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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[ X ]
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended May 31, 2016
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number 000-54500
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Cell MedX Corp.
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(Exact name of registrant as specified in its charter)
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Nevada
(State or other jurisdiction of incorporation or organization)
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38-3939625
(I.R.S. Employer Identification No.)
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2872 Sumter Valley Circle
Henderson, NV
(Address of principal executive offices)
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89052
(Zip Code)
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Registrant’s telephone number, including area code: (844) 238-2692
2857 Sumter Valley Circle, Henderson, NV 89052
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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None
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N/A
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Securities registered pursuant to Section 12(g) of the Act:
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Common Stock - $0.001 par value
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(Title of Class)
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
[ ] Yes [X] No
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 last 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. [X] Yes [ ] 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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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.
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Larger accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ] (Do not check if a smaller reporting company)
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Smaller reporting company
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[ x ]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
[ ] Yes [X] No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $2,304,500 based on average of closing bid and ask for Cell MedX Corp. shares on November 28, 2015.
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.
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Class
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Outstanding at September 13, 2016
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common stock - $0.001 par value
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31,000,000
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ii
Contents
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Page
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PART I
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Item 1
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Business
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1
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Item 1a
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Risk Factors
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6
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Item 1b
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Unresolved Staff Comments
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8
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Item 2
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Properties
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9
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Item 3
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Legal Proceedings
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9
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Item 4
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Mine Safety Disclosures
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9
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PART II
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Item 5
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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10
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Item 6
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Selected Financial Data
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11
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Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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11
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Item 7a
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Quantitative and Qualitative Disclosures About Market Risk
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17
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Item 8
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Financial Statements and Supplementary Data
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18
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Item 9
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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19
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Item 9a
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Controls and Procedures
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19
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Item 9b
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Other Information
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19
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PART III
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Item 10
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Directors, Executive Officers and Corporate Governance
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20
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I Item 11
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Ex Executive Compensation
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22
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Item 12
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Security Ownership of Certain Beneficial Holders and Management
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26
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Item 13
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Certain Relationships and Related Transactions, and Director Independence
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27
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Item 14
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Principal Accounting Fees and Services
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28
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PART IV
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Item 15
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Exhibits, Financial Statement Schedules
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29
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SIGNATURES
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32
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iii
PART I
FORWARD LOOKING STATEMENTS
Unless the context otherwise requires, all references in this report to “Cell MedX,” “the Company,” “we,” “us,” or “our” are to Cell MedX Corp., collectively with its wholly owned subsidiaries Avyonce Cosmedics Inc. and Cell MedX (Canada) Corp.
The information in this Annual Report contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined from time to time, in other reports we file with the Securities and Exchange Commission.
The forward-looking statements in this Form 10-K for the fiscal year ended May 31, 2016, are subject to risks and uncertainties that could cause actual results to differ materially from the results expressed in or implied by the statements contained in this report. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate.
All forward-looking statements are made as of the date of the filing of this Form 10-K and we disclaim any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. We may, from time to time, make oral forward-looking statements. We strongly advise that the above paragraphs and the risk factors described in this Annual Report and in our other documents filed with the United States Securities and Exchange Commission should be read for a description of certain factors that could cause our actual results to materially differ from those in the oral forward-looking statements. We disclaim any intention or obligation to update or revise any oral or written forward-looking statements whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS.
GENERAL
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 November 25, 2014, we completed the acquisition of a proprietary method for the application of bioelectric signaling to treat diabetes and related ailments (the “eBalance Technology”). With our acquisition of the eBalance Technology, we have shifted our business direction to the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes by developing technologies to help manage the illness and related complications.
On November 26, 2014, we formed a subsidiary, Avyonce Cosmedics Inc., (the “Avyonce”) under the laws of the Province of British Columbia. Avyonce’s main business activity is channelled towards the resale and marketing of spa technology and equipment to the worldwide beauty and wellness industry. Avyonce is also instrumental in carrying out the observational studies using eBalance Technology.
On April 26, 2016, we formed a subsidiary, Cell MedX (Canada) Corp., (the “Cell MedX Canada”) under the laws of the Province of British Columbia, in anticipation of increased business activity in Canada. As of the date of this Annual Report on Form 10-K this subsidiary remained dormant.
BUSINESS OF CELL MEDX
eBalance Technology Acquisition
We acquired our proprietary technology for the use of microcurrents for the treatment of diabetes and related ailments, which we call eBalance Technology, on November 25, 2014, when we entered into a Technology Purchase Agreement with Jean Arnett and Bradley Hargreaves (the “Purchase Agreement”).
Pursuant to the Purchase Agreement, Ms. Arnett and Mr. Hargreaves sold to us all of their respective rights, title and interests in and to the eBalance Technology. In consideration for the sale of the eBalance Technology, we paid to Ms. Arnett and Mr. Hargreaves a total of $100,000 and issued to each of Ms. Arnett and Mr. Hargreaves options for the purchase of up to 10,000,000 shares (20,000,000 shares in total) of our common stock at an initial exercise price of $0.05 per share (the “Options”). Exercise of the Options is subject to certain vesting conditions based on the design, initiation and completion of clinical trials for the eBalance Technology as follows:
1
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Combined Number of Options to Vest
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Vesting Condition
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2,500,000
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Upon the design and commencement of the First Clinical Trial (vested on August 26, 2015)
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2,500,000
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Upon the completion of the First Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the First Clinical Trial discussing the results of the First Clinical Trial
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2,500,000
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Upon the design and commencement of the Second Clinical Trial
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2,500,000
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Upon the completion of the Second Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the Second Clinical Trial discussing the results of the Second Clinical Trial
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5,000,000
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Upon the design and commencement of the Third Clinical Trial
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5,000,000
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Upon the completion of the Third Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the Third Clinical Trial discussing the results of the Third Clinical Trial
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20,000,000
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Total
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Any Options that vest and become exercisable expire on the 5th year anniversary of the particular vesting date. Any Options that have not previously vested will expire on December 31, 2019, subject to certain early termination provisions upon the death of the optionee, or if the optionee ceases to act for us in any capacity either voluntarily or as a result of a termination or removal for cause.
eBalance Technology
eBalance Technology is based on the science of bioelectric signals, their affect on epigenetic events within human body, and ability to modify and affect the behavior of cells, tissue, and organs. Based on this technology Cell MedX is developing a radically different and very promising family of devices whose core technology demarcates it from the approaches currently in use and those in the “future advances” pipeline as reflected in current medical literature.
Microcurrent delivery devices used for the treatment of diabetic neuropathy and poor wound healing in diabetics have been in the marketplace for decades. However, the eBalance Technology can be distinguished from those devices, which have a limited utility and are not designed to treat diabetes at its core – the underlying metabolic disorder that leads to hyperglycemia and its sequelae. It is hoped that devices incorporating the eBalance Technology will effect changes much further “upstream” in the pathophysiology or natural history of diabetes. Not a “me too” device, nor an incremental improvement in an established realm, devices based on the eBalance Technology could, if proven through diligent research and development, open a new category of diabetes care.
The eBalance Technology is intended to expand the traditional healthcare model of diabetes management by enabling patients to manage their symptoms using a biosignal generating device that is simple to use, causes no discomfort, and can easily be incorporated into any lifestyle.
It is expected that the eBalance Technology, currently in the research and development stage, will form the basis for a product line that will be available to aid in the management of diabetes mellitus (both Type 1 and Type 2) and its complications, both as a professional clinic-based device and as a home use device. In the future, wearable devices may also be developed.
A research and development plan has been constructed that will perform a series of investigations that will move the product from a prototype stage through a series of refinements and enhancements to achieve the safety and efficacy objectives of the device(s) upon which a set of claims intended for FDA, Health Canada and European Medical CE approval through the rigorous Pre-Market Approval (PMA) process will be constructed. A series of pre-clinical and clinical trials are planned (see “Clinical Trials”, below). The final marketing claims for the product, which will become the foundation for sales & marketing efforts in subsequent phases, will derive from the clinical trials. Such claims will likely focus on overall diabetes management, including reductions in average blood sugar (HbA1C) as well as other markers that denote the degree and quality of blood sugar control. Measures that track complications of the disease will also be in focus.
Market Opportunity – Diabetes and Its Complications
Diabetes is a severe and debilitating disease with profound consequences, both for the individual and for society. The complications of diabetes are devastating, and the economic costs of care comprise a substantial portion of health care budgets. Despite the best efforts of the scientific community to devise a cure, the incidence of diabetes is on the rise. According to the information published by International Diabetes Association (“IDA”) in its Diabetes Atlas1, in 2015 there were 415 million people living with diabetes worldwide and a further 318 million people were at high risk of developing diabetes. These numbers were expected to grow to 642 million and 481 million, respectively, by 2040. It is estimated that each year 86,000 new cases of juvenile diabetes are being diagnosed.
Diabetes mellitus (DM) is a heterogeneous group of metabolic disorders characterized by hyperglycemia (high blood sugar levels) with impaired metabolism of carbohydrate, fat and proteins resulting from defects in insulin secretion, insulin action, or both. Diabetes is one of the world’s oldest diseases with the syndrome being discovered centuries ago. The worldwide increase in the prevalence of diabetes has highlighted the need for increased research efforts into treatment options for both the disease itself and its associated complications.
Type 1 diabetes is caused by destruction of the insulin secreting (beta) cells of the pancreas. The pathogenesis involves autoimmune processes that lead to an absolute insulin deficiency. Type 2 diabetes is caused by a combination of genetic and non-genetic factors that result in insulin resistance and insulin deficiency. Non-genetic factors include increasing age, high caloric intake, obesity, central adiposity, sedentary lifestyle, and low birth weight. This group comprises approximately 90–95% of cases in the diabetes syndrome.
Chronic hyperglycemia leads to various metabolic, hormonal, and physiologic alterations in the body, which further develop a number of secondary complications, resulting in the major increases in morbidity and mortality seen with all types of diabetes. Diabetes dramatically increases the risk of cardiovascular problems, such as coronary artery disease, chest pain (angina), heart attack, stroke, narrowing of arteries (atherosclerosis) and high blood pressure.
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High blood sugar over time can injure the walls of the tiny blood vessels (capillaries) that nourish nerves, especially in the legs, causing tingling, numbness, burning or pain. Gradually, all sensation can be lost. Nerve damage in the feet or poor blood flow to the feet increases the risk of various foot complications. In diabetics, minor wounds easily become serious infections, which may heal poorly. Severe damage might require toe, foot or leg amputation.
Diabetes can damage the blood vessels of the retina (diabetic retinopathy), potentially leading to blindness. It also increases the risk of other serious vision conditions, such as cataracts and glaucoma. Diabetic hypertension is a major contributor to kidney failure or irreversible end-stage kidney disease, which often requires dialysis or a kidney transplant.
Damage to the nerves that control digestion can cause problems with nausea, vomiting, diarrhea or constipation. For men, erectile dysfunction may be an issue. Diabetes may leave people more susceptible to a variety of skin disorders, including bacterial and fungal infections. Type 2 diabetes may increase the risk of Alzheimer's disease.
Diabetes Care and Management
In the absence of a cure, the goal of diabetes management is to reduce the likelihood of complications by eliminating the wide fluctuations in blood sugar that define the disease. The current toolset for managing blood sugar levels is limited.
Diabetes management entails the administration of insulin in combination with careful blood glucose monitoring (Type 1 diabetes) or involves adjustments to diet and exercise levels, use of oral anti-diabetic drugs and insulin administration to control blood sugar (Type 2 diabetes).
Blood sugars may be self-monitored using a portable, personal device that takes a small blood sample obtained with a tiny finger lancet. Using such a device, tight glycemic control becomes possible, as an adjunct to insulin therapy, either injected or delivered via a wearable insulin pump. This technology-enabled self-care model has been shown to reduce complications and improve the quality of life in Type 1 diabetes. Replicating these results in Type 2 diabetes has been challenging, largely reflecting the heterogeneous nature of the disease and the fact that it changes with increasing age and other factors. Implantable sensors that measure blood glucose continually have come into practice more recently.
The value of self-monitoring enablement using electronic devices, including the next generation of wearable health appliances, is aided by incorporating decision support algorithms and other intelligent information technology tools. The concept of the “artificial pancreas” combines glucose sensing technologies with automated insulin delivery by pump, with software based decision making interposed so that the former drives the latter (fully automated feedback loop). Such systems are under development but have not yet made their way to market.
Scientific Foundations
Ion flows and transmembrane gradients produced by ion channels and pumps are key regulators of cell proliferation, migration, and differentiation. Instructive roles for bioelectrical gradients in embryogenesis, regeneration, and neoplasm are being revealed.
The application of electromagnetic forces to human tissues to effect biologic change has been explored since the 19th century. A good deal of that was wishful thinking or deliberate deception. However, recent advances in molecular biology and imaging technology have allowed insight into the sources and downstream consequences of ion flows in complex organisms. In complement to the current focus on molecular genetics and stem cell biology, artificial modulation of bioelectrical signals in somatic tissues is a powerful modality that might result in profound advances in understanding and augmentation of regenerative capacity. Molecular bioelectricity and its role in cell-to-cell signaling and epigenetics (altering cell behavior without altering genes) provides a new pathway to discovery of technologies that can counteract the effects of many diseases.
Many cells in the human body are “electrically excitable” including those involved with production of chemical signals that affect blood sugar. One example of such a cell of the endocrine type is the L cell, which resides in the gut and secretes cell glucagon-like peptide-1 (GLP-1), glucagon-like peptide-2 (GLP-2), peptide YY (PYY) and oxyntomodulin. GLP-1 is an enteric hormone that stimulates insulin secretion and improves glycaemia in Type 2 diabetes. There is evidence that in Type 2 diabetes these cells become “unsynchronized”. Growing these cells in tissue culture and subjecting them to specific electrical signals can act to resynchronize their chemical activity, and alter their behavior as a “dispersed” metabolic organ. This serves as an illustration of how endogenous ion flows may serve as key epigenetic regulators of cell behavior, and suggests that bioelectric mechanisms might be harnessed at a whole organism level to cause functional regenerative changes. It is possible that the eBalance Technology may affect these processes, although that has yet to be established. We intend to explore this hypothesis in greater detail during our clinical trials.
Empirical Modeling
The first-in-human observations took place over many years and were carefully documented. The results of these observations lead to the belief that a specific device with a specific set of bioelectric signals of known waveform, frequency, amplitude, pulse, and duration, accompanied by sensing circuits that respond to fluctuations in the body’s response, in a closed feedback loop, produced cumulative effects that led to remarkable global effects in functional aspects of living in a person who had lived with Type 1 diabetes since age 10. Casual trials in another person with longstanding diabetes, Type 2 in this case, yielded findings of a similar nature in a limited time frame. These observations were followed by broader observational studies by Cell MedX’s team.
Effects observed in these observational studies include subjective reports of diminished fatigue, improved cognition, diminished neuropathic limb pain, improved sleep, reduction in swelling of extremities, improved skin appearance in color and texture, and a reduction in visual disturbance. Objective measures included healing of wounds, control of blood pressure leading to discontinuation or reduction of medication, and greatly improved control of blood sugars with remarkable diminution in HbA1C (which reflects average blood sugar over months). Remarkably, in the context of Type 1 Diabetes with other potential variables remaining the same, insulin requirements diminished to a considerable degree.
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Clinical Trials
On January 13, 2015, we appointed Dr. John Sanderson, MD, a stem cell researcher and former Johnson & Johnson (LifeScan) medical director, our Chief Medical Officer. Prior to this appointment Dr. Sanderson acted as a member of our Scientific Advisory Board.
During January through March 2015, we carried out a preliminary Pilot Trial (the “Pilot Trial”), which was designed to examine the short term metabolic impact of a single treatment with eBalance Technology on two diabetic subjects. Pre- and post-treatment blood samples from each subject were sent for extensive metabolic pathway analysis at the University of Alberta Metabolomics Unit. From those studies we observed alterations in several pathways, which are known to be deficient in persons with diabetes. The results of the Pilot Trial are notable in that significant shifts in metabolites related to blood sugar handling and disposal occurred in a very short time frame, with the only intervening variable being a 20 minute treatment with eBalance Technology.
The findings from the Pilot Trial were then used to inform further experimentation, including selection of metabolic end points for testing during a Phase IB clinical trial, which we started preparations for in July 2015. Due to shortage in available funding, we decided to temporarily postpone the Phase IB clinical Trial.
During the fourth quarter of our fiscal 2016 we engaged Nutrasource Diagnostics Inc. (“Nutrasource”) to commence observational clinical trials in Canada (“Clinical Study”) to assess and quantify eBalance technology’s ability to alter key metabolic pathways while targeting improved blood sugar control. The trial has been designed to include a site in Ontario with possibility of an additional site in British Columbia. The protocol has been designed to include the following end points:
1) Reduction in HbA1c levels;
2) Improvement in insulin sensitivity and a reduction in insulin resistance;
3) Improvement in such complications directly related to diabetes as;
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Diabetic neuropathy;
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Acceleration in wound healing; and
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Improvement in blood pressure control.
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The Clinical Study is expected to span a 3 to 8 month period at an estimated cost of CAD$345,000, payable in monthly instalments of CAD$20,242.
As of the date of this Annual Report on Form 10-K we, with assistance of Nutrasource, have secured the main research facility in Hamilton, Ontario, completed an investigational protocol as well as Informed Consent and Ethics Board submission documentation.
Product Development
On October 1, 2015, we entered into a development agreement with Mr. Claudio Tassi (the “Development Agreement”) for the development of the first eBalance Professional Series Device (the “Prototype”). Based on the Development Agreement we agreed to pay Bioformed Aestetic SL (“Bio4Med”), a company Mr. Tassi is a director of, $12,848 (EURO €12,000) and, upon successful completion of the development of the first eBalance Prototype, issue to Mr. Tassi, 100,000 shares of our common stock. We received the first Prototype in November 2015.
On December 4, 2015, we executed a non-binding letter of intent (“LOI”) with Mr. Tassi and Bio4Med. The LOI contemplates that (i) we will enter into a technology development and license agreements with Mr. Tassi and Bio4Med to continue development of therapeutic devices based on the eBalance Technology; (ii) upon approval of the first Prototype, we will place an order for the production of 25 devises; and (iii) Mr. Tassi will provide his services for an initial term of four months commencing on December 4, 2015.
On December 15, 2015, as contemplated under the LOI, we placed an order for an additional 25 eBalance devices, which we received between March and June of 2016. We consider these devices test prototypes of our eBalance Professional Series model (eBalance Pro Prototype). As of the date of this Annual Report on Form 10-K, we have distributed most of our eBalane Pro Prototypes to clinical practitioners to augment our observational data bank.
Several of eBalance Pro Prototypes will be used in our Clinical Study carried out by Nutrasource.
In August of 2016 we commenced the work on designing a new generation of our eBalance Pro Devices, which are being designed for use by practitioners, however, will be more compact and easier to operate. We expect to receive these devices in the 2nd quarter of our Fiscal 2017.
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The following table summarizes our estimated cash requirements for the following 12 month period ending August 31, 2017:
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Period Ending November 30, 2017
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Period Ending February 28, 2017
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Period Ending May 31, 2017
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Period Ending August 31, 2017
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Total at May 31, 2017
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Research and development
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Clinical observational trials
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$ | 106,977 | $ | 131,074 | $ | 209,074 | $ | 209,074 | $ | 656,199 | ||||||||||
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Development costs
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83,000 | 393,500 | 106,500 | 424,000 | 1,007,000 | |||||||||||||||
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Total research and development
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189,977 | 524,574 | 315,574 | 633,074 | 1,663,199 | |||||||||||||||
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General and administrative costs
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437,560 | 462,000 | 438,583 | 423,667 | 1,761,810 | |||||||||||||||
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Estimated cash requirement
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$ | 627,537 | $ | 986,574 | $ | 754,157 | $ | 1,056,741 | $ | 3,425,009 | ||||||||||
Based on our operating budget, our cash requirement for the next 12 month period is approximately $3,425,009. As at May 31, 2016, we had $27,561 cash on hand, a working capital deficit of $1,619,635 and cash flows used in operations of $421,572 for the year then ended. We will require additional capital to support our day-to-day operations and carry out the planned clinical trials and the development of the eBalance Technology. We are planning to raise this capital through debt or equity financing or through a combination of both.
Medical Device Regulations and Government Approvals
The manufacture, packaging, marketing and importing of medical devices is heavily regulated in the United States, Canada and Europe. Further, we expect that any other countries in which we may seek to sell or market devices based on the eBalance Technology will similarly have an extensive regulatory environment.
The U.S. Food and Drug Administration’s (FDA) Center for Devices and Radiological Health (CDRH) is responsible for regulating firms that manufacture, repackage, re-label and/or import medical devices sold in the United States. Health Canada’s Health Products and Food Branch Inspectorate is responsible for regulating the manufacture, labeling, packaging, distribution and import of medical devices sold in Canada.
Prior to selling any devices based on the eBalance Technology for the treatment in the United States or Canada, we will be required to make applications to obtain approval from the FDA and Health Canada, respectively. The type of application and complexity of the procedures for obtaining FDA and Health Canada approval will depend upon the classification of the devices that we develop under the provisions of the United States Food and Drugs Act of 1906, as amended, and the Food and Drugs Act (Canada), as amended, respectively, and related regulations. In addition, we may be required to apply to the FDA for an investigational device exemption (IDE) and/or Health Canada under the Investigational Testing Authorization (“ITA”) program for the use of any such devices in clinical trials that we sponsor to test the efficacy of the eBalance Technology in treating diabetes and related ailments. An application for an ITA has been submitted to Health Canada in July 2016 and is currently being reviewed by Health Canada.
Third Party Payers / Private Insurers
Reimbursement for medical devices through Medicare and Medicaid in the U.S., and through health protectorates in other nations, is not guaranteed. Third party private payers or private insurers typically follow the lead of government healthcare providers. A decision as to whether a device or treatment is covered involves extensive negotiations and is typically predicated on the concept of health cost savings. If the device can be shown to reduce health care costs through prevention of expensive complications of diabetes, such applications for approvals would be more favorably reviewed.
Marketing Plans
Once approved for marketing, the intent is to market devices incorporating the eBalance Technology through authorized dealers and distributors of medical equipment, as well as directly to end users and to professional / institutional users. Devices targeted at end users are expected to be self-managed devices that can be used by individuals in the comfort of their own homes. Devices targeted at professional / institutional users are expected to be larger scaled devices that can be used in clinical settings. A professional sales force is also expected to be developed. Initially, the Company intends to focus on marketing any products that we develop based on the eBalance Technology in the United States and Canada. The North America and Caribbean include approximately 44.3 million patients suffering from diabetes mellitus and related complications of which 50% are struggling to keep their blood sugar levels within recommended ranges and therefore potentially benefitting from our eBalance Technology.
Competition
The current market for treatments that assist in the control and management of diabetes and its complications is highly competitive. However, since our technology is based on the microcurrent therapy, which is not traditionally used for management of diabetes, direct competition for eBalance Technology is not well defined.
Indirect competitors include a multitude of pharmaceutical companies that produce insulin and other various drugs to maintain and prevent diabetes related complications; companies producing glucose monitoring devices.
Competitors in microcurrent therapy would include BodiHealth Systems, focusing on pain relief market in US; Electromedical Products International, Inc., the company that developed Alpha-Stim® PPM, which treats and alleviates acute, chronic or postoperative pain using microcurrent therapy.
Patents/Trade Marks/Licenses/Franchises/Concessions/Royalty Agreements or Labor Contracts
Our eBalance Technology is not protected by a patent or a trademark.
As of the date of the filing of this Annual Report on Form 10-K, we are continuing our negotiations with Bio4Med on the licensing agreement for the microcurrent technology that underlies our eBalance Technology. When completed, we expect that the Licensing Agreement will also include royalty payable to Bio4Med for each device sold based on this technology.
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Number of Total Employees and Number of Full Time Employees
We currently have no employees other than our executive officers, who provide their services as independent consultants. We contract for the services of medical and technical staff we require to administer our observational studies and the clinical trials, as well as other consultants on “as needed” basis.
ITEM 1A. RISK FACTORS.
There is a high degree of risk associated with buying our common stock. Prospective investors should carefully read this Annual Report on Form 10-K and consider the following risk factors when deciding whether to purchase our shares. These are speculative stocks and should be purchased by only those who can afford to lose their entire investment.
The risk factors outlined below are some of the known, substantial, material and potential risks that could adversely affect our business, financial condition, operating results and common share value. We cannot assure that we will successfully address these or any unknown risks and a failure to do so can have a negative impact on your investment. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also impair or adversely affect our business, financial condition or results of operation.
Risks Associated with our Company and our Industry
We operate in a highly competitive market. We face competition from large, well established medical device manufacturers and pharmaceutical companies in the market for treating and managing diabetes and related ailments. Many of these companies are very well accepted by health practitioners and have significant resources, and we may not be able to compete effectively.
The market for treatment and management of 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, the 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 the eBalance Technology and products based on this technology.
Our products will 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 postmarketing reporting, including adverse event reports and field alerts due to manufacturing quality concerns.
Changes in the health care regulatory environment may adversely affect our business.
A number of the provisions of the U.S. Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and its amendments changed access to health care products and services and established new fees for the medical device industry. Future rulemaking could increase rebates, reduce prices or the rate of price increases for health care products and services, or require additional reporting and disclosure. We cannot predict the timing or impact of any future rulemaking.
Inability to protect and enforce our intellectual property rights could adversely affect our financial results.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, tradenames and other forms of trade dress, are important to our business. An inability to defend, protect and enforce our intellectual property rights could adversely affect our financial results, even if we are successful in developing and marketing products based on the eBalance Technology. In addition, an adverse outcome in any litigation or interference proceeding could subject us to significant liabilities to third parties and require us to cease using the technology that is at issue or to license the technology from third parties. In addition, a finding that any of our intellectual property rights are invalid could allow our competitors to more easily and cost-effectively compete. Thus, an unfavorable outcome in any patent litigation or interference proceeding could have a material adverse effect on our business, financial condition or results of operations.
The cost to us of any patent litigation or interference proceeding could be substantial. Uncertainties resulting from the initiation and continuation of patent litigation or interference proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and interference proceedings could also absorb significant management time
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.
We do not currently have any marketable products. 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.
6
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.
Health care 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.
We are recently formed, lack an operating history and to date have generated only minimal revenues through our wholly owned subsidiary, Avyonce. If we cannot increase our revenues to start generating profits, our investors may lose their entire investment.
We are a recently formed company and to date have generated only minimal revenues through sales of Spa equipment and MediSpa courses through our wholly owned subsidiary, Avyonce. 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 no operating history and thus no way to measure progress or potential future success. Success has yet to be proved. We have yet to prove our eBalane Technology through clinical trials and we have yet to develop any products through which we would be able to start generating revenue. Financial losses should be expected to continue in the near future and at least until such time that we enter commercial production of devices based on the eBalance Technology, of which there is no assurance. As a new business we face all the risks of a ‘start-up’ venture including unforeseen costs, expenses, problems, and management limitations and difficulties. Since inception, we have accumulated deficit of $3,254,597 and there is no guarantee, that we may ever be able to turn a profit or locate additional opportunities, hire additional management and other personnel.
We need to acquire additional financing or our business will fail.
We must obtain additional capital or our business will fail. In order to continue development of our eBalance Technology and to successfully complete observational and clinical trials, we must secure more funds. Currently, we have very limited resources and have already accumulated a deficit. 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.
7
Should a larger public market develop for our stock, future sales of shares may negatively affect their market price.
Even if a larger market develops, the shares may be sparsely traded and have wide share price fluctuations. Liquidity may be low despite there being a market, making it difficult to get a return on the investment. The price also depends on potential investor’s feelings regarding the results of our operations, the competition of other companies’ shares, our ability to generate future revenues, and market perception about future of microcurrent technologies.
Because our stock is a penny stock, stockholders will be more limited in their ability to sell their stock.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system.
Because our securities constitute "penny stocks" within the meaning of the rules, the rules apply to us and to our securities. The rules may further affect the ability of owners of shares to sell our securities in any market that might develop for them. As long as the quotation price of our common stock is less than $5.00 per share, the common stock will be subject to Rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that:
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·
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contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
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·
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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;
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·
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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;
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·
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contains a toll-free telephone number for inquiries on disciplinary actions;
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·
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defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
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·
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contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.
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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:
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(a)
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we would not be able to pay our debts as they become due in the usual course of business; or
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(b)
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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.
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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 1B. UNRESOLVED STAFF COMMENTS.
None.
8
ITEM 2. PROPERTIES.
Our principal executive office is located at 2872 Sumter Valley Circle, Henderson, NV 89052. Our wholly owned subsidiary’s, Avyonce’s, and Cell MedX (Canada) Corp.’s principle office is located at 810 – 789 West Pender Street, Vancouver, BC V6C 1H2. Other than these offices, we do not currently maintain any other facilities, and do not anticipate the need for maintaining other facilities at any time in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
We are not a party to any pending legal proceedings and, to the best of our knowledge, none of our properties or assets are the subject of any pending legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
9
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET INFORMATION
Quotations for our common stock are entered on the OTC Link alternative trading system on the OTCQB marketplace under the symbol “CMXC”. The table below gives the high and low bid information for each fiscal quarter for the last two fiscal years. The bid information was obtained from OTC Markets Group Inc. and reflects inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
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High & Low Bids
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Period ended
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High
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Low
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August 31, 2014
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$0.78
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$0.21
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November 30, 2014
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$0.702
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$0.21
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February 28, 2015
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$0.775
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$0.26
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May 31, 2015
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$0.32
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$0.11
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August 31, 2015
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$0.33
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$0.255
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November 30, 2015
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$0.21
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$0.10
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February 29, 2016
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$0.32
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$0.065
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May 31, 2016
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$0.29
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$0.10
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HOLDERS OF RECORD
As of September 12, 2016, we had approximately 41 holders of record, according to a shareholders’ list provided by our transfer agent as of that date. The number of registered shareholders does not include the beneficial owners of common stock held in street name. The transfer agent for Cell MedX’s common stock is Pacific Stock Transfer Company with an address at 6725 Via Austi Pkwy, Suite 300 Las Vegas, NV 89119 and their telephone number is 702-361-3033.
DIVIDENDS
We have not paid any cash dividends on our common stock since our inception and do not anticipate paying any cash dividends in the foreseeable future. We plan to retain our earnings, if any, to provide funds for the expansion of our business.
Our Articles of Incorporation and Bylaws do not contain any restrictions limiting our ability to declare dividends. Section 78.288 of the Nevada Revised Statutes prohibits us from declaring dividends where, after giving effect to the distribution of the dividend:
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(a)
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we would not be able to pay our debts as they become due in the usual course of business; or
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(b)
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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.
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RECENT SALES OF UNREGISTERED SECURITIES
During our fiscal year ended May 31, 2016, we completed the following unregistered sales of our equity securities:
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On August 5, 2015, we issued to our CEO, President and a member of the board of directors options to purchase up to 2,500,000 shares of our common stock (the “CEO Options”). The CEO Options are exercisable at $0.35 per share, subject to the following vesting schedule:
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Number of Options to Vest
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Vesting Date
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500,000
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August 5, 2015
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500,000
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October 1, 2015
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500,000
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January 1, 2016
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500,000
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April 1, 2016
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500,000
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July 1, 2016
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2,500,000
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10
Any CEO Options that vest and become exercisable will expire on the 5th year anniversary of the particular vesting date, subject to certain early termination provisions, upon the death of the optionee, or if the optionee ceases to act for the Company in any capacity either voluntarily or as a result of a termination or removal for cause.
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On September 23, 2015, we issued to Mr. Bulwa, our consultant, options to purchase up to 150,000 shares of our common stock at an exercise price of $0.20 per share expiring September 1, 2017. We issued these options pursuant to the provisions of Regulation S of the Securities Act of 1933 (the "Act"), relying on the representation we received from Mr. Bulwa that he was not a US person as defined in Regulation S of the Act.
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On March 3, 2016, as additional consideration for Mr. Richard Jeffs lending us $50,000 in exchange for an unsecured promissory note, we issued to Mr. Jeffs share purchase warrants (the “Warrants”) for the purchase of up to 2,000,000 shares of the Company’s common stock, exercisable for a period of five years at a price of $0.15 per share if exercised during the first year, $0.25 per share if exercised during the second year, $0.40 per share if exercised during the third year, $0.60 per share if exercised during the fourth year and $0.75 per share during the fifth year.
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The Warrants were issued to Mr. Jeffs in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Regulation S of the Securities Act, on the basis of representations made by Mr. Jeffs that he is not a "US Person" (as that term is defined in Regulation S) and was not in the United States at the time the Lender acquired the Warrants.
PENNY STOCK RULES
The SEC has adopted regulations that regulate broker-dealer practices in connection with transactions in “penny stocks.” “Penny stocks” are generally defined as being any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. The application of the “penny stock” rules may affect your ability to resell our securities.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and Item 10(f) of Regulation SK and are not required to provide the information required under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Annual Report on Form 10-K constitute "forward-looking statements". These statements, identified by words such as “plan,” "anticipate," "believe," "estimate," "should," "expect" and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under this caption "Management's Discussion and Analysis" and elsewhere in this Form 10-K. We do not intend to update the forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. We advise you to carefully review the reports and documents we file from time to time with the United States Securities and Exchange Commission (the “SEC”).
11
General
The inclusion of supplementary analytical and related information herein may require us to make estimates and assumptions to enable us to fairly present, in all material respects, our analysis of trends and expectations with respect to our results of operations and financial position taken as a whole. Actual results may vary from the estimates and assumptions we make.
Results of Operation
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Year Ended
May 31,
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Percentage
Increase /
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2016
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2015
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(Decrease)
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Sales
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$ | 36,557 | $ | 42,624 | (14.2 | )% | ||||||
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Cost of goods sold
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(28,416 | ) | (26,560 | ) | 7.0 | % | ||||||
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Gross margin
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8,141 | 16,064 | (49.3 | )% | ||||||||
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Operating expenses
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Amortization
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20,603 | 1,955 | 953.9 | % | ||||||||
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Consulting fees
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331,587 | 275,146 | 20.5 | % | ||||||||
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Financing costs
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- | 88,900 | (100.0 | )% | ||||||||
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General and administrative expenses
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241,666 | 294,318 | (17.9 | )% | ||||||||
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Research and development costs
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650,377 | 177,867 | 265.7 | % | ||||||||
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Stock-based compensation
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868,160 | 203,829 | 325.9 | % | ||||||||
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Total operating expenses
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2,112,393 | 1,042,015 | 102.7 | % | ||||||||
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Other items
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Accretion expense
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(5,028 | ) | - | n/a | ||||||||
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Gain on sale of equipment
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2,979 | - | n/a | |||||||||
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Interest
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(32,836 | ) | (6,214 | ) | 428.4 | % | ||||||
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Net loss
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$ | (2,139,137 | ) | $ | (1,032,165 | ) | 107.2 | % | ||||
12
Revenues
Our revenue during the years ended May 31, 2016 and 2015 was associated with the operations of our wholly owned subsidiary, Avyonce Cosmedics Inc. (“Avyonce”). The revenue consisted of sales of spa equipment and consumable products, as well as continuing education courses to estheticians and health care professionals in the field of medical aesthetics. During the year ended May 31, 2016, due to the unforeseen downward trend in spa equipment supply market, the business efforts of Avyonce were redirected to the observational studies of the effects of the eBalance Therapy.
Operating Expenses
During the year ended May 31, 2016, our operating expenses increased by 102.7% from $1,042,015 incurred during the year ended May 31, 2015, to $2,112,393 incurred during the year ended May 31, 2016. The increase was mainly associated with our increased research and development activities during the year as well as stock-based compensation we granted to our senior officers. The most significant year-to-date changes were as follows:
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Our research and development fees for the year ended May 31, 2016, increased by $472,510, from $177,867 we incurred during the year ended May 31, 2015 to $650,377 for the year ended May 31, 2016. We recorded $496,345 as fair value of options to acquire up to 2,500,000 shares of our common stock that we granted to Ms. Arnett and Mr. Hargreaves in connection with our acquisition from them of the eBalance Technology pursuant to our Technology Purchase Agreement, as amended. In addition, we incurred $50,000 pursuant to our Management Consulting Agreement with Dr. Sanderson, and $26,700 with Newport Aesthetics Research, for conducting our US-based clinical study (which we have terminated during the year ended May 31, 2016, when the clinical trials were moved to Canada during the 4th quarter of our Fiscal 2016). In the comparative period, our research and development costs included $100,000 we paid Ms. Arnett and Mr. Hargreaves for the eBalance Technology, pursuant to our Technology Purchase Agreement, as amended, and $70,000 we paid or accrued to Dr. Sanderson, as compensation for his agreeing to act as our Chief Medical Officer and to design and carry out our medical studies.
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During the year ended May 31, 2016, we recorded $868,160 in share-based compensation, an increase of $664,331 as compared to $203,829 we recorded during the year ended May 31, 2015. The share-based compensation included $262,874 (2015 - $203,829) in fair market value of the options we issued to Dr. Sanderson pursuant to his consulting agreement with us, and $605,286 (2015 - $Nil) in fair market value of the options we issued to Mr. McEnulty pursuant to his option agreement with us.
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During the year ended May 31, 2016, our consulting and management fees increased by $56,441 and $27,600, respectively. We incurred $331,587 in consulting fees (2015 - $275,146), of this amount, $159,437 (2015 - $172,647) was paid or accrued to Jean Arnett and Brad Hargreaves – the vendors of our eBalance Technology - for assisting us with our business development efforts. Our management fees for the year ended May 31, 2016, totaled $55,200 (2015 - $27,600).
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●
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In order to continue providing information about our Company and the eBalance Technology to the general public, during the year ended May 31, 2016, we incurred $28,375 in corporate communications and $4,801 in marketing fees; these costs decreased significantly compared to $80,631 we incurred for corporate communications and marketing fees during the year ended May 31, 2015, which included programming and design of our corporate web site, the production of PowerPoint and video presentations associated with our eBalance technology and the business of the Company.
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●
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During the year ended May 31, 2015, we recorded $88,900 in financing fees on the loan agreements we entered into to support our current operations. The non-cash financing fees resulted from the conversion features of the loans, which were below the market value of the shares on the date of the transactions.
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Our legal fees for the year ended May 31, 2016, were $39,807, as compared to $64,819 we incurred during the year ended May 31, 2015. Higher legal fees during the year ended May 31, 2015 were associated with the acquisition of the eBalance Technology. In addition, during the year ended May 31, 2015, we recorded $29,646 in due diligence costs related to the acquisition of the eBalance Technology.
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Other Items
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●
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During the year ended May 31, 2016, we accrued $32,836 (2015 - $6,214) in interest associated with the outstanding notes payable. Of this interest, $7,620 was accrued on $197,000 in notes payable we issued to Mr. Jeffs, our major shareholder.
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During the year ended May 31, 2016, we recorded $2,979 in a gain on sale of equipment which we sold to Mr. Hargreaves for total proceeds of $19,301.
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During the year ended May 31, 2016, we recorded $5,028 (2015 - $Nil) in accretion expense which resulted from the difference between the 6% stated interest rate and the 77.51% implied interest rate we used to determine the fair value of the proceeds we received pursuant to the $50,000 term loan with Mr. Jeffs.
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Liquidity and Capital Resources
Working Capital
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Year Ended May 31,
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Percentage | |||||||||||
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2016
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2015
|
Increase / (Decrease)
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||||||||||
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Current assets
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$ | 61,844 | $ | 20,718 | 198.5 | % | ||||||
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Current liabilities
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1,681,479 | 730,630 | 130.1 | % | ||||||||
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Working capital deficit
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$ | (1,619,635 | ) | $ | (709,912 | ) | 128.1 | % | ||||
13
As of May 31, 2016, we had a cash balance of $27,561, a working capital deficit of $1,619,635 and cash flows used in operations of $421,572 for the year then ended. During the year ended May 31, 2016, we funded our operations with $247,000 we received from Mr. Jeffs, our major shareholder, and with $480,000 we received from non-related parties. See “Net Cash Provided By Financing Activities”.
We did not generated sufficient cash flows from our operating activities to satisfy our cash requirements for the Fiscal 2016. The amount of cash that we have generated from our operations to date is significantly less than our current debt obligations, including our debt obligations under our notes payable. There is no assurance that we will be able to generate sufficient cash from our operations to repay the amounts owing under these notes and advances payable, or to service our other debt obligations. If we are unable to generate sufficient cash flow from our operations to repay the amounts owing when due, we may be required to raise additional financing from other sources.
Cash Flows
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Year Ended May 31,
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2016
|
2015
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|||||||
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Cash flows used in operating activities
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$ | (421,572 | ) | $ | (316,811 | ) | ||
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Cash flows used in investing activities
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(218,790 | ) | (27,801 | ) | ||||
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Cash flows provided by financing activities
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666,788 | 345,244 | ||||||
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Effects of foreign currency exchange on cash
|
(123 | ) | (575 | ) | ||||
|
Net increase in cash during the period
|
$ | 26,303 | $ | 57 | ||||
Net Cash Used in Operating Activities
Net cash used in operating activities during the year ended May 31, 2016, was $421,572. This cash was primarily used to cover our cash operating expenses of $689,172, to increase our inventory by $3,925 and increase our other current assets mainly associated with the prepayments of future expenses by $8,429. These uses of cash were offset by increases in our accounts payable and accrued liabilities of $136,278 and $8,268, respectively, as well as an increase in the amounts due to related parties of $135,408.
Net cash used in operating activities during the year ended May 31, 2015, was $316,811. This cash was primarily used to cover our cash operating expenses of $735,964, to increase our inventory held by Avyonce by $729 and increase our other current assets mainly associated with the prepayments of future expenses by $18,772. These uses of cash were offset by increases in our accounts payable and accrued liabilities of $222,790 and $30,402, respectively, as well as an increase in the amounts due to related parties of $185,462.
Non-cash transactions
During the year ended May 31, 2016, our net loss was affected by the following expenses that did not have any impact on cash used in operations:
|
·
|
$496,345 in share-based compensation associated with the fair value of the options to purchase up to 2,500,000 shares of our common stock, which we issued to Ms. Arnett and Mr. Hargreaves as part of the options to purchase up to 20,000,000 shares of our common stock pursuant to our Technology Purchase Agreement, dated for reference November 25, 2014, and which vested on August 26, 2015;
|
|
·
|
$262,874 in share-based compensation associated with the fair value of the options to purchase up to 2,400,000 shares of our common stock we issued to Dr. Sanderson as compensation for his appointment as our Chief Medical Officer; and $605,286 in share-based compensation associated with the fair value of the options to purchase up to 2,500,000 shares of our common stock we issued to Mr. Frank McEnulty, our CEO and President;
|
|
·
|
$32,836 in interest we accrued on the outstanding notes payable. Of this interest, $7,620 was accrued on $197,000 in notes payable we issued to Mr. Jeffs, our major shareholder;
|
|
·
|
$5,028 in accretion expense which resulted from the difference between the 6% stated interest rate and the 77.51% implied interest rate we used to determine the fair value of the proceeds we received pursuant to the $50,000 term loan with Mr. Jeffs;
|
|
·
|
$20,603 in amortization expense we recorded on the equipment that is being used in our research of the eBalance Technology;
|
|
·
|
$20,364 in share-based compensation associated with the fair value of the options to purchase up to 150,000 shares of our common stock, which we issued to Mr. Bulwa, as apart of his Consulting Agreement with us;
|
|
·
|
$9,608 loss that resulted from foreign exchange fluctuations on Canadian dollar denominated transactions; and
|
|
·
|
$2,979 gain on sale of equipment, which we sold to Mr. Hargreaves.
|
14
During the year ended May 31, 2015, our net loss was affected by the following expenses that did not have any impact on cash used in operations:
|
·
|
$203,829 in stock-based compensation associated with the fair value of the options to purchase up to 2,400,000 shares of our common stock we issued to Dr. Sanderson as compensation for his appointment as our Chief Medical Officer;
|
|
·
|
$88,900 in financing costs associated with the conversion feature of the notes payable we issued to an arms length party, as the conversion price was below the market value of the shares on the date of the transaction;
|
|
·
|
$6,214 in interest we accrued on the outstanding notes payable we issued to non-related parties;
|
|
·
|
$1,955 in amortization expense we recorded on our equipment to be used in clinical trials of our eBalance Technology; and
|
|
·
|
$4,697 gain that resulted from foreign exchange fluctuations on Canadian Dollar denominated loans and advances we received.
|
Net Cash Provided by Financing Activities
During the year ended May 31, 2016, we borrowed a total of $480,000 from unrelated parties and $197,000 from our major shareholder. These loans are unsecured, payable on demand and bear interest at 6% per annum, compounded monthly. In addition, we borrowed $50,000 from our major shareholder, which is to be repaid on or before March 3, 2017. The loan bears a 6% interest rate, however, due to the issuance of the warrants to acquire up to 2,000,000 shares of the Company’s common stock, which were issued to Mr. Jeffs as consideration for lending us the funds, the fair value of the loan, at the time of the transaction, was determined to be $25,000, which resulted in 77.51% implied interest.
During the same period we repaid $60,212 in non-interest bearing advances, net of any additions, to a non-related party.
During the year ended May 31, 2015, we borrowed a total of $205,000 from City Group LLC (the “Lender”), an unrelated party. The loans are unsecured, payable on demand and bear interest at 6% per annum, compounded monthly. Subject to applicable US securities laws, at the discretion of the Lender, $195,000 of principle amount outstanding and accrued interest thereon may be converted into shares of our common stock at $0.50 per share. We recorded $88,900 in non-cash financing fees associated with the conversion feature. In addition, we received $40,523 and $24,721 (CAD$27,500) in non-interest bearing advances from an unrelated party; these advances were due on demand and were repaid during our Fiscal 2016.
In addition to the debt financing, during the same period we received subscriptions for 150,000 units (each a “Unit”) at a price of $0.50 per Unit for total proceeds of $75,000. Each Unit consisted of one share of our common stock and one warrant for the purchase of one additional share of our common stock, exercisable at a price of $1.00 per share. As of the date of this report, the Units subscribed for remain unissued.
Net Cash Used in Investing Activities
During the year ended May 31, 2016, we paid $218,790 for the equipment which is being used in our clinical and observational studies. During the year ended May 31, 2015, we paid $27,801 for the equipment which is being used in our observational studies.
Going Concern
The notes to our audited consolidated financial statements at May 31, 2016, disclose our uncertain ability to continue as a going concern. We are development stage company with limited operations. To date we were able to generate only minimal revenue from the operations of our wholly owned subsidiary, Avyonce. Our research and development plans for the near future will require large capital expenditures, which we are planning to mitigate through equity or debt financing.
We have accumulated a deficit of $3,254,597 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 audited consolidated 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.
Principals of consolidation
The consolidated financial statements include the accounts of Cell MedX Corp. and our wholly owned subsidiaries, Avyonce Cosmedics Inc. and Cell MedX (Canada) Corp. On consolidation, we eliminate all intercompany balances and transactions.
15
Foreign currency translations and transactions
Our functional and reporting currency is the United States dollar. We translate foreign denominated monetary assets and liabilities into their U.S. dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenues and expenses are translated at average rates of exchange during the period. Related translation adjustments as well as gains or losses resulting from foreign currency transactions are reported as part of operating expenses on the statement of operations.
The functional currency of our wholly owned subsidiaries is the Canadian dollar. On consolidation, the subsidiaries translate the assets and liabilities to U.S. dollars using foreign exchange rates which prevailed at the balance sheet date, and translate revenues and expenses using average exchange rates during the period. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the other comprehensive income. As of the date of this Annual Report on Form 10-K we have not entered into derivative instruments to offset the impact of foreign currency fluctuations.
Revenue recognition
We recognize the revenue when all the following conditions have been met:
|
·
|
the sales price is fixed or determinable;
|
|
·
|
pervasive evidence of an agreement exists;
|
|
·
|
when delivery of the product has occurred and title has transferred or services have been provided; and
|
|
·
|
when collectability is reasonably assured.
|
Inventory valuation
Inventories are valued at the lower of cost or net realizable value, net of trade discounts received, with costs being determined based on the weighted average cost basis.
Research and development costs
We expense all in-house research and development costs in the period they were incurred. Acquired research and development costs are capitalized to the extent that the sum of the undiscounted cash flows expected to result from the asset can be reasonably estimated or may be verified by an appraisal in certain instances. In all other instances the costs are expensed in the period they were incurred. Acquired research and development costs for a particular research and development project that have no future economic values, are expensed as research and development costs at the time the costs are incurred.
Accounts receivable
Receivables represent valid claims against debtors for services provided or goods sold on or before the balance sheet date and are reduced to their estimated net realizable value. An allowance for doubtful accounts is based on an assessment of the collectability of all past due accounts. At May 31, 2016 and 2015, our allowance for doubtful accounts was $Nil.
Long-lived assets
In accordance with ASC 360, “Property, Plant, and Equipment”, we test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to:
|
·
|
significant decreases in the market price of the asset;
|
|
·
|
significant adverse changes in the business climate or legal factors;
|
|
·
|
accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset;
|
|
·
|
current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and
|
|
·
|
current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.
|
Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount exceeds fair value.
16
Equipment
Equipment is stated at cost and is amortized over its estimated useful life on a straight-line basis over 3 years.
Stock options and other share-based compensation
For equity awards, such as stock options, total compensation cost is based on the grant date fair value and for liability awards, such as stock appreciation rights, total compensation cost is based on the settlement value. We recognize the stock-based compensation expense for all awards over the service period required to earn the award, which is the shorter of the vesting period or the time period an employee becomes eligible to retain the award at retirement.
Fair value of financial Instruments
Our financial instruments include cash, amounts receivable, accounts payable, notes and advances payable, and amounts due to related parties. The fair values of these financial instruments approximate their carrying values due to their short maturities.
Concentration of credit risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and trade accounts receivable.
At May 31, 2016, we had $27,561 in cash on deposit with a large chartered Canadian bank and a large US bank. Of these deposits approximately $4,662 was insured. As part of our cash management process, we perform periodic evaluations of the relative credit standing of these financial institutions. We have not experienced any losses in cash balances and do not believe we are exposed to any significant credit risk on our cash.
Accounts receivable consists of sales income generated by our wholly owned subsidiary, Avyonce, and is not collateralized. We continually monitor the financial condition of our customers to reduce the risk of loss. We routinely assess the financial strength of our source of revenue income and as a consequence, concentration of credit risk is limited. At May 31, 2016, we had $1,040 in accounts receivable outstanding.
Recent accounting standards and pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards Board or other authoritative standards groups with future effective dates are either not applicable or are not expected to have a significant impact on our consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f) of Regulation SK and are not required to provide the information required under this item.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
Index to Financial Statements
|
|
|
Page No.
|
|
|
Financial Statements
|
|
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
Consolidated Balance Sheets as of May 31, 2016 and May 31, 2015
|
F-2
|
|
Consolidated Statements of Operations for the years ended May 31, 2016 and May 31, 2015
|
F-3
|
|
Consolidated Statement of Stockholders’ Deficit for the years ended May 31, 2016 and May 31, 2015
|
F-4
|
|
Consolidated Statements of Cash Flows for the years ended May 31, 2016 and May 31, 2015
|
F-5
|
|
Notes to the Consolidated Financial Statements
|
F-6
|
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Cell MedX Corp.
We have audited the accompanying consolidated balance sheets of Cell MedX Corp. (the “Company”) as of May 31, 2016 and 2015, the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Cell MedX Corp. as of May 31, 2016 and 2015, the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, to date the Company has reported losses since inception from operations and requires additional funds to meet its obligations and fund the costs of its operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/DMCL
DALE MATHESON CARR-HILTON LABONTE LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
September 12, 2016
F-1
|
CELL MEDX CORP.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(EXPRESSED IN US DOLLARS)
|
|
May 31, 2016
|
May 31, 2015
|
|||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash
|
$ | 27,561 | $ | 1,258 | ||||
|
Inventory
|
4,599 | 707 | ||||||
|
Other current assets
|
29,684 | 18,753 | ||||||
|
Total current assets
|
61,844 | 20,718 | ||||||
|
Equipment
|
207,083 | 25,846 | ||||||
|
Total assets
|
$ | 268,927 | $ | 46,564 | ||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Accounts payable
|
$ | 384,147 | $ | 242,954 | ||||
|
Accrued liabilities
|
37,966 | 30,339 | ||||||
|
Due to related parties
|
307,650 | 183,538 | ||||||
|
Notes and advances payable
|
951,716 | 273,799 | ||||||
|
Total liabilities
|
1,681,479 | 730,630 | ||||||
|
STOCKHOLDERS' DEFICIT
|
||||||||
|
Common stock, $0.001 par value, 300,000,000 shares authorized;
|
||||||||
|
31,000,000 shares issued and outstanding at May 31, 2016 and 2015
|
31,000 | 31,000 | ||||||
|
Additional paid-in capital
|
1,734,498 | 324,629 | ||||||
|
Obligation to issue shares
|
75,000 | 75,000 | ||||||
|
Accumulated deficit
|
(3,254,597 | ) | (1,115,460 | ) | ||||
|
Accumulated other comprehensive income
|
1,547 | 765 | ||||||
|
Total stockholders' deficit
|
(1,412,552 | ) | (684,066 | ) | ||||
|
Total liabilities and stockholders’ deficit
|
$ | 268,927 | $ | 46,564 | ||||
|
|
||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
CELL MEDX CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN US DOLLARS)
|
Year ended
|
Year ended
|
|||||||
|
May 31,
|
May 31,
|
|||||||
|
2016
|
2015
|
|||||||
|
Revenue
|
||||||||
|
Sales
|
$ | 36,557 | $ | 42,624 | ||||
|
Cost of goods sold
|
28,416 | 26,560 | ||||||
|
Gross margin
|
8,141 | 16,064 | ||||||
|
Operating expenses
|
||||||||
|
Amortization
|
20,603 | 1,955 | ||||||
|
Consulting fees
|
331,587 | 275,146 | ||||||
|
Financing fees
|
- | 88,900 | ||||||
|
General and administrative expenses
|
241,666 | 294,318 | ||||||
|
Research and development costs
|
650,377 | 177,867 | ||||||
|
Stock-based compensation
|
868,160 | 203,829 | ||||||
|
Total operating expenses
|
2,112,393 | 1,042,015 | ||||||
|
Other items
|
||||||||
|
Accretion expense
|
(5,028 | ) | - | |||||
|
Gain on sale of equipment
|
2,979 | - | ||||||
|
Interest
|
(32,836 | ) | (6,214 | ) | ||||
|
Net loss
|
(2,139,137 | ) | (1,032,165 | ) | ||||
|
Unrealized foreign exchange translation gain
|
782 | 765 | ||||||
|
Comprehensive loss
|
$ | (2,138,355 | ) | $ | (1,031,400 | ) | ||
|
Net loss per common share
|
||||||||
|
Basic and diluted
|
$ | (0.07 | ) | $ | (0.03 | ) | ||
|
Weighted average number of shares outstanding – basic and diluted
|
31,000,000 | 31,000,000 | ||||||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
||||||||
F-3
CELL MEDX CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(EXPRESSED IN US DOLLARS)
|
Obligation
|
Additional
|
Accumulated Other |
|
|||||||||||||||||||||||||
|
Common Stock
|
to Issue
|
Paid-in
|
Deficit
|
Comprehensive |
|
|||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Capital
|
Accumulated
|
Income |
Total
|
||||||||||||||||||||||
|
Balance - May 31, 2014
|
31,000,000 | $ | 31,000 | $ | - | $ | 31,900 | $ | (83,295 | ) | $ | - | $ | (20,395 | ) | |||||||||||||
|
Financing costs - beneficial conversion feature
|
- | - | - | 88,900 | - | - | 88,900 | |||||||||||||||||||||
|
Proceeds from share subscription
|
- | - | 75,000 | - | - | - | 75,000 | |||||||||||||||||||||
|
Stock-based compensation
|
- | - | - | 203,829 | - | - | 203,829 | |||||||||||||||||||||
|
Net loss for the year ended May 31, 2015
|
- | - | - | - | (1,032,165 | ) | - | (1,032,165 | ) | |||||||||||||||||||
|
Translation to reporting currency
|
- | - | - | - | - | 765 | 765 | |||||||||||||||||||||
|
Balance - May 31, 2015
|
31,000,000 | 31,000 | 75,000 | 324,629 | (1,115,460 | ) | 765 | (684,066 | ) | |||||||||||||||||||
|
Options issued for technology
|
- | - | - | 496,345 | - | - | 496,345 | |||||||||||||||||||||
|
Options issued for consulting fees
|
- | - | - | 20,364 | - | - | 20,364 | |||||||||||||||||||||
|
Stock-based compensation
|
- | - | - | 868,160 | - | - | 868,160 | |||||||||||||||||||||
|
Warrants issued for term loan
|
- | - | - | 25,000 | - | - | 25,000 | |||||||||||||||||||||
|
Net loss for the year ended May 31, 2016
|
- | - | - | - | (2,139,137 | ) | - | (2,139,137 | ) | |||||||||||||||||||
|
Translation to reporting currency
|
- | - | - | - | - | 782 | 782 | |||||||||||||||||||||
|
Balance - May 31, 2016
|
31,000,000 | $ | 31,000 | $ | 75,000 | $ | 1,734,498 | $ | (3,254,597 | ) | $ | 1,547 | $ | (1,412,552 | ) | |||||||||||||
|
|
||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CELL MEDX CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
|
Year Ended May 31,
|
||||||||
|
2016
|
2015
|
|||||||
|
Cash flows used in operating activities:
|
||||||||
|
Net loss
|
$ | (2,139,137 | ) | $ | (1,032,165 | ) | ||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
|
Accretion expense
|
5,028 | - | ||||||
|
Accrued interest on notes payable
|
32,836 | 6,214 | ||||||
|
Amortization
|
20,603 | 1,955 | ||||||
|
Consulting fees - non-cash
|
20,364 | - | ||||||
|
Financing costs
|
- | 88,900 | ||||||
|
Foreign exchange loss (gain)
|
9,608 | (4,697 | ) | |||||
|
Gain on sale of equipment
|
(2,979 | ) | - | |||||
|
Research and development costs - non-cash
|
496,345 | - | ||||||
|
Stock-based compensation
|
868,160 | 203,829 | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Inventory
|
(3,925 | ) | (729 | ) | ||||
|
Other current assets
|
(8,429 | ) | (18,772 | ) | ||||
|
Accounts payable
|
136,278 | 222,790 | ||||||
|
Accrued liabilities
|
8,268 | 30,402 | ||||||
|
Due to related parties
|
135,408 | 185,462 | ||||||
|
Net cash flows used in operating activities
|
(421,572 | ) | (316,811 | ) | ||||
|
Cash flows used in investing activities:
|
||||||||
|
Acquisition of equipment
|
(218,790 | ) | (27,801 | ) | ||||
|
Net cash used in investing activities
|
(218,790 | ) | (27,801 | ) | ||||
|
Cash flows from financing activities
|
||||||||
|
Advances payable
|
(60,212 | ) | 65,244 | |||||
|
Proceeds from notes payable
|
727,000 | 205,000 | ||||||
|
Obligation to issue shares
|
- | 75,000 | ||||||
|
Net cash provided by financing activities
|
666,788 | 345,244 | ||||||
|
Effects of foreign currency exchange on cash
|
(123 | ) | (575 | ) | ||||
|
Increase in cash
|
26,303 | 57 | ||||||
|
Cash, beginning
|
1,258 | 1,201 | ||||||
|
Cash, ending
|
$ | 27,561 | $ | 1,258 | ||||
|
The accompanying notes are an integral part of these consolidated financial statements.
|
||||||||
F-5
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
Cell MedX Corp. (the “Company”) was incorporated under the laws of the State of Nevada. On November 26, 2014, the Company formed a subsidiary, Avyonce Cosmedics Inc., (“Avyonce”) and on April 26, 2016, the Company formed an additional subsidiary, Cell MedX (Canada) Corp. (“Cell MedX Canada”). Both subsidiaries were formed under the laws of British Columbia.
The Company is an early development stage company focused on the discovery, development and commercialization of therapeutic products for patients with diseases such as diabetes. Through Avyonce, the Company is engaged in reselling and marketing spa technology and equipment.
Going concern
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of May 31, 2016, the Company has not achieved profitable operations and has accumulated a deficit of $3,254,597. 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 raise 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 a private placement of common stock.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and are presented in US dollars.
Principles of consolidation
The consolidated financial statements include the accounts of Cell MedX Corp. and its subsidiaries, Avyonce and Cell MedX Canada. On consolidation, all intercompany balances and transactions are eliminated.
Accounting estimates
The preparation of these consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of equipment, fair value of stock-based compensation, fair value of financial instruments and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
F-6
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
Foreign currency translations and transactions
The Company’s functional and reporting currency is the United States dollar. Foreign denominated monetary assets and liabilities are translated into their U.S. dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Revenues and expenses are translated at average rates of exchange during the period. Related translation adjustments as well as gains or losses resulting from foreign currency transactions are reported as part of operating expenses on the statement of operations.
The functional currency of Avyonce and Cell MedX Canada is the Canadian dollar. On consolidation, the subsidiaries translate their assets and liabilities to U.S. dollars using foreign exchange rates which prevailed at the balance sheet date, and translate their revenues and expenses using average exchange rates during the period. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the other comprehensive income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Revenue recognition
Revenue is recognized when all the following conditions have been met:
|
·
|
the sales price is fixed or determinable;
|
|
·
|
pervasive evidence of an agreement exists;
|
|
·
|
when delivery of the product has occurred and title has transferred or services have been provided; and
|
|
·
|
when collectability is reasonably assured.
|
Inventory valuation
Inventories are valued at the lower of cost or net realizable value, net of trade discounts received, with costs being determined based on the weighted average cost basis.
Research and development costs
The Company expenses all in-house research and development costs in the period they were incurred. Acquired research and development costs are capitalized to the extent that the sum of the undiscounted cash flows expected to result from the asset can be reasonably estimated or may be verified by an appraisal in certain instances. In all other instances the costs are expensed in the period they were incurred. Acquired research and development costs for a particular research and development project that have no future economic values, are expensed as research and development costs at the time the costs are incurred.
Income taxes
Income tax expense is based on pre-tax financial accounting income. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not some portion or all of the deferred tax assets will not be realized.
Loss per share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of common shares outstanding during the reporting period. Diluted net income per common share includes the potential dilution that could occur upon exercise of the options and warrants to acquire common stock computed using the treasury stock method which assumes that the increase in the number of shares is reduced by the number of shares which could have been repurchased by the Company with the proceeds from the exercise of the options and warrants.
F-7
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
Long-lived assets
In accordance with ASC 360, “Property, Plant, and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount exceeds fair value.
Equipment
Equipment is stated at cost and is amortized over its estimated useful life on a straight-line basis over 3 years.
Financial instruments
The Company’s financial instruments include cash, inventory, amounts receivable, accounts payable, notes and advances payable, and amounts due to related parties. The fair values of these financial instruments approximate their carrying values due to their short maturities.
Stock options and other stock-based compensation
For equity awards, such as stock options, total compensation cost is based on the grant date fair value and for liability awards, such as stock appreciation rights, total compensation cost is based on the settlement value. The company recognizes stock-based compensation expense for all awards over the service period required to earn the award, which is the shorter of the vesting period or the time period an employee becomes eligible to retain the award at retirement.
Recent accounting pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards Board or other authoritative standards groups with future effective dates are either not applicable or are not expected to have a significant impact on the consolidated financial statements of the Company.
NOTE 3 –TECHNOLOGY
On November 25, 2014, the Company completed the acquisition of a proprietary technology for the use of microcurrents for the treatment of diabetes and related ailments (the “Technology”) from Jean Arnett and Brad Hargreaves (the “Vendors”).
F-8
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
In consideration for the sale of the Technology, the Company paid the Vendors a total of $100,000 and issued the Vendors options for the purchase of up to 20,000,000 shares of the Company’s common stock at an exercise price of $0.05 per share. The options vest as follows:
|
Number of Options to Vest
|
Vesting Condition
|
|
2,500,000
|
Upon the design and commencement of the first clinical trial (vested)
|
|
2,500,000
|
Upon the completion of the first clinical trial.
|
|
2,500,000
|
Upon the design and commencement of the second clinical trial.
|
|
2,500,000
|
Upon the completion of the second clinical trial.
|
|
5,000,000
|
Upon the design and commencement of the third clinical trial.
|
|
5,000,000
|
Upon the completion of the third clinical trial.
|
|
20,000,000
|
Total
|
During the year ended May 31, 2015, the cash consideration paid for acquisition of the Technology has been expensed as research and development costs.
On August 26, 2015, the board of directors of the Company determined that the options to purchase up to 2,500,000 common shares of the Company’s common stock granted to the Vendors for the Technology, which were to vest upon the design and commencement of the first clinical trial, have vested. The total fair value of the vested options was calculated to be $496,345 (Note 10) and was expensed as research and development costs.
NOTE 4– RELATED PARTY TRANSACTIONS
Amounts due to related parties, other than notes payable to related parties (Notes 8 and 9) at May 31, 2016 and 2015:
|
May 31, 2016
|
May 31, 2015
|
|||||||
|
Due to the Chief Executive Officer (“CEO”) and President
|
$ | 66,254 | $ | 23,054 | ||||
|
Due to the Vice President (“VP”), Corporate Strategy
|
95,575 | 60,228 | ||||||
|
Due to the VP, Technology and Operations
|
56,596 | 44,362 | ||||||
|
Due to the Chief Medical Officer
|
81,059 | 51,059 | ||||||
|
Due to a company owned by VP, Corporate Strategy and VP Technology and Operations
|
1,747 | 1,835 | ||||||
|
Due to the Chief Financial Officer (“CFO”)
|
6,419 | 3,000 | ||||||
|
Due to related parties
|
$ | 307,650 | $ | 183,538 | ||||
Amounts are unsecured, due on demand and bear no interest.
F-9
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
During the years ended May 31, 2016 and 2015, the Company had the following transactions with related parties:
|
May 31,
2016
|
May 31,
2015
|
|||||||
|
Management fees incurred to the CEO and President
|
$ | 43,200 | $ | 21,600 | ||||
|
Stock-based compensation incurred to the CEO and President (Note 10)
|
605,286 | - | ||||||
|
Management fees incurred to the CFO
|
12,000 | 6,000 | ||||||
|
Consulting fees incurred to the VP, Corporate Strategy
|
85,669 | 95,915 | ||||||
|
Consulting fees incurred to the VP, Technology and Operations
|
73,768 | 76,732 | ||||||
|
Cash consideration paid for Technology to the VP, Technology and Operations and VP, Corporate Strategy
|
- | 100,000 | ||||||
|
Net payments made (received) for equipment acquired from (sold to) the VP, Technology and Operations and VP, Corporate Strategy
|
(8,911 | ) | 8,500 | |||||
|
Value of options issued and vested for Technology acquired from the VP, Technology and Operations and VP, Corporate Strategy, and recorded as part of research and development costs (Notes 3 and 10)
|
496,345 | - | ||||||
|
Inventory acquired from a company owned by VP, Technology and Operations and VP, Corporate Strategy
|
- | 1,689 | ||||||
|
Consulting fees incurred to the Chief Medical Officer and recorded as part of research and development costs (Note 5)
|
50,000 | 70,000 | ||||||
|
Stock-based compensation incurred to the Chief Medical Officer (Notes 5 and 10)
|
262,874 | 203,829 | ||||||
|
Research and development costs incurred to a company controlled by the Chief Medical Officer
|
26,700 | - | ||||||
|
Accrued interest expense incurred to a significant shareholder, included in general and administrative expense (Note 8)
|
7,620 | - | ||||||
|
Accretion expense associated with a loan agreement entered into with significant shareholder (Note 9)
|
5,028 | - | ||||||
|
Total transactions with related parties
|
$ | 1,659,579 | $ | 584,265 | ||||
NOTE 5 – MATERIAL AGREEMENTS
Management Consulting Agreement
On January 13, 2015, the Company entered into a three-year Management Consulting Agreement (the “Consulting Agreement”) with Dr. John Sanderson, MD. Pursuant to the Consulting Agreement, the Company agreed to pay Dr. Sanderson a monthly consulting fee of $10,000. In addition, the Company agreed to pay Dr. Sanderson a signing bonus of $10,000, plus an additional $10,000 as compensation for the past consulting services (Note 4). In the event of early termination without cause $60,000 will become payable to Dr. Sanderson.
The Company also issued to Dr. Sanderson non-transferrable options to purchase up to 2,400,000 shares of the Company’s common stock at an exercise price of $0.67 per share. The options vest quarterly starting on March 31, 2015 in equal portions of 200,000 shares per vesting period, and expire on the 5th year anniversary of the applicable vesting date subject to early termination provisions in the event that Dr. Sanderson ceases to act for the Company in any capacity. As of May 31, 2016, the options to purchase up to 1,000,000 shares of the Company’s common stock had vested. During the year ended May 31, 2016, the Company recorded stock-based compensation of $262,874 (2015 - $203,829) in connection with the vesting of these options (Note 10).
During the year ended May 31, 2016, the Company and Dr. Sanderson reached an agreement to suspend his consulting services until further notice, since the Company decided to move its clinical and observational studies to Canada.
F-10
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
Service Agreement for Observational Clinical Trials
On March 15, 2016, the Company entered into a service agreement with Nutrasource Diagnostics Inc. (“Nutrasource”) for its observational clinical studies in Canada (the “Clinical Studies”). The Clinical Studies will span over a 3 to 8 month period and will examine the effects of eBalance therapy on diabetes and associated complications. The estimated cost of the Clinical Studies is approximately CAD$345,000, payable in monthly instalments of CAD$20,242 over a period of 17 months.
NOTE 6 – EQUIPMENT
On October 1, 2015, the Company entered into an eBalance Prototype Development Agreement (the “Development Agreement”) with an unrelated party (the “Developer”) for development of its first eBalance Professional Series Device (the “Prototype”). Based on the Development Agreement, upon delivery of the Prototype the Company paid the Developer $12,848 (EURO €12,000).
On December 15, 2015, the Company submitted its first manufacturing order with the Developer to manufacture 25 eBalance Professional Series devices (the “eBalance Pro Devices”) based on the Prototype delivered to the Company in November 2015. The Company incurred a total of $185,027 in costs associated with commissioning of 25 eBalance Pro Devices, which were recorded as part of equipment and are being amortized on a straight line basis over their estimated useful lives of three (3) years.
These prototypes were received in spring of 2016 and have been provided to various clinicians to aid the Company with collection of data.
During the year ended May 31, 2016, the Company sold equipment to a director of the Company for proceeds of $19,301 resulting in a gain on sale of equipment of $2,979 recorded in the statement of operations.
Amortization schedule for the equipment at May 31, 2016 and 2015:
|
May 31, 2016
|
May 31, 2015
|
|||||||
|
Book value, beginning of the period
|
$ | 25,846 | $ | - | ||||
|
Changes during the period
|
201,840 | 27,801 | ||||||
|
Amortization
|
(20,603 | ) | (1,955 | ) | ||||
|
Book value, end of the period
|
$ | 207,083 | $ | 25,846 | ||||
NOTE 7 – INVENTORY
As at May 31, 2016, the inventory consisted of supplies held for resale, and was valued at $4,599 (May 31, 2015 - $707). The Company uses lower of cost or net realizable value to determine the book value of the inventory at reporting date.
F-11
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
NOTE 8 – NOTES AND ADVANCES PAYABLE
The tables below summarize the short-term loans and advances outstanding as at May 31, 2016 and 2015:
|
As at May 31, 2016
|
|||||||||||||||
|
Principal outstanding
|
Interest rate
per annum
|
Additional
description
|
Accrued
Interest / Accretion
|
Total Book
Value
|
|||||||||||
| $ | 195,000 | 6% |
Convertible
|
$ | 18,588 | $ | 213,588 | ||||||||
| 490,000 | 6% |
Non-convertible
|
12,842 | 502,842 | |||||||||||
| 197,000 | 6% |
Related Party (Note 4)
|
7,620 | 204,620 | |||||||||||
| 50,000 | 6% |
Related Party Term Loan (Notes 4 and 9)
|
5,028 | 30,028 | |||||||||||
| 638 | 0% |
Advances
|
- | 638 | |||||||||||
| $ | 932,638 | $ | 44,078 | $ | 951,716 | ||||||||||
.
|
As at May 31, 2015
|
|||||||||||||||
|
Principal outstanding
|
Interest rate
per annum
|
Additional
description
|
Accrued
Interest / Accretion
|
Total Book Value
|
|||||||||||
| $ | 195,000 | 6% |
Convertible
|
$ | 6,147 | $ | 201,147 | ||||||||
| 10,000 | 6% |
Non-convertible
|
67 | 10,067 | |||||||||||
| 62,585 | 0% |
Advances
|
- | 62,585 | |||||||||||
| $ | 267,585 | $ | 6,214 | $ | 273,799 | ||||||||||
During the year ended May 31, 2016, the Company entered into a number of loan agreements with unrelated parties for a total of $480,000 (2015 - $205,000). These loans bear interest at 6% per annum, are unsecured and are payable on demand. During the same period, the Company entered into a number of loan agreements with Mr. Richard Jeffs (“Mr. Jeffs”), the Company’s major shareholder, for a total of $247,000 (2015 – $Nil). The loans for a total of $197,000 bear interest at 6% per annum, are unsecured and are payable on demand. The remaining loan for $50,000 bears interest at 6% per annum compounded annually, and is payable on March 3, 2017 (Note 9).
During the year ended May 31, 2016, the Company repaid $60,212, net of additions, in non-interest bearing advances. These advances were unsecured and payable on demand.
As of May 31, 2016, the Company recorded $32,836 (2015 - $6,214) in interest expense associated with above loans, not including the interest accumulated on the Term Loan with Mr. Jeffs (Note 9).
F-12
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
Convertible Loans
During the year ended May 31, 2015, the Company signed two loan agreements with City Group LLC., (the “Lender”) for $125,000 and $70,000. The loans bear interest at 6% per annum, are unsecured and payable on demand. At the discretion of the Lender, the loans and accrued interest thereon can be converted into restricted shares of common stock of the Company at $0.50 per share. Since at the time of the transactions the conversion price was below the market value of the shares of the Company’s common stock, the Company recorded a beneficial conversion feature and associated non-cash financing costs of $88,900.
NOTE 9 – TERM LOAN
On March 3, 2016, the Company entered into a loan agreement (the “Term Loan Agreement”) with Richard Jeffs for a loan in the principal amount of $50,000 maturing March 3, 2017, with interest payable at a rate of 6% per annum (the “Term Loan”). As additional consideration for the Term Loan, the Company issued to the Mr. Jeffs share purchase warrants (the “Warrants”) for the purchase of up to 2,000,000 shares of the Company’s common stock, exercisable for a period of five years at a price of $0.15 per share if exercised during the first year, $0.25 per share if exercised during the second year, $0.40 per share if exercised during the third year, $0.60 per share if exercised during the fourth year and $0.75 per share during the fifth year. The Warrants were determined to be detachable from the debt instrument, as the debt instrument does not have to be surrendered to exercise the warrant. Under the guidance provided by ASC 470-20-25-2, proceeds from the sale of debt instrument with stock purchase warrants must be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to the warrants was $25,000 and was recorded to additional paid-in capital.
The Term Loan has effective interest rate of 77.51%, which was due primarily to the recording of non-cash accretion interest. During the year ended May 31, 2016, the Company recognized accretion expense of $5,028 (2015 - $Nil).
At March 3, 2016, the fair value of Warrants was valued using the Black-Scholes Option pricing model using the following assumptions:
|
At March 3, 2016
|
|||
|
Expected Warrant Life
|
5 years
|
||
|
Risk-Free Interest Rate
|
1.33% | ||
|
Expected Dividend Yield
|
Nil
|
||
|
Expected Stock Price Volatility
|
16% |
NOTE 10 – SHARE CAPITAL
During the year ended May 31, 2016, the Company did not have any transactions that resulted in the issuance of the shares of its common stock.
During the year ended May 31, 2015, the Company received a subscription for 150,000 units (each a “Unit”) at a price of $0.50 per Unit for total proceeds of $75,000. Each Unit consists of one share of the Company’s common stock and one warrant for the purchase of one additional share of the Company’s common stock, exercisable at a price of $1.00 per share, expiring one year after the issuance of the Units. As of May 31, 2016, the Units subscribed for have not yet been issued.
F-13
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
Options
On November 25, 2014, as part of the technology purchase agreement dated for reference October 16, 2014, and as amended on October 28, 2014 and November 13, 2014, the Company issued to the vendors of the Technology (the “Vendors”) options for the purchase of up to 20,000,000 shares of the Company’s common stock at an initial exercise price of $0.05 per share and expiring on the 5th year anniversary of the applicable vesting date, or on December 31, 2019, for those options that have not vested.
On August 26, 2015, the board of directors of the Company determined that the options to purchase up to 2,500,000 common shares of the Company’s common stock granted to the Vendors for the Technology, which were to vest upon the design and commencement of the first clinical trial, have vested.
The total fair value of the vested options was calculated to be $496,345 (Note 4) and was determined using the Black-Scholes Option pricing model at the grant date using the following assumptions:
|
At August
26, 2015
|
||
|
Expected Life of Options
|
5 years
|
|
|
Risk-Free Interest Rate
|
1.49% | |
|
Expected Dividend Yield
|
Nil
|
|
|
Expected Stock Price Volatility
|
216% |
As of May 31, 2016, the remaining options for the purchase of up to 17,500,000 shares of the Company’s common stock remained unvested.
On January 13, 2015, the Company issued 2,400,000 non-transferrable options to its Chief Medical Officer. The options vest quarterly starting on March 31, 2015, in equal portions of 200,000 shares per vesting period, and expire on the 5th year anniversary of the applicable vesting date.
The total fair value of the options was calculated to be $591,503 and was determined using the Black-Scholes Option pricing model at the grant date using the following assumptions:
|
At January 13, 2015
|
||
|
Expected Life of Options
|
5 years from vesting
|
|
|
Risk-Free Interest Rate
|
1.37% | |
|
Expected Dividend Yield
|
Nil
|
|
|
Expected Stock Price Volatility
|
27% |
As of May 31, 2016, options to acquire up to 1,000,000 shares of the Company’s common stock have vested, and the Company recognized $262,874 (2015 - $203,829) (Note 4) as share-based compensation expense for the year ended May 31, 2016. Further $124,800 will be recognized in the future periods.
F-14
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
On August 5, 2015, the Company issued to its CEO, President and a member of the board of directors options to purchase up to 2,500,000 shares of the Company’s common stock (the “CEO Options”). The CEO Options are exercisable at $0.35 per share, subject to the following vesting schedule:
|
Number of Options to Vest
|
Vesting Date
|
|
500,000
|
August 5, 2015
|
|
500,000
|
October 1, 2015
|
|
500,000
|
January 1, 2016
|
|
500,000
|
April 1, 2016
|
|
500,000
|
July 1, 2016
|
|
2,500,000
|
Any CEO Options that vest and become exercisable will expire on the 5th year anniversary of the particular vesting date, subject to certain early termination provisions, upon the death of the optionee, or if the optionee ceases to act for the Company in any capacity either voluntarily or as a result of a termination or removal for cause.
The total fair value of the options was calculated to be $616,886 and was determined using the Black-Scholes option pricing model at the grant date using the following assumptions:
|
At August 5, 2015
|
||
|
Expected Life of Options
|
5 years from vesting
|
|
|
Risk-Free Interest Rate
|
1.65% | |
|
Expected Dividend Yield
|
Nil
|
|
|
Expected Stock Price Volatility
|
218% |
Of the total fair value of the options $605,286 (Note 4) was recognized as share-based compensation expense for the year ended May 31, 2016 and remaining $11,600 will be recognized in the first quarter of fiscal 2017.
On September 23, 2015, the Company issued 150,000 non-transferrable options to a consultant. The options vested immediately and expire on September 1, 2017.
The total fair value of the options was calculated to be $20,364 and was recorded as share-based compensation for consulting fees during the year ended May 31, 2016. The fair value of the options granted was determined using the Black-Scholes Option pricing model at the grant date using the following assumptions:
|
At September 23, 2015
|
||
|
Expected Life of Options
|
1.94 years
|
|
|
Risk-Free Interest Rate
|
0.7% | |
|
Expected Dividend Yield
|
Nil
|
|
|
Expected Stock Price Volatility
|
214% |
F-15
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
The changes in the number of stock options outstanding during the years ended May 31, 2016 and 2015 are as follows:
|
Year ended
May 31, 2016
|
Year ended
May 31, 2015
|
|||||||||||||||
|
Number of
options
|
Weighted average exercise price
|
Number of
options
|
Weighted average exercise price
|
|||||||||||||
|
Options outstanding, beginning
|
22,400,000 | $ | 0.12 | - | n/a | |||||||||||
|
Options granted
|
2,650,000 | $ | 0.34 | 22,400,000 | $ | 0.12 | ||||||||||
|
Options outstanding, ending
|
25,050,000 | $ | 0.14 | 22,400,000 | $ | 0.12 | ||||||||||
|
Options exercisable, ending
|
5,650,000 | $ | 0.27 | 200,000 | $ | 0.67 | ||||||||||
Details of options outstanding and exercisable as at May 31, 2016 are as follows:
|
Exercise price
|
Grant date
|
Number of options
granted
|
Number of options
exercisable
|
|
$0.05
|
November 25, 2014
|
20,000,000
|
2,500,000
|
|
$0.67
|
January 13, 2015
|
2,400,000
|
1,000,000
|
|
$0.35
|
August 5, 2015
|
2,500,000
|
2,000,000
|
|
$0.20
|
September 23, 2015
|
150,000
|
150,000
|
|
25,050,000
|
5,650,000
|
At May 31, 2016, the weighted average remaining contractual life of the stock options outstanding and exercisable was 4.27 years.
|
|
Warrants
|
On March 3, 2016 (the “Effective Date”) the Company issued non-transferrable share purchase warrants to acquire up to 2,000,000 shares of the Company’s common stock expiring on March 3, 2021, to Mr. Jeffs as additional consideration for the Term Loan (Note 9). The exercise price of these warrants is as follows:
|
Period expiring on:
|
Exercise Price
|
|
March 3, 2017
|
$0.15
|
|
March 3, 2018
|
$0.25
|
|
March 3, 2019
|
$0.40
|
|
March 3, 2020
|
$0.60
|
|
March 3, 2021
|
$0.75
|
As at May 31, 2016, the Company has 2,000,000 (May 31, 2015 – Nil) warrants outstanding. The remaining contractual life of the warrants was 4.75 years.
F-16
CELL MEDX CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2016
|
NOTE 11 – INCOME TAXES
|
The reported income taxes differ from the amounts obtained by applying statutory rates to the loss before income taxes as follows:
|
May 31, 2016
|
May 31, 2015
|
|||||||
|
Net loss
|
$ | (2,139,137 | ) | $ | (1,032,165 | ) | ||
|
Statutory tax rate
|
34% | 34% | ||||||
|
Expected income tax recovery
|
(727,307 | ) | (350,936 | ) | ||||
|
Permanent differences
|
296,884 | 99,528 | ||||||
|
Temporary differences
|
7,005 | 665 | ||||||
|
Difference in foreign tax rates
|
1,345 | 1,408 | ||||||
|
Change in valuation allowance
|
422,073 | 249,335 | ||||||
|
Income tax recovery
|
$ | - | $ | - | ||||
The Company’s tax-effected future income tax assets and liabilities are estimated as follows:
|
May 31, 2016
|
May 31, 2015
|
|||||||
|
Deferred income tax assets (liabilities)
|
||||||||
|
Losses carried forward
|
$ | 693,708 | $ | 279,970 | ||||
|
Equipment
|
7,670 | (665 | ) | |||||
|
Less: Valuation allowance
|
(701,378 | ) | (279,305 | ) | ||||
|
Net deferred income tax assets
|
$ | - | $ | - | ||||
At May 31, 2016 and 2015, the Company had a deferred tax asset that related to net operating losses. A full valuation allowance has been established; as management believes it is more likely than not that the deferred tax asset will not be realized.
As at May 31, 2016, the Company had net operating loss carry forwards of approximately $1,977,972 (2015 - $774,500) to reduce future federal and state taxable income. The Company also had non-capital loss carry forwards of approximately $66,874 (2015 - $25,000) to reduce Canadian taxable income. These losses expire by 2036.
The Company is not currently subject to any income tax examinations by any tax authority. Should a tax examination be opened, management does not anticipate any tax adjustments, if accepted, that would result in a material change to its financial position.
|
NOTE 12 – SUBSEQUENT EVENTS
|
Loan Agreements
Subsequent to the year ended May 31, 2016, the Company received $75,000 under loan agreements with non-related parties and $74,278 (CAD$96,500) under loan agreements with Richard Jeffs. The loans bear interest at 6% per annum, are unsecured, non-convertible and payable on demand.
F-17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
In connection with the preparation of this Annual Report on Form 10-K, an evaluation was carried out by our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) as of May 31, 2016. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures.
Based on that evaluation, our management concluded, as of the end of the period covered by this report, 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 the Securities and Exchange Commission’s rules and forms due to lack of segregation of duties.
Management’s Report on Internal Controls over Financial Reporting
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC’s rules and forms. Management is responsible for establishing and maintaining adequate internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002 (SOX). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:
|
·
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and our Board of Directors; and
|
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an assessment of the effectiveness of our internal control over financial reporting as of May 31, 2016, based on criteria established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, it was found that the internal controls cannot be relied upon due to lack of segregation of duties.
Our independent auditors have not issued an attestation report on management’s assessment of our internal control over financial reporting. As a result, this Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.
Changes in Internal Controls
As of the end of the period covered by this report, there have been no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that materially affected, or are reasonably likely to materially affect, our results of operations.
ITEM 9B. OTHER INFORMATION
Not applicable
19
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Each of our directors holds office until the earlier of (i) our next annual meeting of our stockholders, (ii) that director’s successor has been elected and qualified, or (iii) that director resigns. Each of our executive officers are appointed by our Board of Directors and holds office until he resigns or is removed by the Board.
Our management team is listed below:
|
Name
|
Age
|
Positions
|
|
Frank McEnulty
|
59
|
Chief Executive Officer, President and Director
|
|
Yanika Silina
|
38
|
Chief Financial Officer, Treasurer, Corporate Secretary
|
|
Dr. John Sanderson, MD
|
66
|
Chief Medical Officer
|
|
Jean Arnett
|
60
|
Vice President, Corporate Strategy, and Director
|
|
Bradley Hargreaves
|
57
|
Vice President, Technology and Operations
|
Set forth below is a brief description of the background and business experience of each of our executive officers and directors:
Mr. McEnulty has served as a director and as the Chief Executive Officer and President of our Company since March 6, 2014. Prior to closing our acquisition of the eBalance Technology, on November 25, 2015, Mr. McEnulty also served as our Chief Financial Officer, Treasurer and Secretary. Mr. McEnulty is an experienced executive with an extensive background in finance and accounting. Since 1996, Mr. McEnulty has been the President and CEO of Meghan Matthews, Inc., a private investment company. Since 2004, Mr. McEnulty has also been a member of the board and compensation committee for Ojai Oil Company. Ojai Oil Company currently trades on the OTC Pink marketplace. Since September 2014 until January 2015 Mr. McEnulty has been the director of Madison Technologies, Inc. From 1989 through 1995, Mr. McEnulty was the Chief Operating Officer and Vice President of Finance for Tri-Five Property Management, a foreign owned real estate investment company. Mr. McEnulty received a Masters of Business Administration from the University of Southern California and a Bachelor of Science from California State University, Long Beach.
Ms. Silina has served as the Company’s Chief Financial Officer and Corporate Secretary since November 24, 2014. Ms. Silina is a Chartered Professional Accountant and holds a Diploma in Management Studies from Thompson Rivers University. Ms. Silina is currently the CFO of Lifestyle Delivery Systems Inc. (CSE: LDS), and a director of Kesselrun Resources Ltd., a reporting issuer listed on the TSX Venture Exchange (TSX.V: KES). Ms. Silina has previously held various management positions with other public companies listed on OTCQB and Canadian Securities Exchange.
Dr. Sanderson, MD is a stem cell researcher who began his career in clinical medicine specializing in diabetes and intravenous nutrition of critically ill patients. He has received NIH funding, has multiple issued patents and published numerous academic papers as principal investigator. While a medical director and consultant at Johnson & Johnson, Dr. Sanderson was tasked with due diligence oversight for mergers and acquisition, formulating strategic initiatives, and evaluating new technologies. In 2009 Dr. Sanderson founded Cellese Regenerative Therapeutics, Inc., a private company that focuses exclusively on the application of adult stem cells to dermatologic problems and effects of ageing; Dr. Sanderson is CEO and Chief Scientist with this company. In addition, Dr. Sanderson is a director and co-founder of Locata Corporation, a privately held technology company headquartered in Canberra, Australia. From April 2005 to January 2007, Dr. Sanderson acted as Medical Director of Johnson & Johnson’s diabetes company, LifeScan. Dr. Sanderson received his master’s degree in medicine from University of Manitoba in 1979, and his master’s degree in Physiologic Psychology from Occidental College, Los Angeles, CA in 1974.
Ms. Arnett has been involved in delivering world-class customer service to the medispa industry; this includes distribution, business planning & marketing, as well as continuing education. Ms. Arnett’s specialty is the development of strategic business models, addressing both vertical and horizontal markets thereby maximizing return on investment. Ms. Arnett’s career has also covered banking and stock brokering positions for major banks in Canada. Ms. Arnett has been in charge of strategic planning for XC Velle Institute Inc., a privately held technology and spa company, since 2009. In addition, from 2001 to 2009, Ms. Arnett worked in the capacity of director of business and strategic planning for a privately held technology and spa company that at one point employed up to 15 employees. Ms. Arnett is also the inspiration behind our Technology, having lived with Type 1 diabetes for more than 50 years.
Mr. Hargreaves’ background is in engineering, with two operations journeyman tickets and four year operations certification from Shell Canada. During the past eight years Mr. Hargreaves has researched the eBalance Technology and designed and improved treatment protocols for the treatment of disabilities and related ailments. Mr. Hargreaves will provide his expertise and technical support to our research and development team and will oversee the continuous development of the project from an engineering prospective. Mr. Hargreaves has been the director of operations and principal of XC Velle Institute Inc., a privately held technology and spa company, since 2009. From approximately 2002 to 2009, Mr. Hargreaves worked operations for a privately held spa company that at one point employed up to 15 employees.
Significant Employees
We have no significant employees other than our officers and directors.
Family Relationships
Ms. Arnett and Mr. Hargreaves are married to each other. There are no other family relationships between our executive officers or directors.
Involvement in Certain Legal Proceedings
20
During the past ten years, none of Cell MedX’s directors or officers has been:
|
·
|
a person against whom a bankruptcy petition was filed;
|
|
·
|
a general partner or executive officer of any partnership, corporation or business association against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;
|
|
·
|
convicted in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
|
·
|
the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or commodities trading or banking activities;
|
|
·
|
the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of (1) any court of competent jurisdiction, permanently or temporarily enjoining him or otherwise limiting him from acting, or (2) any Federal or State authority barring, suspending or otherwise limiting for more than 60 days his right to act, as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity, or to be associated with persons engaged in any such activity;
|
|
·
|
found by a court of competent jurisdiction in a civil action or by the SEC to have violated any Federal or State securities law, and the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated;
|
|
·
|
found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
|
|
·
|
the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
|
|
·
|
any Federal or State securities or commodities law or regulation, or
|
|
·
|
any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or
|
|
·
|
any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
·
|
the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the SEC. Under the SEC regulations, Reporting Persons are required to provide us with copies of all forms that they file pursuant to Section 16(a). Based on our review of the copies of such forms received by us, the following persons have, during the fiscal year ended May 31, 2016, failed to file, on a timely basis, the reports required by Section 16(a) of the Exchange Act:
|
Name and Principal Position
|
Number of Late Reports
|
Transactions Not Timely Reported
|
Known Failures to File a Required Form
|
|
Richard Jeffs
|
1(1)
|
1
|
nil
|
|
(1)
|
On March 3, 2016, we granted to Mr. Jeffs warrants to acquire up to 2,000,000 shares of our common stock as an additional consideration to $50,000 Mr. Jeffs lent to us. The grant resulted in Mr. Jeffs beneficially owning 12.5% of our issued and outstanding common stock. Mr. Jeffs filed his Form 3 reflecting his status as over 5% shareholder on April 21, 2016.
|
Nomination Procedure for Directors
We do not have a standing nominating committee. Recommendations for candidates to stand for election as directors are made by our Board of Directors. In carrying out their responsibilities, the Board of Directors will consider candidates suggested by stockholders. If a stockholder wishes to formally place a candidate’s name in nomination, however, he or she must do so in accordance with the provisions of the Company’s Bylaws. Suggestions for candidates to be evaluated by the proposed directors must be sent to the Board of Directors, c/o Cell MedX Corp., 2872 Sumter Valley Circle, Henderson, NV 89052.
Identification of Audit Committee
We do not have a separately-designated standing audit committee. Rather, our entire Board of Directors performs the required functions of an audit committee.
Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
As of May 31, 2016, we did not have a written audit committee charter or similar document and have not adopted any specific policies or procedures for the engagement of non-audit services.
21
Audit Committee Financial Expert
Frank McEnulty, our Chief Executive Officer, President and a member of our Board of Directors qualifies as an “audit committee financial expert”, as defined by Item 407(d)(5) of Regulation S-K promulgated under the Securities Act of 1933 and the Securities Exchange Act of 1934. Notwithstanding the fact that Mr. McEnulty is not an independent director, we believe that his experience in analyzing and evaluating financial statements, as well as his prior experience being on the board of directors of other public companies will provide us with the guidance we need until we are able to expand our board to include independent directors who have the knowledge and experience to serve on an audit committee.
Code of Ethics
We have adopted a Code of Ethics that applies to all our executive officers and employees, including our CEO and CFO. Our Code of Ethics is attached as an exhibit to this Annual Report on Form 10-K. We believe that our Code of Ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the Code.
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes all compensation received by our Executive Officers for the past two fiscal years:
SUMMARY COMPENSATION TABLE
|
Name and
principal position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive
Plan Compensation
|
Non-qualified
Deferred
Compensation
Earnings
|
All other
compensation
|
Total
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||
|
Frank McEnulty
CEO and President
|
2015
2016
|
21,600(1)
43,200(1)
|
Nil
Nil
|
Nil
Nil
|
Nil
605,286(2)
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
21,600
648,486
|
|
Yanika Silina
CFO
|
2015
2016
|
6,000(1)
12,000(1)
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
6,000
12,000
|
|
Dr. John Sanderson
Chief Medical Officer
|
2015
2016
|
70,000(3)
50,000(3)
|
Nil
Nil
|
Nil
Nil
|
203,829(4)
262,874(4)
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
273,829
312,874
|
|
Jean Arnett
Vice President, Corporate Strategy
|
2015
2016
|
95,915(5)
85,669(5)
|
Nil
Nil
|
Nil
Nil
|
Nil
248,172(6)
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
95,915
333,841
|
|
Bradley Hargreaves
Vice President, Technology and Operations
|
2015
2016
|
76,732(5)
73,768(5)
|
Nil
Nil
|
Nil
Nil
|
Nil
248,172(6)
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
76,732
321,940
|
|
(1)
|
We do not have any written compensation agreements with Mr. McEnulty or Ms. Silina. Mr. McEnulty and Ms. Silina are being compensated for management services based on verbal agreements between us and Mr. McEnulty and Ms. Silina who invoice us for their services at a monthly rate of $3,600 and $1,000, respectively.
|
|
(2)
|
Option awards represent the value assigned to the options to acquire up to 2,500,000 shares of our common stock issued pursuant to the Option Agreement with Mr. McEnulty.
|
|
(3)
|
Represents amounts paid or accrued to Dr. Sanderson for consulting services pursuant to the Management Consulting Agreement with Dr. Sanderson.
|
|
(4)
|
Option awards represent the value assigned to the options to acquire up to 2,400,000 shares of our common stock issued pursuant to the Management Consulting Agreement with Dr. Sanderson.
|
|
(5)
|
Represents amounts paid or accrued to Ms. Arnett and Mr. Hargreaves for consulting services pursuant to the Consulting Agreements, which were verbally amended during the Fiscal 2016, among Ms. Arnett, Mr. Hargreaves and us.
|
|
(6)
|
Option awards represent the value assigned to the options to acquire up to 2,500,000 shares of our common stock which vested on August 26, 2015, issued pursuant to the technology purchase agreement dated for reference October 16, 2014, and as amended on October 28, 2014 and November 13, 2014 between Ms. Arnett, Mr. Hargreaves and us.
|
22
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table provides information concerning unvested stock awards for each of our named executive officers, as that term is defined in Item 402(m)(2) of Regulation S-K as of our fiscal year end of May 31, 2016.
|
OPTION AWARDS
|
|||||
|
Name and Position
|
No. of Securities Underlying Unexercised Options (#) Exercisable
|
No. of Securities Underlying Unexercised Options (#) Unexercisable
|
Option Exercise Price
|
Option Vesting Date
|
Option Expiration Date
|
|
Jean Arnett(1)
|
1,250,000
|
-
|
$0.05
|
Aug. 26, 2015
|
Aug. 26, 2020
|
|
Vice President, Corporate Strategy
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
2,500,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
2,500,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
Bradley Hargreaves(1)
|
1,250,000
|
-
|
$0.05
|
Aug. 26, 2015
|
Aug. 26, 2020
|
|
Vice President, Technology and Operations
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
1,250,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
2,500,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
-
|
2,500,000
|
$0.05
|
(1)
|
5 years after vesting
|
|
|
Dr. Sanderson
|
200,000
|
-
|
$0.67
|
Mar. 31, 2015
|
Mar. 31, 2020
|
|
Chief Medical Officer
|
200,000
|
-
|
$0.67
|
Jun. 30, 2015
|
Jun. 30, 2020
|
|
200,000
|
-
|
$0.67
|
Sept. 30, 2015
|
Sept. 30, 2020
|
|
|
200,000
|
-
|
$0.67
|
Dec. 31, 2015
|
Dec. 31, 2020
|
|
|
200,000
|
-
|
$0.67
|
Mar. 31, 2016
|
Mar. 31, 2021
|
|
|
-
|
200,000
|
$0.67
|
Jun. 30, 2016
|
Jun. 30, 2021
|
|
|
-
|
200,000
|
$0.67
|
Sept. 30, 2016
|
Sept. 30, 2021
|
|
|
-
|
200,000
|
$0.67
|
Dec. 31, 2016
|
Dec. 31, 2021
|
|
|
-
|
200,000
|
$0.67
|
Mar. 31, 2017
|
Mar. 31, 2022
|
|
|
-
|
200,000
|
$0.67
|
Jun. 30, 2017
|
Jun. 30, 2022
|
|
|
-
|
200,000
|
$0.67
|
Sept. 30, 2017
|
Sept. 30, 2022
|
|
|
-
|
200,000
|
$0.67
|
Dec. 31, 2017
|
Dec. 31, 2022
|
|
|
Frank McEnulty
|
500,000
|
-
|
$0.35
|
Aug. 5, 2015
|
Aug. 5, 2020
|
|
Chief Executive Officer
|
500,000
|
-
|
$0.35
|
Oct. 1, 2015
|
Oct. 1, 2020
|
|
500,000
|
-
|
$0.35
|
Jan. 1, 2016
|
Jan. 1, 2021
|
|
|
500,000
|
-
|
$0.35
|
Apr. 1, 2016
|
Apr. 1, 2021
|
|
|
-
|
500,000
|
$0.35
|
Jul. 31, 2016
|
Jul. 31, 2021
|
|
|
(1)
|
On November 24, 2014, we issued to each of Ms. Arnett and Mr. Hargreaves options for the purchase of up to 10,000,000 (20,000,000 shares in total) of our common stock at an exercise price of $0.05 per share (the “Arnett/Hargreaves Options”). Exercise of the Arnett/Hargreaves Options is subject to certain vesting conditions based on the design, initiation and completion of clinical trials for the eBalance Technology. On November 30, 2014, we amended the terms of the Arnett/Hargreaves Options to re-define the clinical trials to be conducted. As amended, the Arnett/Hargreaves Options vest as follows:
|
23
|
Combined Number
of Options to Vest
|
Vesting Condition
|
|
2,500,000
|
Upon the design and commencement of the First Clinical Trial (vested on August 26, 2015)
|
|
2,500,000
|
Upon the completion of the First Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the First Clinical Trial discussing the results of the First Clinical Trial.
|
|
2,500,000
|
Upon the design and commencement of the Second Clinical Trial.
|
|
2,500,000
|
Upon the completion of the Second Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the Second Clinical Trial discussing the results of the Second Clinical Trial.
|
|
5,000,000
|
Upon the design and commencement of the Third Clinical Trial.
|
|
5,000,000
|
Upon the completion of the Third Clinical Trial and the delivery to the Company of a final white paper authored by the trial researchers for the Third Clinical Trial discussing the results of the Third Clinical Trial.
|
|
20,000,000
|
Total
|
The “First Clinical Trial” means a pilot clinical trial conducted on human subjects designed to test the safety and efficacy of the eBalance Technology as an adjunctive treatment for diabetes mellitus. Objectives for this trial include the identification of markers of improved diabetic control, insight into optimal treatment parameters, magnitude and timing of clinical effects, and measurement of overall efficacy while monitoring for any potential adverse effects.
The “Second Clinical Trial” means a controlled clinical trial conducted on human subjects to evaluate the safety and efficacy of the eBalance Technology in a more formal multicenter format. Specific objectives and study endpoints will be informed by the results of the pilot clinical trial. The magnitude of the eBalance Technology’s bioelectric impacts on diabetes management and outcomes will be investigated over a longer time frame, while seeking to establish optimal prescriptions of current dosing, frequencies, timing, waveform, pulsing, and patterning. The Second Clinical Trial will also include a series of investigations in vitro and in diabetic model animals to further elucidate mechanisms of action, limits of dosing safety, and to explore for occult adverse effects of bioelectrical therapies.
The “Third Clinical Trial” means a formal, controlled & blinded clinical trial conducted on human subjects designed to demonstrate efficacy and safety of the eBalance device, adhering to the rigorous standards of an FDA approved and monitored Investigational New Device, and producing data adequate to support the Pre-Marketing Approval (PMA) application as well as subsequent filings with regulatory agencies in non-U.S. jurisdictions. The claims for the device will be driven by the discoveries of the first two clinical trials as well as animal safety data. The study design will examine the efficacy of eBalance Technology in ameliorating the signs and symptoms of diabetes mellitus, reducing the incidence and/or impact of common complications of diabetes, and improving overall diabetes control. The cost implications of such benefits will also be examined.
Any Arnett/Hargreaves Options that vest and become exercisable will expire on the 5th year anniversary of the particular vesting date. Any Arnett/Hargreaves Options that have not vested will expire on December 31, 2019, subject to certain early termination provisions upon the death of the optionee, or if the optionee ceases to act for the Company in any capacity either voluntarily or as a result of a termination or removal
Executive Officer Employment / Consulting Agreements
Aside from the agreements described below, there are no employment agreements between us and any other named executive officers, and there are no employment agreements or other compensating plans or arrangements with regard to any named executive officers which provide for specific compensation in the event of resignation, retirement, other termination of employment or from a change of control of Cell MedX or from a change in a named executive officer’s responsibilities following a change in control.
Frank McEnulty and Yanika Silina
We do not have any written compensation agreements with Mr. McEnulty or Ms. Silina. Mr. McEnulty and Ms. Silina are being compensated for management services based on verbal agreements between us and Mr. McEnulty and Ms. Silina who invoice us for their services at a monthly rate of $3,600 and $1,000, respectively.
On August 5, 2015, we granted to Mr. McEnulty, options to purchase up to 2,500,000 shares of our common stock. The options granted to Mr. McEnulty are exercisable at $0.35 per share and vest in equal installments of 500,000 shares each, with options for the first 500,000 shares vesting on the grant date. The remaining options vested on October 1, 2015, January 1, 2016, April 1, 2016 and July 1, 2016, respectively, and expire on the 5th year anniversary of the applicable vesting date, subject to certain early termination provisions, upon death, or if Mr. McEnulty ceases to act for us in any capacity either voluntarily or as a result of a termination or removal for cause.
Dr. John Sanderson
As of the filing of this Annual Report of Form 10-K we have suspended our Management Consulting Agreement with Dr. Sanderson (the “Sanderson Agreement”) due to the move of our clinical trials to Canada. Pursuant to the Sanderson Agreement, Dr. Sanderson was entitled to a base consulting fee of $10,000 per month. In the event of early termination without cause Dr. Sanderson was entitled to $60,000 in severance pay, which was to become payable immediately upon termination. Dr. Sanderson waived his right to the severance pay.
Dr. Sanderson continues to provide his services as a head of our advisory board in exchange for the options to purchase up to 2,400,000 shares of our common stock at an exercise price of $0.67 per share, which we have granted to him on January 13, 2015. The options vest quarterly starting on March 31, 2015, in equal portions of 200,000 shares per vesting period, and expire on the 5th year anniversary of the applicable vesting date.
24
Jean Arnett and Bradley Hargreaves
Prior to their appointments as our Vice President of Corporate Strategy and Vice President of Technology and Operations, respectively, we entered into separate consulting agreements with Ms. Arnett and Mr. Hargreaves to assist us in our business development efforts. These agreements extended for an initial term of two months, but have been extended on a month-to-month basis. Under the terms of their consulting agreements, we paid Ms. Arnett and Mr. Hargreaves consulting fees of CAD$12,500 and CAD$10,000 per month.
As of December 1, 2015, we have renegotiated Ms. Arnett’s and Mr. Hargreaves’ consulting agreements. Under new terms Ms. Arnett and Mr. Hargreaves were each entitled to receive USD$5,000 per month.
|
DIRECTOR COMPENSATION
|
The compensation paid to our directors during our May 31, 2016 fiscal year, has been disclosed in the tables above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT.
The following tables set forth certain information concerning the number of shares of our common stock owned beneficially as of September 9, 2016 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) each of our directors and each of our named executive officers (as defined under Item 402(m)(2) of Regulation S-K), and (iii) officers and directors as a group. Unless otherwise indicated, the shareholders listed possess sole voting and investment power with respect to the shares shown.
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following tables does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding. As of September 12, 2016, there were 31,000,000 shares of our common stock issued and outstanding.
25
Security Ownership of Certain Beneficial Owners (greater than 5%)
|
Title of Class
|
Name and Address of
Beneficial Owner
|
Amount and Nature of
Beneficial Owner
|
Percent
of Class
|
|
Common Stock
|
Jean Arnett
904-1616 Bayshore Drive
Vancouver, BC V6G 3L1
|
6,250,000(1)
|
19.38%
|
|
Common Stock
|
Brad Hargreaves
904-1616 Bayshore Drive
Vancouver, BC V6G 3L1
|
6,250,000(2)
|
19.38%
|
|
Common Stock
|
Richard Norman Jeffs
11750 Fairtide Road,
Ladysmith, BC V9G 1K5
|
4,152,900 (3)
|
12.58%
|
Security Ownership of Management
|
Title of Class
|
Name and Address of
Beneficial Owner
|
Amount and Nature of
Beneficial Owner
|
Percent
of Class
|
|
|
Common Stock
|
Frank McEnulty
Chief Executive Officer, President and Director
2872 Sumter Valley Circle
Henderson, NV 89052
|
2,500,000(4)
|
7.46%
|
|
|
Common Stock
|
Yanika Silina
Chief Financial Officer, Treasurer and Secretary
810 – 789 West Pender Street,
Vancouver, BC V6C 1H2
|
50,000
|
0.16%
|
|
|
Common Stock
|
Jean Arnett,
Vice President, Corporate Strategy and Director
904-1616 Bayshore Drive
Vancouver, BC V6G 3L1
|
6,250,000(1)
|
19.38%
|
|
|
Common Stock
|
Brad Hargreaves
Vice President, Technology and Operations
904-1616 Bayshore Drive
Vancouver, BC V6G 3L1
|
6,250,000(2)
|
19.38%
|
|
| Common Stock |
Dr. Sanderson, MD
Chief Medical Officer
9 Islandview
Irvine, CA 92604
|
1,400,000(5) | 4.32% | |
|
Common Stock
|
Directors and Executive Officers (as a group)
|
16,450,000
|
53.06%
|
|
|
(1)
|
6,250,000 shares listed as being held by Ms. Arnett include options to purchase 1,250,000 shares of our common stock at an exercise price of $0.05 per share. In addition Ms. Arnett holds options for the purchase of up to additional 8,750,000 shares of our common stock that vest based on the achievement of certain milestones as previously discussed under Item 11. Executive Compensation. The shares issuable pursuant to these options have not been included in the shares beneficially owned by Ms. Arnett as they are not exercisable within the next 60 days, subject to the triggering of certain early vesting provisions.
|
|||
|
(2)
|
6,250,000 shares listed as being held by Mr. Hargreaves include options to purchase 1,250,000 shares of our common stock at an exercise price of $0.05 per share. In addition, Mr. Hargreaves holds options for the purchase of up to additional 8,750,000 shares of our common stock that vest based on the achievement of certain milestones as previously discussed under Item 11. Executive Compensation. The shares issuable pursuant to these options have not been included in the shares beneficially owned by Mr. Hargreaves as they are not exercisable within the next 60 days, subject to the triggering of certain early vesting provisions.
|
|||
|
(3)
|
4,152,900 shares listed as being held by Mr. Jeffs include warrants to purchase up to 2,000,000 shares of our common stock exercisable at a price of $0.15 per share if exercised during the first year, $0.25 per share if exercised during the second year, $0.40 per share if exercised during the third year, $0.60 per share if exercised during the fourth year and $0.75 per share during the fifth year.
|
|||
|
(4)
|
The shares beneficially owned by Mr. McEnulty represent options to purchase up to 2,500,000 shares of our common stock exercisable at a price of $0.35 per share.
|
|||
|
(5)
|
The shares beneficially owned by Dr. Sanderson represent options to purchase up to 1,400,000 shares of our common stock exercisable at a price of $0.67 per share. In addition, Dr. Sanderson holds options for the purchase of up to additional 1,000,000 shares of our common stock, which options vest quarterly starting on December 31, 2016, in equal portions of 200,000 shares. The shares issuable pursuant to these options have not been included in the shares beneficially owned by Dr. Sanderson as they are not exercisable within the next 60 days, subject to the triggering of certain early vesting provisions.
|
|||
26
Equity Compensation Plans
The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all previous equity compensation plans not previously approved by stockholders, as of May 31, 2016, our most recent fiscal year end:
Equity Compensation Plan Information
|
Plan Category
|
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
|
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
|
|
Equity Compensation Plans Approved By Security Holders
|
None
|
Not Applicable
|
None
|
|
Equity Compensation Plans Not Approved By Security Holders (1)
|
25,050,000
|
$0.14
|
None
|
|
(1)
|
At May 31, 2016 we had the following individual compensation arrangements under which we issued options to purchase shares of our common stock:
|
|
·
|
Pursuant to our Technology Purchase Agreement, dated for reference November 24, 2014, we issued to each of Ms. Arnett and Mr. Hargreaves options for the purchase of up to 10,000,000 (20,000,000 shares in total) of our common stock at an exercise price of $0.05 per share. Exercise of the Options is subject to certain vesting conditions based on the design, initiation and completion of clinical trials for the eBalance Technology, as amended on November 30, 2014. Detailed description of the Options we granted to Ms. Arnett and Mr. Hargreaves has been disclosed in Item 11. Executive Compensation.
|
|
·
|
On January 13, 2015, we granted to Dr. Sanderson non-transferrable options to purchase up to 2,400,000 shares of our common stock at an exercise price of $0.67 per share. The options vest quarterly starting on March 31, 2015 in equal portions of 200,000 shares per vesting period, and expire on the 5th year anniversary of the applicable vesting date, subject to early termination provisions in the event that Dr. Sanderson ceases to act for us in any capacity.
|
|
·
|
On August 5, 2015, we granted to Mr. McEnulty non-transferrable options to purchase up to 2,500,000 shares of our common stock at an exercise price of $0.35 per share. These options vested in equal installments of 500,000 shares each, with options for the first 500,000 shares vesting on the grant date. The remaining options vested on October 1, 2015, January 1, 2016, April 1, 2016 and July 1, 2016, respectively, and expire on the 5th year anniversary of the applicable vesting date, subject to certain early termination provisions, upon death, or if Mr. McEnulty ceases to act for us in any capacity either voluntarily or as a result of a termination or removal for cause.
|
|
·
|
On September 23, 2015, we granted to a consultant non-transferrable options to purchase up to 150,000 shares of our common stock at an exercise price of $0.20 per share. The options vested immediately and expire on September 1, 2017.
|
Changes in Control
Other than a change in control resulting from the exercise by Ms. Arnett and Mr. Hargreaves of their options as described above, we are not aware of any arrangements that might result in a change in control of our Company subsequent to the date of this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Director Independence
Our common stock is quoted on the OTC Link alternative trading system on the OTCQB marketplace, which does not have director independence requirements. In determining whether any of our directors are independent, we have applied the definition of “independent director” in Section 803 of the NYSE MKT Company Guide. We have determined that, under that definition, as of the date of this Annual Report on Form 10-K, none of our directors is independent.
Transactions with Related Persons
Since June 1, 2015, the directors, executive officers, or holders of more than 5% of our common stock, or members of their immediate families, as described below, have completed transactions with us in which they had direct or indirect material interests that exceeded the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years.
27
Frank McEnulty
As at May 31, 2016, we were indebted to Mr. McEnulty, our CEO, President and a member of our Board of Directors, in the amount of $66,254 on account of unpaid management fees and reimbursable expenses.
Yanika Silina
As at May 31, 2016, we were indebted to Ms. Silina, our CFO, Treasurer and Corporate Secretary in the amount of $6,419 on account of unpaid management fees and reimbursable expenses.
Ms. Arnett
As at May 31, 2016, we were indebted to Ms. Arnett in the amount of $95,575 for unpaid consulting fees, and reimbursable expenses.
Mr. Hargreaves
During the year ended May 31, 2016, we received $8,911 from the transactions with Mr. Hargreaves which included acquisition and sale of equipment for the Company. As of May 31, 2016, we were indebted to Mr. Hargreaves in the amount of $56,596 for unpaid consulting fees and reimbursable expenses.
Dr. John Sanderson, MD
As at May 31, 2016, we were indebted to Dr. Sanderson, our Chief Medical Officer in the amount of $81,059 on account of unpaid consulting fees and reimbursable expenses.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for Cell MedX’s audit of annual financial statements and for review of financial statements included in Cell MedX’s Form 10-Q’s or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were:
2016 - $28,040 – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $2,940 – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $6,800 – Sadler, Gibb & Associates, L.L.C.
Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of Cell MedX’s financial statements and are not reported in the preceding paragraph:
2016 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $1,000 – Sadler, Gibb & Associates, L.L.C.
Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were:
2016 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $Nil – Sadler, Gibb & Associates, L.L.C.
28
All Other Fees
The aggregate fees billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) were:
2016 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $Nil – Dale Matheson Carr-Hilton Labonte, L.L. P. Chartered Accountants
2015 - $Nil – Sadler, Gibb & Associates, L.L.C.
Approval Policies and Procedures
We do not have a separately standing audit committee. As such, our entire board of directors acts as our audit committee. Our Board of Directors annually reviews the qualifications of our principal accountant and approves their engagement as our principal accountant prior to their engagement. All of the non-audit services provided by our principal accountant were either pre-approved by our Board of Directors prior to engagement of the principal accountant for those services, or were approved by our Board of Directors prior to completion of their audit of our annual financial statements.
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.
Financial Statements
The financial statements of Cell MedX Corp. have been included in Item 8 above.
Financial Statement Schedules
All schedules for which provision is made in Regulation S-X are either not required to be included herein under the related instructions or are inapplicable or the related information is included in the footnotes to the applicable financial statement and, therefore, have been omitted from this Item 15.
Exhibits
All Exhibits required to be filed with the Form 10-K are included in this Annual Report or incorporated by reference to Cell MedX Corp.’s previous filings with the SEC, which can be found in their entirety at the SEC website at www.sec.gov under SEC File Number 000-54500.
|
Exhibit Number
|
Description of Document
|
|
|
3.1
|
Articles of Incorporation (2)
|
|
|
3.2
|
Articles of Merger – Sports Asylum, Inc. and Plandel Resources, Inc.(5)
|
|
|
3.3
|
Articles of Merger – Cell MedX Corp. and Sports Asylum, Inc.(5)
|
|
|
3.4
|
Bylaws (1)
|
|
|
4.1
|
Specimen Stock Certificate (1)
|
|
|
10.1
|
Letter Agreement dated August 29, 2014, among Sports Asylum, Inc., Jean Arnett, Brad Hargreaves and XC Velle Institute Inc. (4)
|
|
|
10.2
|
Consulting Agreement dated September 1, 2014, among Sports Asylum, Inc. and Jean Arnett.
|
|
|
10.3
|
Consulting Agreement dated September 1, 2014, among Sports Asylum, Inc. and Brad Hargreaves.
|
|
|
10.4
|
Technology Purchase Agreement dated October 16, 2014, among Cell MedX Corp., Jean Arnett, and Brad Hargreaves.(6)
|
|
|
10.5
|
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.(7)
|
|
|
10.6
|
Convertible Loan Agreement and Note Payable dated November 12, 2014, among Cell MedX Corp., and City Group LLC. (12)
|
|
|
10.7
|
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.(8)
|
|
|
10.8
|
Non-Qualified Stock Option Agreement dated November 25, 2014, among Cell MedX Corp. and Jean Arnett.(9)
|
|
|
10.9
|
Non-Qualified Stock Option Agreement dated November 25, 2014, among Cell MedX Corp. and Brad Hargreaves.(9)
|
|
|
10.10
|
First Amendment to Stock-Option Agreement dated November 30, 2014, to that Non-Qualified Stock Option Agreement dated November 25, 2014 among Cell MedX Corp. and Jean Arnett.(9)
|
|
|
10.11
|
First Amendment to Stock-Option Agreement dated November 30, 2014, to that Non-Qualified Stock Option Agreement dated November 25, 2014 among Cell MedX Corp. and Brad Hargreaves. (9)
|
|
|
10.12
|
Convertible Loan Agreement and Note Payable dated December 12, 2014, among Cell MedX Corp., and City Group LLC.(10)
|
|
|
10.13
|
Management Consulting Agreement dated January 13, 2015, among Cell MedX Corp., and Dr. John Sanderson, MD.(10)
|
|
|
10.14
|
Stock Option Agreement dated December 12, 2014, among Cell MedX Corp. and Dr. John Sanderson, MD. (10)
|
|
|
10.15
|
Loan Agreement and Note Payable dated April 20, 2015, among Cell MedX Corp., and City Group LLC.
|
|
|
10.16
|
Loan Agreement and Note Payable dated June 17, 2015, among Cell MedX Corp., and City Group LLC.
|
|
|
10.17
|
Loan Agreement and Note Payable dated June 29, 2015, among Cell MedX Corp., and Richard N. Jeffs.
|
29
|
10.18
|
Loan Agreement and Note Payable dated July 7, 2015, among Cell MedX Corp., and City Group LLC.
|
|
|
10.19
|
Loan Agreement and Note Payable dated July 9, 2015, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.20
|
Loan Agreement and Note Payable dated July 15, 2015, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.21
|
Stock Option Agreement dated August 5, 2015, among Cell MedX Corp. and Frank E. McEnulty.(11)
|
|
|
10.22
|
Loan Agreement and Note Payable dated August 12, 2015, among Cell MedX Corp., and Richard N. Jeffs.(13)
|
|
|
10.23
|
Loan Agreement and Note Payable dated September 3, 2015, among Cell MedX Corp., and Richard N. Jeffs. (14)
|
|
|
10.24
|
Consulting Agreement dated September 1, 2015, and effective as of September 23, 2015 among Cell MedX Corp., and Steven H. Bulwa. (14)
|
|
|
10.25
|
Stock Option Agreement dated September 23, 2015, among Cell MedX Corp. and Steven H. Bulwa.(14)
|
|
|
10.26
|
Loan Agreement and Note Payable dated September 24, 2015, among Cell MedX Corp., and City Group LLC. (14)
|
|
|
10.27
|
Loan Agreement and Note Payable dated September 28, 2015, among Cell MedX Corp., and Richard N. Jeffs. (14)
|
|
|
10.28
|
eBalance Prototype Development Agreement dated October 1, 2015, among Cell MedX Corp., and Claudio Tassi. (14)
|
|
|
10.29
|
Non-binding Letter of Intent dated December 4, 2015, to Enter into Development Agreement and License Agreement among Cell MedX Corp., Claudio Tassi, and Bioformed Aesthetic S.L.(15)
|
|
|
10.30
|
Loan Agreement and Note Payable dated November 5, 2015, among Cell MedX Corp., and Tradex Capital Corp. (17)
|
|
|
10.31
|
Loan Agreement and Note Payable dated December 23, 2015, among Cell MedX Corp., and Coventry Capital LLC.(15)
|
|
|
10.32
|
Loan Agreement and Note Payable dated February 4, 2016, among Cell MedX Corp., and Tradex Capital Corp. (17)
|
|
|
10.33
|
Loan Agreement and Note Payable dated March 2, 2016, among Cell MedX Corp., and Tradex Capital Corp. (17)
|
|
|
10.34
|
Loan Agreement dated March 3, 2016, between Richard Norman Jeffs and Cell MedX Corp. (16)
|
|
|
10.35
|
Loan Agreement and Note Payable dated March 10, 2016, among Cell MedX Corp., and Tradex Capital Corp. (17)
|
|
|
10.36
|
Loan Agreement and Note Payable dated March 30, 2016, among Cell MedX Corp., and Tradex Capital Corp. (17)
|
|
|
10.37
|
Loan Agreement and Note Payable dated March 31, 2016, among Cell MedX Corp., and Richard N. Jeffs. (17)
|
|
|
10.38
|
Loan Agreement and Note Payable dated April 29, 2016, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.39
|
Loan Agreement and Note Payable dated June 1, 2016, among Cell MedX Corp., and Tradex Capital Corp.
|
|
|
10.40
|
Loan Agreement and Note Payable dated June 2, 2016, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.41
|
Loan Agreement and Note Payable dated June 29, 2016, among Cell MedX Corp., and Tradex Capital Corp.
|
|
|
10.42
|
Loan Agreement and Note Payable dated June 30, 2016, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.43
|
Loan Agreement and Note Payable dated August 8, 2016, among Cell MedX Corp., and Richard N. Jeffs.
|
|
|
10.44
|
Loan Agreement and Note Payable dated August 22, 2016, among Cell MedX Corp., and Tradex Capital Corp.
|
|
|
14.1
|
Code of Ethics (3)
|
|
|
21.1
|
List of Subsidiaries.
|
|
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
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.
|
|
|
32.2
|
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.
|
|
|
101
|
The following materials from this Annual Report on Form 10-K for the year ended May 31, 2016, formatted in XBRL (extensible Business Reporting Language):
|
|
|
(1) Consolidated Balance Sheets at May 31, 2016 and 2015
|
||
|
(2) Consolidated Statements of Operations for the years ended May 31, 2016 and 2015
|
||
|
(3) Consolidated Interim Statements of Shareholders’ Deficit for the years ended May 31, 2016 and 2015
|
||
|
(4) Consolidated Statements of Cash Flows for the years ended May 31, 2016 and 2015
|
||
30
|
(1)
|
Filed as an exhibit to the Company’s Registration Statement on Form S-1 filed with SEC on July 13, 2010
|
|
|
(2)
|
Filed as an exhibit to the Company’s Amendment No. 1 to Registration Statement on Form S-1 filed with SEC on October 13, 2010
|
|
|
(3)
|
Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with SEC on August 26, 2014
|
|
|
(4)
|
Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on September 5, 2014
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(5)
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Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 9, 2014
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(6)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on October 17, 2014
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(7)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on November 3, 2014
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|
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(8)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on November 18 , 2014
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(9)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 3, 2014
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(10)
|
Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 13, 2015
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(11)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 11, 2015
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(12)
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Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2015
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(13)
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Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with SEC on September 3, 2015
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(14)
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Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 14, 2016
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(15)
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Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 15, 2015
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(16)
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Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2016
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(17)
|
Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2016
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31
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, Cell MedX Corp. has caused this report to be signed on its behalf by the undersigned duly authorized persons.
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CELL MEDX CORP.
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|||
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Date: September 13, 2016
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By:
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/s/Frank E. McEnulty | |
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Name:
|
Frank E. McEnulty
|
||
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Title:
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President, Chief Executive Officer and Director
|
||
|
|
(Principal Executive Officer)
|
||
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Date: September 13, 2016
|
By:
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/s/Yanika Silina | |
|
Name:
|
Yanika Silina
|
||
|
Title:
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Chief Financial Officer
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||
|
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(Principal Accounting Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the following persons on behalf of Cell MedX Corp. and in the capacities and on the dates indicated have signed this report below.
|
Signature
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Title
|
Date
|
|
/s/Frank McEnulty
|
Chief Executive Officer, President
|
September 13, 2016
|
|
Frank McEnulty
|
(Principal Executive Officer)
and Member of the Board of Directors
|
|
|
/s/Jean Arnett
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Vice President, Corporate Strategy
|
September 13, 2016
|
|
Jean Arnett
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and Member of the Board of Directors
|
32