9)%
Current liabilities 2,133,298 2,050,375 4.0%
Working capital deficit $ (2,104,722) $ (2,009,031) 4.8%
As of August 31, 2022, we had a cash balance of $9,620, a working capital
deficit of $2,104,722 and cash flows used in operations of $75,655 for the
period then ended. During the three-month period ended August 31, 2022, we
funded our operations with $61,000 we borrowed from Mr. Richard Jeffs 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 three-month period ended August 31, 2022.
The amount of cash we have generated from our operations to date is
significantly less than our current debt obligations. There is no assurance that
we will be able to generate sufficient cash from our operations to repay the
amounts owing under the outstanding notes and advances payable, or to service
our other debt obligations. If we are unable to generate sufficient cash flow
from our operations to repay the amounts owing when due, we may be required to
raise additional financing from other sources. The outcome of these matters
cannot be predicted with any certainty at this time and raises substantial doubt
that we will be able to continue as a going concern.
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