The accompanying unaudited condensed consolidated interim financial statements of Cell MedX Corp. as at August 31, 2020, have been prepared by the Company’s management in conformity with accounting principles generally accepted in the United States of America and in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders' deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

Operating results for the three-month period ended August 31, 2020, are not necessarily indicative of the results that can be expected for the year ending May 31, 2021.

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Cell MedX,” and the “Company” mean Cell MedX Corp. and its subsidiary, Cell MedX (Canada) Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars.

1

CELL MEDX CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

(Unaudited)

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

F-1

CELL MEDX CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(EXPRESSED IN US DOLLARS)

(Unaudited)

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

F-2

CELL MEDX CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

(EXPRESSED IN US DOLLARS)

(Unaudited)

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

F-3

CELL MEDX CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(EXPRESSED IN US DOLLARS)

(Unaudited)

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

F-4

CELL MEDX CORP.

NOTES TO THE CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

AUGUST 31, 2020

(UNAUDITED)

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

Cell MedX Corp. (Cell MedX, or the “Company”) was incorporated under the laws of the State of Nevada. On April 26, 2016, the Company formed a subsidiary, Cell MedX (Canada) Corp. (“Cell MedX Canada”) under the laws of the province of British Columbia. Cell MedX is a biotech company focusing on the discovery, development and commercialization of therapeutic and non-therapeutic products that promote general wellness.

Unaudited Interim Financial Statements

The unaudited interim condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended May 31, 2020, included in the Company’s Annual Report on Form 10-K, filed with the SEC on September 15, 2020. The interim unaudited condensed consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended August 31, 2020, are not necessarily indicative of the results that may be expected for the year ending May 31, 2021.

Going concern

The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of August 31, 2020, the Company has not achieved profitable operations and has accumulated a deficit of $8,250,722. Continuation as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet obligations and pay its liabilities arising from normal business operations when they come due and ultimately upon its ability to achieve profitable operations. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that the Company will be able to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Management intends to obtain additional funding by borrowing funds from its directors and officers, issuing promissory notes, and/or private placement of common stock.

Risks related to the rapid expansion of the COVID-19 pandemic

The Company is cognizant of the rapid expansion of the COVID-19 pandemic and the resulting global implications. To date, there have been no disruptions to the Company’s day-to-day operations. However, the Company cautions that there continues to be a possibility for potential future implementation of certain restrictions. The impact of these restrictions on the Company’s operations, if implemented, is currently unknown but could be significant.

NOTE 2 - RELATED PARTY TRANSACTIONS

Amounts due to related parties, other than advances and notes payable to related parties (Note 7) at August 31, 2020, and at May 31, 2020:

(1)The amounts due to the companies controlled by John da Costa, who was appointed Director and COO on June 8, 2020. 

F-5

The amounts due to related parties are unsecured, due on demand and bear no interest.

During the three-month periods ended August 31, 2020 and 2019, the Company had the following transactions with related parties:

NOTE 3 - INVENTORY

As at August 31, 2020, the inventory consisted of eBalance® devices and accessories held for sale valued at $30,699 (May 31, 2020 - $29,405) and work in progress, that included unfinished eBalance® devices and supplies required for manufacturing valued at $23,765 (May 31, 2020 - $22,481).

NOTE 4 - OTHER CURRENT ASSETS

As at August 31, 2020, other current assets consisted of $39,966 in prepaid expenses (May 31, 2020 - $44,021) and $20,921 in receivables associated with GST Cell MedX Canada paid on taxable supplies (May 31, 2020 - $16,346).

NOTE 5 - EQUIPMENT

Changes in the net book value of the equipment at August 31, 2020 and May 31, 2020 are as follows:

NOTE 6 - REVENUE

During the three-month period ended August 31, 2020, the Company’s revenue consisted of monthly subscriptions to eBalance® microcurrent treatments. During the comparative three-month period ended August 31, 2019, the Company’s revenue consisted of sales of its eBalance® devices, and the fees associated with the rights to the wholesale distribution of eBalance® devices pursuant to a letter of intent the Company entered into on June 6, 2019, which granted a potential distributor rights to all Mainland China, not including Hong Kong.  Following are the details of revenue and associated costs:

F-6

NOTE 7 - NOTES AND ADVANCES PAYABLE

The tables below summarize the short-term loans and advances outstanding as at August 31, 2020, and May 31, 2020:

(1) Convertible Loans Payable

During the year ended May 31, 2020, in order to support its daily operations and to secure required working capital, the Company entered into several short-term convertible loan agreements with two lenders for a total of $327,650 in exchange for unsecured notes payable due on demand and accumulating interest at 6% annual interest compounded monthly.  Pursuant to the loan agreements, the lenders may convert any portion of principal and/or interest accrued thereon into restricted units of common stock in the capital of the Company on the terms and at a conversion price of the then-current private placement offering. The conversion rights were assessed to have $Nil value.

During the three-month period ended August 31, 2020, the Company recorded $5,143 in interest on the convertible loans payable (2020 - $Nil).

(2) Non-convertible Loans Payable

On July 9, 2020, the Company entered into a loan agreement for $14,744 (CAD$20,000). The loan bears interest at 6% per annum compounded monthly, is unsecured, and payable from the first proceeds of warrants that may be exercised subsequent to the money being lent under the loan agreement or on July 9, 2021, whichever comes first.

On August 31, 2020, the Company entered into a loan agreement for $65,000. The loan bears interest at 6% per annum compounded monthly, is unsecured, and payable on demand.

As at August 31, 2020, the Company owed a total of $114,505 (2020 - $32,094) under 6% unsecured loan agreements. During the three-month period ended August 31, 2020, the Company recorded $628 in interest on these loans (2020 - $475).

(3) Related Party Loans Payable

As at August 31, 2020, the Company owed a total of $7,440 (2020 - $6,933) under unsecured loan agreement with Mr. Jeffs, the Company’s major shareholder. During the three-month period ended August 31, 2020, the Company recorded $108 in interest on the loan with Mr. Jeffs. (2020 - $2,321).

F-7

(4) Unsecured Line of Credit with Related Party

On December 27, 2018, the Company entered into an agreement with Mr. Jeffs for an unsecured line of credit of up to $250,000 (the “Credit Line”). The funds advanced under the Credit Line accumulate interest at a rate of 6% per annum compounded monthly and are payable on demand.  On August 28, 2019, Mr. Jeffs applied $250,000, the Company owed under the Credit Line to exercise the warrants the Company granted to Mr. Jeffs in consideration for the Credit Line and acquired 5,000,000 shares of the Company’s common stock at $0.05 per share.

As at August 31, 2020, the Company owed Mr. Jeffs $37,827 under the Credit Line (2020 - $37,260), which continues to accumulate interest at 6% per annum compounded monthly. During the three-month period ended August 31, 2020, the Company recorded $566 in interest on principal outstanding under the Credit Line (2020 - $4,156).

(5) Advances Payable

As at August 31, 2020, the Company owed a total of $88,599 (2020 - $87,769) for advances the Company received in its fiscal 2019 and 2020 years. The advances are non-interest bearing, unsecured, and payable on demand. Of the total amount advanced, $3,847 was owed to Da Costa Management Corp, a company owned by John da Costa, who was appointed the Company’s COO and Director on June 8, 2020, (2020 - $3,639), and $11,502 (2020 - $10,880) was owed to Brek Technologies Inc., a company controlled by Mr. da Costa and Mr. Jeffs (Note 2).

(6) Interest Expense

During the three-month period ended August 31, 2020, the Company recorded a total of $6,446 (2020 - $6,952) in interest expense associated with its liabilities under the notes and advances payable.

NOTE 8 - SHARE CAPITAL

On July 30, 2020, the Company issued 988,000 units of its common stock for gross proceeds of $247,000, of which $80,000 were received during the year ended May 31, 2020. Each unit consisted of one common share of the Company and one warrant allowing its holder to acquire an additional common share at $0.35 until January 30, 2021, and at $0.50 per share from January 30, 2021 to July 30, 2022.

On August 13, 2020, the Company issued 1,250,000 shares of its common stock to Ms. Arnett, the Company’s 10% shareholder, on the exercise of 1,250,000 options at $0.05 per option. Ms. Arnett chose to apply $62,500 the Company owed to her on account of past services against the exercise price of the shares. Ms. Arnett transferred the remaining $24,712 the Company owed to her as at August 13, 2020, to Mr. Hargreaves, the Company’s director of VP; Technology and Operations, in a private transaction.

On August 13, 2020, the Company issued 1,234,855 shares of its common stock to Mr. Hargreaves, the Company’s VP; Technology and Operations, on the exercise of 1,234,855 shares at $0.05 per option. Mr. Hargreaves chose to apply $61,743 the Company owed to him against the exercise price of the shares.

Options

The changes in the number of stock options outstanding during the three-month period ended August 31, 2020, and for the year ended May 31, 2020, are as follows:

F-8

Details of options outstanding and exercisable as at August 31, 2020, are as follows:

At August 31, 2020, the weighted average remaining contractual life of the stock options outstanding was 1.23 years.

Warrants

The changes in the number of warrants outstanding during the three-month period ended August 31, 2020, and for the year ended May 31, 2020, are as follows:

Details of warrants outstanding as at August 31, 2020, are as follows:

At August 31, 2020, the weighted average life and exercise price of the warrants was 1.08 years and $0.91, respectively.

F-9

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim financial statements, the notes to those financial statements and other financial information appearing elsewhere in this document. In addition to historical information, the following discussion and other parts of this document contain forward-looking statements that reflect plans, estimates, intentions, expectations and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in the "Risk Factors" in Part II, Item 1A of this Quarterly Report.

The discussion provided in this Quarterly Report should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2020, filed with the United States Securities and Exchange Commission (the “SEC”) on September 15, 2020.

Overview

We were incorporated as Plandel Resources, Inc. under the laws of the State of Nevada on March 19, 2010. On March 24, 2014, we changed our name to Sports Asylum, Inc. and on September 30, 2014, we changed our name to Cell MedX Corp. to reflect our new business direction. On April 26, 2016, we formed a subsidiary, Cell MedX (Canada) Corp., (the “Subsidiary”) under the laws of the Province of British Columbia.

We are a biotech company focused on the discovery, development and commercialization of therapeutic and non-therapeutic products that promote general health, pain relief, wellness and alleviate complications associated with medical conditions including, but not limited to: diabetes, Parkinson’s disease, high blood pressure, neuropathy and kidney function. Our Subsidiary is engaged in development and manufacturing of therapeutic devices based on our proprietary eBalance® Technology, which harnesses power of microcurrents and their effects on human body.

Current uncertainty with respect to rapid expansion of the COVID-19 pandemic

We are cognizant of the rapid expansion of the COVID-19 pandemic and the resulting global implications. To date, there have been no disruptions to our day-to-day operations. However, we caution that there continues to be a possibility for potential future implementation of certain restrictions. The impact of these restrictions on our operations, if implemented, is currently unknown but could be significant.

Recent Corporate Developments

The following corporate developments occurred during the quarter ended August 31, 2020, and up to the date of the filing of this report:

Private Placement Financing

On July 30, 2020, we closed our private placement financing and issued 988,000 units for total gross proceeds of $247,000. Each unit consisted of one common share of the Company and one share purchase warrant entitling the holder to purchase one additional common share for a period of two years after closing at an exercise price of $0.35 per share expiring on January 30, 2021, and at $0.50 per share from January 30, 2021 to July 30, 2022.

Exercise of Options

On July 13, 2020, Mr. Hargreaves, our VP, Technology and Operations, and Ms. Arnett, the 10% security holder of the Company, exercised their options to acquire shares of the Company’s common stock by acquiring 2,484,855 shares for total proceeds to the Company of $124,243. The remaining options to acquire 15,145 common shares expired unexercised. Ms. Arnett and Mr. Hargreaves chose to apply the balances we owed to them as at August 13, 2020, towards the exercise price of their options.

2

Update on eBalance® Research and Development Activities

At the end of February 2020, we completed an audit required for certification of our quality management systems (“QMS”) under Stage 2 Medical Device Single Audit Program (“MDSAP”) and under ISO 13485:2016 standard. The audit was carried out by BSI Group Canada Inc. (“BSI”) and included the following:

-The effectiveness of our QMS incorporating the applicable regulatory requirements outlined by ISO13485:2016 standard and as required under MDSAP; 

-Product/process-related technologies; 

-Adequate technical documentation for our eBalance® device in relation to ISO13485:2016 standard and MDSAP; and 

-Our ability to comply with these requirements. 

The assessment report was finalized in mid-March 2020, and on March 31, 2020, we received Certificate No. FM 716345, certifying that the Company operates a Quality Management System which complies with the requirements of ISO 13485:2016 for design, development and manufacture of microcurrent therapeutic devices for wellness and pain relief, and on June 2, 2020, received a certificate #MDSAP 716274.

Following the receipt of ISO and MDSAP certificates, we filed two separate applications for Class II Medical Device Licenses for the eBalance® Pro System and the eBalance® Home System with Health Canada. On July 17, 2020, Health Canada issued a Class II Medical Device License #104925 for our eBalance® Home System, and on August 18, 2020, issued a Class II Medical Device License #105044 for our eBalance® Pro System.

Prior to selling our eBalance® Home and Pro Systems for the treatment in the United States, we will be required to apply for an approval from the FDA. As of the date of this Quarterly Report on Form 10-Q we are in the process of completing the necessary documentation and testing required for the 510(K) submission to the FDA.

Extension of Investor Outreach Program with Think Ink Marketing

On September 23, 2020, we signed an extension agreement with Think Ink Marketing Data & Email Services, Inc. (“Think Ink”) to continue providing public relations services in an effort to increase public awareness of the Company and our products, services and securities. The agreement is for twelve months with either party having the right to terminate upon thirty-day notice.

Think Ink is a California-based marketing firm established in 1991 that provides its customers with a complete range of marketing services that span both digital and direct mail venues. The Company has budgeted up to $25,000 per month for the services of Think Ink including banner and native ads.

Results of Operations for the Three Months ended August 31, 2020 and 2019

Our operating results for the three-month periods ended August 31, 2020 and 2019, and the changes in the operating results between those periods are summarized in the table below.

3

Revenues

During the three-month period ended August 31, 2020, we recognized $1,467 in revenue, which consisted of monthly recurring revenue associated with the eBalance® treatment packages. The cost attributed to this revenue was $369.

During the three-month period ended August 31, 2019, we recognized $11,343 in revenue, which consisted of sales of our eBalance® wellness devices to end-users. The cost attributed to this revenue was $5,375 and consisted of $4,052 in manufacturing costs of eBalance devices, and $1,323 in royalties we accrued on the sale of each device.

On June 6, 2019, we entered into a letter of intent for the wholesale distribution rights to all Mainlined China, not including Hong Kong (the “LOI”). As part of the LOI the potential distributor (the “Distributor”) paid a non-refundable fee of $25,000, of which $8,958 we recorded as revenue from distribution rights for the three-month period ended August 31, 2019.

As of the date of this Quarterly Report on Form 10-Q, we continue research and further development of our eBalance® Technology and devices based on this technology. During the summer of 2020, Health Canada granted our eBalance® Home and Pro Systems Class II medical device licenses, which allow us to market our eBalance® devices for wellness and pain management. Our certification with FDA continues to be ongoing; at the time of this Quarterly Report on Form 10-Q we are compiling required documentation for a 510(K) premarket submission, which allows us to demonstrate that the eBalance® device is at least as safe and effective as a legally marketed device available on the market. Once this submission is approved, it will allow us to start our commercial activity in the USA.

Operating Expenses

During the three-month period ended August 31, 2020, our operating expenses decreased by 22.7% from $253,261 incurred during the three-month period ended August 31, 2019, to $195,854 incurred during the three-month period ended August 31, 2020. The most significant changes were as follows:

·Our research and development fees for the three-month period ended August 31, 2020, increased by $24,424, or 40.2%, from $60,713 we incurred during the three-month period ended August 31, 2019, to $85,137 we incurred during the three-month period ended August 31, 2020. The higher research and development fees during the three-month period ended August 31, 2020, were associated with the preparation for the 510(K) submission to the FDA, as well as continued improvement and development of the eBalance® systems. 

·Our general and administrative fees for the three-month period ended August 31, 2020, decreased by $53,782, or 62.1%, from $86,562 we incurred during the three-month period ended August 31, 2019, to $32,780 we incurred during the three-month period ended August 31, 2020. The largest factor that contributed to this change was associated with fluctuation in foreign exchange rates, which, during the three-month period ended August 31, 2020, resulted in $42,450 gain, as compared to $3,308 gain during the comparative period; our expenditures on corporate communications decreased by $14,075 to $42,263 we recorded during the three-month period ended August 31, 2020, as compared to $56,338 we incurred during the three-month period ended August 31, 2019. Other factors that affected our general and administrative fees were associated with a $1,989 decrease to our accounting and audit fees, which decreased from $7,000 we incurred during the three-month period ended August 31, 2019, to $5,011 during the three-month period ended August 31, 2020. Our management fees decreased by $4,800 from $13,800 we incurred during the three-month period ended August 31, 2019 to $9,000 we incurred during the three-month period ended August 31, 2020, the decrease resulted from renegotiation of monthly management fees with the Company’s CEO and the CFO. In addition, during the current period, we did not incur any marketing and advertising fees as opposed to $4,191 we incurred during the three-month period ended August 31, 2019. These decreases were in part offset by $9,943 in professional fees which we incurred during the three-month period ended August 31, 2020, the expense we did not incur in the comparative period. 

4

·During the three-month period ended August 31, 2020, our consulting fees decreased by $12,331, from $89,271 we incurred during the three-month period ended August 31, 2019, to $76,940 we incurred during the three-month period ended August 31, 2020. Larger consulting fees during the comparative period ended August 31, 2019, were associated with $25,000 we paid for consultation on setting up our distribution channels in China. 

·During the three-month period ended August 31, 2020, we incurred $261 in distribution expenses we paid or accrued to our sales representatives (August 31, 2019 - $16,447). Based on our agreements with the sales representatives, we agreed to pay CAD$350 as commission for each eBalance® device they sell. In order to allow our sales representatives to establish their customer base, during the three-month period ended August 31, 2019, we were paying a monthly fee of CAD$5,000. Due to a delay in securing Health Canada Class II device licenses, we suspended our agreements with sales representatives in January 2020. As of the date of this Quarterly Report on Form 10-Q we are discussing the re-engagement of the sales representatives to aid us with the marketing of the eBalance® Home and Pro Systems in Canada. 

Other Items

Liquidity and Capital Resources

Working Capital

As of August 31, 2020, we had a cash balance of $120,474, a working capital deficit of $1,489,948 and cash flows used in operations of $169,629 for the period then ended. During the three-month period ended August 31, 2020, we funded our operations with $167,000 received from our private placement financing, and $79,773 we borrowed under loan agreements accumulating interest at 6% per annum, compounded monthly, and due on demand.

We did not generate sufficient cash flows from our operating activities to satisfy our cash requirements for the period ended August 31, 2020. The amount of cash we have generated from our operations to date is significantly less than our current debt obligations. There is no assurance that we will be able to generate sufficient cash from our operations to repay the amounts owing under the outstanding notes and advances payable, or to service our other debt obligations.  If we are unable to generate sufficient cash flow from our operations to repay the amounts owing when due, we may be required to raise additional financing from other sources. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that we will be able to continue as a going concern.

Cash Flows

5

Net Cash Used in Operating Activities

Net cash used in operating activities during the three months ended August 31, 2020, was $169,629. This cash was primarily used to cover our cash operating expenses of $226,997, to decrease our accrued liabilities by $4,456, and to increase other current assets by $4,293. These uses of cash were offset by $38,831 increase in our accounts payable, $31,911 increase in amounts due to related parties, and by a $375 decrease in inventory.

Net cash used in operating activities during the three months ended August 31, 2019, was $203,682. This cash was primarily used to cover our cash operating expenses of $240,972 and to decrease our accounts payable and amounts due to related parties by $3,617 and $13,239, respectively. These uses of cash were offset by $4,215 and $33,295 decreases in our inventory and other current assets, respectively, and by increases in our accrued liabilities and unearned revenue of $7,400 and $9,236 respectively.

Non-cash transactions

During the three-month period ended August 31, 2020, our net loss was affected by the following expenses that did not have any impact on cash used in operations:

·$6,446 (2020 - $6,952) in interest we accrued on the outstanding notes payable. Of this interest, $675 (2020 - $6,477) was accrued on the notes payable we issued to Mr. Jeffs; 

·$43,477 (2020 - $2,905) in unrealized foreign exchange gain, which resulted from fluctuations of Canadian dollar in relation to US dollar, our functional and reporting currency ; and 

·$736 (2020 - $268) in amortization of equipment we acquired for our manufacturing operations and for our office. 

·$5,000 (2020 - $Nil) in non-cash investor relations expenses which were associated with fair market value of the shares we issued to our consultant for investor relation services in April 2020. 

Net Cash Used in Investing Activities

During the three-month period ended August 31, 2020, we purchased office equipment for $1,574 (2020 - $2,463).

Net Cash Provided by Financing Activities

During the three-month period ended August 31, 2019, we were advanced a total of $15,000 which is payable on demand. In addition to the advances, we issued 4,050,000 units of our common stock for total proceeds of $486,000. We did not incur any share-issuance costs associated with the units issued as part of the private placement financing.

Going Concern

The notes to our unaudited condensed consolidated financial statements as at August 31, 2020, disclose our uncertain ability to continue as a going concern. Our current business operations are in an early development stage and as such, we were able to generate only minimal revenue from the operations. Our research and development as well as marketing plans for the near future will require large capital expenditures, which we are planning to mitigate through equity or debt financing, or by requiring upfront deposits from our potential distributors, once we begin commercial production of our eBalance® devices.

6

As at August 31, 2020, we had accumulated a deficit of $8,250,722 since inception and increased sales will be required to fund and support our operations. Our continuation as a going concern depends upon the continued financial support of our shareholders, our ability to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations. Our unaudited condensed consolidated interim financial statements do not give effect to any adjustments that would be necessary should we be unable to continue as a going concern and therefore be required to realize our assets and discharge our liabilities in other than the normal course of business and at amounts different from those reflected in our financial statements.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

An appreciation of our critical accounting policies is necessary to understand our financial results. These policies may require management to make difficult and subjective judgments regarding uncertainties, and as a result, such estimates may significantly impact our financial results. The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes. We have applied our critical accounting policies and estimation methods consistently.

Changes in and Disagreements with Accountants on Accounting Procedures and Financial Disclosure

None.

None

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

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2020. Based on that evaluation, our management concluded that our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting information required to be disclosed within the time periods specified in Securities and Exchange Commission’s rules and forms due to lack of segregation of duties.

During the quarter ended August 31, 2020, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

7

None.

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

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

Risks associated with the current uncertainty with respect to rapid expansion of the COVID-19 pandemic

We are cognizant of the rapid expansion of the COVID-19 pandemic and the resulting global implications. To date, there have been no disruptions to our day-to-day operations. However, we caution that there continues to be a possibility for potential future implementation of certain restrictions that would affect our operations, research and development and marketing plans. The impact of these restrictions on the results of our business, if implemented, is currently unknown but could be significant.

Risks Associated with our Company and our Industry

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

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

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

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

8

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

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

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

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

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

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

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

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

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

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

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

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

To date we have generated only minimal revenues. If we cannot increase our revenues to start generating profits, our investors may lose their entire investment.

To date we have generated only minimal revenues. No profits have been made to date and if we fail to make any then we may fail as a business and an investment in our common stock will be worth nothing. We have a very limited operating history and thus our progress as well as potential future success cannot be reasonably estimated. Success has yet to be proven and financial losses should be expected to continue in the near future and at least until such time that we enter commercial production of devices based on the eBalance® Technology, of which there is no assurance. We continue to face all the risks of a ‘start-up’ venture including unforeseen costs, expenses, problems, and management limitations and difficulties.  Since inception, we have accumulated deficit of $8,250,722 and there is no guarantee, that we may ever be able to turn a profit or locate additional opportunities, hire additional management and other personnel.

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

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

Risks related to our stock

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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None.

None.

None.

None.

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(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)Reserved 

(5)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 9, 2014 

(6)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on October 17, 2014 

(7)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on November 3, 2014 

(8)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on November 18, 2014 

(9)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 3, 2014 

(10)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 13, 2015 

(11)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on August 11, 2015 

(12)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 14, 2016 

(13)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 15, 2015 

(14)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2016 

(15)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2016 

(16)Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on September 13, 2016 

(17)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2016 

(18)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2017 

(19)Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on August 29, 2017 

(20)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 17, 2017 

(21)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 16, 2018 

(22)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with SEC on December 5, 2017. 

(23)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 14, 2019 

(24)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on December 31, 2018 

(25)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on March 27, 2019 

(26)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 14, 2020 

(27)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on January 31, 2020 

(28)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2020 

(29)Filed as an exhibit to the Company’s Current Report on Form 10-K filed with the SEC on September 15, 2020 

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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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