Cell MedX Corp. - Quarter Report: 2016 November (Form 10-Q)

form10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended November 30, 2016

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Commission File Number: 000-54500

Cell MedX Corp.

(Exact name of registrant as specified in its charter)

Nevada		38-3939625
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

123 W. Nye Ln, Suite 446 Carson City, NV		89706
(Address of principal executive offices)		(Zip code)

(844) 238-2692

(Registrant’s telephone number, including area code)

2872 Sumter Valley Circle, Henderson, NV 89052

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act.) o Yes x No

The number of shares of the Registrant’s common stock, par value $.001 per share, outstanding as of January 17, 2017 was 40,244,605.

CONTENTS

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	9

Item 4.	Controls and Procedures	9

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	10

Item 1A.	Risk Factors	10

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12

Item 3.	Defaults Upon Senior Securities	12

Item 4.	Mine Safety Disclosures	12

Item 5.	Other Information	12

Item 6.	Exhibits	13

	SIGNATURES	15

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited consolidated interim financial statements of Cell MedX Corp. as at November 30, 2016, 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 and six month periods ended November 30, 2016, are not necessarily indicative of the results that can be expected for the year ending May 31, 2017.

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

CELL MEDX CORP.

CONSOLIDATED BALANCE SHEETS

(EXPRESSED IN US DOLLARS)

	November 30, 2016			May 31, 2016
ASSETS	(Unaudited)

Current assets
Cash	$	117,980		$	27,561
Inventory		3,715			4,599
Other current assets		71,139			29,684
Total current assets		192,834			61,844

Equipment		185,673			207,083
Total assets	$	378,507		$	268,927


LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable	$	396,836		$	384,147
Accrued liabilities		8,412			37,966
Due to related parties		333,772			307,650
Notes and advances payable		130,128			951,716
Unearned revenue		11,172			-
Total liabilities		880,320			1,681,479

STOCKHOLDERS' DEFICIT
Common stock, $0.001 par value, 300,000,000 shares authorized;
40,244,605 and 31,000,000 shares issued and outstanding at November 30, 2016 and May 31, 2016, respectively		40,245			31,000
Additional paid-in capital		4,048,000			1,734,498
Obligation to issue shares		-			75,000
Accumulated deficit		(4,593,517	)		(3,254,597	)
Accumulated other comprehensive income		3,459			1,547
Total stockholders' deficit		(501,813	)		(1,412,552	)
Total liabilities and stockholders’ deficit	$	378,507		$	268,927


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

F-1

CELL MEDX CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(EXPRESSED IN US DOLLARS)

	Three Months Ended November 30,						Six Months Ended November 30,
	2016			2015			2016			2015

Revenue
Sales	$	336		$	3,767		$	5,704		$	5,649
Cost of goods sold		180			2,897			3,591			4,102
Gross margin		156			870			2,113			1,547

Operating expenses
Amortization		18,510			2,587			36,521			6,500
Consulting fees		75,607			103,252			150,747			189,710
General and administrative expenses		51,239			52,721			95,463			120,683
Research and development costs		67,173			25,185			140,025			578,724
Stock-based compensation		29,306			290,281			78,203			606,866
Total operating expenses		241,835			474,026			500,959			1,502,483

Other items
Accretion expense		(7,473	)		-			(13,730	)		-
Gain on sale of equipment		-			-			-			2,979
Interest		(5,596	)		(6,458	)		(20,991	)		(11,085	)
Loss on settlement of debt		(805,353	)		-			(805,353	)		-
Net loss		(1,060,101	)		(479,614	)		(1,338,920	)		(1,509,042	)

Unrealized foreign exchange translation gain		1,881			469			1,912			2,455
Comprehensive loss	$	(1,058,220	)	$	(479,145	)	$	(1,337,008	)	$	(1,506,587	)
Net loss per common share
Basic and diluted	$	(0.03	)	$	(0.02	)	$	(0.04	)	$	(0.05	)

Weighted average number of shares outstanding – basic and diluted		36,014,128			31,000,000			33,493,364			31,000,000


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

F-2

CELL MEDX CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

(UNAUDITED)

(EXPRESSED IN US DOLLARS)

					Obligation								Accumulated Other
	Common Stock				to Issue			Additional Paid-in		Deficit			Comprehensive
	Shares		Amount		Shares			Capital		Accumulated			Income			Total

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		-		-		-			606,866		-			-			606,866
Net loss for the six months ended November 30, 2015		-		-		-			-		(1,509,042	)		-			(1,509,042	)
Translation to reporting currency		-		-		-			-		-			2,455			2,455

Balance - November 30, 2015		31,000,000		31,000		75,000			1,448,204		(2,624,502	)		3,220			(1,067,078	)

Stock-based compensation		-		-		-			261,294		-			-			261,294
Warrants issued for term loan		-		-		-			25,000		-			-			25,000
Net loss for the six months ended May 31, 2016		-		-		-			-		(630,095	)		-			(630,095	)
Translation to reporting currency		-		-		-			-		-			(1,673	)		(1,673	)

Balance - May 31, 2016		31,000,000		31,000		75,000			1,734,498		(3,254,597	)		1,547			(1,412,552	)

Stock-based compensation		-		-		-			78,203		-			-			78,203
Shares issued for cash		2,383,333		2,383		-			355,117		-			-			357,500
Shares issued for debt		6,711,272		6,712		-			1,805,332		-			-			1,812,044
Issuance of shares subscribed		150,000		150		(75,000	)		74,850		-			-			-
Net loss for the six months ended November 30, 2016		-		-		-			-		(1,338,920	)		-			(1,338,920	)
Translation to reporting currency		-		-		-			-		-			1,912			1,912

Balance - November 30, 2016		40,244,605	$	40,245	$	-		$	4,048,000	$	(4,593,517	)	$	3,459		$	(501,813	)



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

F-3

CELL MEDX CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(EXPRESSED IN US DOLLARS)

	Six Months Ended November 30,
	2016			2015

Cash flows used in operating activities:
Net loss	$	(1,338,920	)	$	(1,509,042	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense		13,730			-
Accrued interest on notes payable		20,991			11,085
Amortization		36,521			6,500
Consulting fees - non-cash		-			20,364
Foreign exchange gain		(4,264	)		(8,190	)
Gain on sale of equipment		-			(2,979	)
Loss on settlement of debt		805,353			-
Research and development costs - non-cash		-			496,345
Stock-based compensation		78,203			606,866
Changes in operating assets and liabilities:
Inventory		797			(94	)
Other current assets		(40,213	)		8,349
Accounts payable		12,358			81,663
Accrued liabilities		(29,553	)		(21,024	)
Unearned revenue		11,471			6,592
Due to related parties		30,221			140,525
Net cash flows used in operating activities		(403,305	)		(163,040	)

Cash flows used in investing activities:
Acquisition of equipment		(14,940	)		(32,838	)
Net cash used in investing activities		(14,940	)		(32,838	)

Cash flows provided by financing activities:
Advances payable		2,684			(45,800	)
Proceeds from notes payable		148,754			242,000
Proceeds from subscription to shares		357,500			-
Net cash provided by financing activities		508,938			196,200

Effects of foreign currency exchange on cash		(274	)		(37	)
Increase in cash		90,419			285
Cash, beginning		27,561			1,258
Cash, ending	$	117,980		$	1,543

Non-cash investing transactions:
Sale of equipment recorded as settlement of due to related parties	$	-		$	19,301


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

F-4

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 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 and non-therapeutic products that promote general wellness and alleviate complications associated with medical conditions including, but not limited to, diabetes, Parkinson’s disease, and high blood pressure.

Unaudited Interim Financial Statements

The unaudited interim consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“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, 2016, included in the Company’s Annual Report on Form 10-K, filed with the SEC. The interim unaudited consolidated financial statements should be read in conjunction with those audited consolidated financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six month periods ended November 30, 2016, are not necessarily indicative of the results that may be expected for the year ending May 31, 2017.

Reclassifications

Certain prior period amounts in the accompanying unaudited consolidated interim financial statements have been reclassified to conform to the current period’s presentation. These reclassifications had no net effect on the consolidated results of operations or financial position for any period presented.

Going Concern

The accompanying unaudited consolidated interim financial statements have been prepared assuming the Company will continue as a going concern. Continuation as a going concern is dependent upon the ability of the Company to obtain the necessary financing to meet its 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 unaudited interim consolidated 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– RELATED PARTY TRANSACTIONS

Amounts due to related parties, other than notes payable to related parties (Notes 6 and 7) at November 30, 2016, and May 31, 2016:

	November 30, 2016		May 31, 2016
Due to the Chief Executive Officer (“CEO”) and President	$	89,654	$	66,254
Due to the Vice President (“VP”), Corporate Strategy		98,220		95,575
Due to the VP, Technology and Operations		59,958		56,596
Due to the Chief Medical Officer		81,059		81,059
Due to a company owned by VP, Corporate Strategy and VP Technology and Operations		1,704		1,747
Due to the Chief Financial Officer (“CFO”)		3,177		6,419
Due to related parties	$	333,772	$	307,650

Amounts are unsecured, due on demand and bear no interest.

F-5

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

During the six months ended November 30, 2016 and 2015, the Company had the following transactions with related parties:

	November 30, 2016		November 30, 2015
Management fees incurred to the CEO and President	$	21,600	$	21,600
Stock-based compensation incurred to the CEO and President (Note 8)		11,600		446,942
Management fees incurred to the CFO		6,000		6,000
Consulting fees incurred to the VP, Corporate Strategy		25,178		55,669
Consulting fees incurred to the VP, Technology and Operations		25,178		43,768
Net payments received for equipment sold to the VP, Technology and Operations and VP, Corporate Strategy		-		(19,301	)
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 (Note 8)		-		496,345
Consulting fees incurred to the Chief Medical Officer recorded as part of research and development costs		-		50,000
Stock-based compensation incurred to the Chief Medical Officer (Note 8)		66,603		159,924
Research and development costs incurred to a company controlled by the Chief Medical Officer		-		25,700
Accrued interest expense incurred to a significant shareholder, included in general and administrative expense (Note 6)		5,549		-
Accretion expense associated with a term loan entered into with significant shareholder (Note 7)		13,730		-
Total transactions with related parties	$	175,438	$	1,286,647

On September 26, 2016, the Company entered into a letter agreement (the “Letter Agreement”) with Jean Arnett and Brad Hargreaves to cancel the unvested portion of the options granted to Ms. Arnett and Mr. Hargreaves by the Company (Note 8). In addition, the Company renegotiated its consulting arrangements with Ms. Arnett and Mr. Hargreaves. Based on the Letter Agreement, the Company has agreed to pay each of Ms. Arnett and Mr. Hargreaves CAD$5,000 per month, beginning effective August 1, 2016, for duration of six months.

NOTE 3 – EQUIPMENT

Amortization schedule for the equipment at November 30, 2016, and May 31, 2016:

	November 30, 2016			May 31, 2016
Book value, beginning of the period	$	207,083		$	25,846
Changes during the period		15,111			201,840
Amortization		(36,521	)		(20,603	)
Book value, end of the period	$	185,673		$	207,083

NOTE 4 – INVENTORY

As at November 30, 2016, the inventory consisted of supplies held for resale, and was valued at $3,715 (May 31, 2016 - $4,599). The Company uses lower of cost or net realizable value to determine the book value of the inventory at reporting date.

F-6

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

NOTE 5 – UNEARNED REVENUE

On September 14, 2016, the Company received a $11,172 (CAD$15,000) deposit.

NOTE 6 – NOTES AND ADVANCES PAYABLE

The tables below summarize the short-term loans and advances outstanding as at November 30, 2016, and May 31, 2016:

As at November 30, 2016
Principal Outstanding	Interest Rate per Annum		Accrued Interest / Accretion	Total Book Value
$ 49,151	6%	Non-convertible	$ 1,031	$ 50,182
32,295	6%	Related Party (Note 2)	663	32,958
50,000	6%	Term Loan- Related Party (Notes 2 and 7)	18,758	43,758
3,230	0%	Advances	-	3,230
$ 134,676			$ 20,452	$ 130,128

As at May 31, 2016
Principal Outstanding	Interest Rate per Annum		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 2)	7,620	204,620
50,000	6%	Term Loan- Related Party (Notes 2 and 7)	5,028	30,028
638	0%	Advances	-	638
$ 932,638			$ 44,078	$ 951,716

During the six-month period ended November 30, 2016, the Company entered into a number of loan agreements for $75,000 (May 31, 2016 - $480,000). These loans bare interest at 6% per annum, are unsecured and payable on demand. During the same period, the Company entered into a number of loan agreements with Mr. Richard Jeffs (“Mr. Jeffs”), a major shareholder, for a total of $73,754 (CAD$96,500) (May 31, 2016 – $247,000). The loans of CAD$96,500 bear interest at 6% per annum, are unsecured and are payable on demand.

On September 30, 2016, Mr. Jeffs notified the Company that he had assigned all rights to his claims against the Company in the amount of $250,000 to two unaffiliated parties. The assignees notified the Company of their intention to convert the debt acquired by them from Mr. Jeffs into the units of the Company’s common stock as part of the non-brokered private placement offering (the “Offering”), which the Company closed on October 12, 2016 (Note 8).

On October 12, 2016, as part of its Offering, the Company settled a total of $1,006,691 owed under the notes payable (the “Debt”), which consisted of $949,001 in principal and $57,690 in accrued interest. The Debt was converted to 6,711,272 units of the Company's common stock at $0.15 per unit. 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 five years after closing at an exercise price of $0.50 per share if exercised during the first year, $0.75 per share if exercised during the second year, $1.00 per share if exercised during the third year, $1.25 per share if exercised during the fourth year, and at $1.50 per share if exercised during the fifth year. The Company recorded a loss on settlement of $805,353, which resulted from the difference between the fair market value of the stock at the date of the conversion being $0.27 per share, and price of the unit offered as part of the private placement being $0.15 per unit.

As of November 30, 2016, the Company recorded $20,991 (2015 - $11,085) in interest expense associated with above loans.

F-7

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

NOTE 7 – TERM LOAN

On March 3, 2016, the Company entered into a loan agreement (the “Term Loan Agreement”) with Mr. 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 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 six-month period ended November 30, 2016, the Company recognized accretion expense of $13,730 (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 8 – SHARE CAPITAL

In January 2015 the Company received a subscription to 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 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 on December 31, 2015. The Company issued the shares on September 20, 2016. Since the expiration date of the warrants had passed, the warrants were not issued.

On October 12, 2016, the Company closed its Offering at a price of $0.15 per unit, by issuing 2,383,333 units for cash proceeds of $357,500 and 6,711,272 units to the holders of the Company’s notes payable (Note 6) for debt settlement of $1,006,691. Each unit sold under the Offering consisted of one common share of the Company and one share purchase warrant expiring on October 12, 2021, and entitling the holder to purchase one additional common share for a period of five years after closing at an exercise price of $0.50 per share if exercised during the first year, $0.75 per share if exercised during the second year, $1.00 per share if exercised during the third year, $1.25 per share if exercised during the fourth year, and at $1.50 per share if exercised during the fifth year.

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 2) 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%

On September 26, 2016, the Company entered into a letter agreement with the Vendors to cancel remaining 17,500,000 options (Note 2).

F-8

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

On January 13, 2015, the Company issued 2,400,000 non-transferrable options to its Chief Medical Officer. The options are exercisable at $0.67 per share and 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 November 30, 2016, options to acquire up to 1,400,000 shares of the Company’s common stock have vested, and the Company recognized $66,603 (2015 - $159,924) (Note 2) as stock-based compensation expense for the six-month period ended November 30, 2016. Further $58,197 will be recognized in the future periods.

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. As of November 30, 2016, all CEO Options have vested.

The CEO Options 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%

During the six-month period ended November 30, 2016, the Company recognized $11,600 as share-based compensation expense (2015 - $446,942) (Note 2).

The changes in the number of stock options outstanding during the six-month period ended November 30, 2016, and for the year ended May 31, 2016, are as follows:

	Six months ended November 30, 2016					Year ended May 31, 2016
	Number of options			Weighted average exercise price		Number of options		Weighted average exercise price
Options outstanding, beginning		25,050,000		$	0.14		22,400,000	$	0.12
Options granted		-			n/a		2,650,000	$	0.34
Options cancelled		(17,500,000	)	$	0.05		-		n/a
Options outstanding, ending		7,550,000		$	0.35		25,050,000	$	0.14
Options exercisable, ending		6,550,000		$	0.30		5,650,000	$	0.27

F-9

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

Details of options outstanding and exercisable as at November 30, 2016, are as follows:

Exercise price	Grant date	Number of options granted	Number of options exercisable
$0.05	November 25, 2014	2,500,000	2,500,000
$0.67	January 13, 2015	2,400,000	1,400,000
$0.35	August 5, 2015	2,500,000	2,500,000
$0.20	September 23, 2015	150,000	150,000
		7,550,000	6,550,000

At November 30, 2016, the weighted average remaining contractual life of the stock options outstanding and exercisable was 3.89 years.

Warrants

On March 3, 2016, 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 7). 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

On October 12, 2016, as part of the Offering, the Company issued warrants to acquire up to 9,094,605 of the Company’s common stock expiring on October 12, 2021. The exercise price of these warrants is as follows:

Period expiring on:	Exercise Price
October 12, 2017	$0.50
October 12, 2018	$0.75
October 12, 2019	$1.00
October 12, 2020	$1.25
October 12, 2021	$1.50

F-10

CELL MEDX CORP.

NOTES TO THE UNAUDITED INTERIM

CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOVEMBER 30, 2016

The changes in the number of warrants outstanding during the six-month period ended November 30, 2016, and for the year ended May 31, 2016, are as follows:

	Six months ended November 30, 2016	Year ended May 31, 2016
Warrants outstanding, beginning	-	-
Warrants issued	11,094,605	-
Warrants outstanding, ending	11,094,605	-

Details of warrants outstanding as at November 30, 2016, are as follows:

Exercise price	Expiry Date	Number of warrants exercisable
$0.15 1st year; $0.25 2nd year; $0.40 3rd year; $0.60 4th year; $0.75 5th year	March 3, 2021	2,000,000
$0.50 1st year; $0.75 2nd year; $1.00 3rd year $1.25 4th year; $1.50 5th year	October 12, 2021	9,094,605
		11,094,605

At November 30, 2016, the weighted average remaining contractual life of the share purchase warrants was 4.76 years.

NOTE 9 – SUBSEQUENT EVENTS

a)	Subsequent to November 30, 2016, the Company received 20 eBalance Pro wellness devices. The Company paid the developer $93,764 (EURO 86,776) for the devices.

b)	In January 2017 the Company received CAD$40,000 under loan agreements with a non-related party, and CAD$15,000 under a loan agreement with Mr. Richard Jeffs. The loans bear interest at 6% per annum, are unsecured and payable on demand (Note 6).

F-11

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

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

The discussion provided in this Quarterly Report should be read in conjunction with our Annual Report on Form 10-K for the year ended May 31, 2016, filed with the United States Securities and Exchange Commission (the “SEC”) on September 13, 2016.

Overview

We were incorporated as Plandel Resources, Inc. under the laws of the State of Nevada on March 19, 2010. On March 24, 2014, we changed our name to Sports Asylum, Inc. and on September 30, 2014, we changed our name to Cell MedX Corp. to reflect our current business direction.

On November 25, 2014, we completed the acquisition of a proprietary method for the application of bioelectric signaling to treat diabetes and related ailments (the “eBalance Technology”). With our acquisition of the eBalance Technology, we have shifted our business direction to the discovery, development and commercialization of therapeutic and non-therapeutic products that promote general wellness and alleviate complications associated with medical conditions including, but not limited to, diabetes, Parkinson’s disease, and high blood pressure.

On November 26, 2014, we formed a subsidiary, Avyonce Cosmedics Inc., (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.

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.

Recent Corporate Developments

The following corporate developments occurred during the quarter ended November 30, 2016, and up to the date of the filing of this report:

Letter Agreement with Jean Arnett and Brad Hargreaves

On September 26, 2016, we entered into a letter agreement (the “Letter Agreement”) with Jean Arnett and Brad Hargreaves to, among other things, cancel the unvested portion of the options granted to Ms. Arnett and Mr. Hargreaves pursuant to those separate Option Agreements between us and Ms. Arnett, and Mr. Hargreaves, each dated for reference November 25, 2014 (the “Cancelled Options”). The Cancelled Options had previously entitled Ms. Arnett and Mr. Hargreaves to collectively acquire up to 17,500,000 common shares of the Company (8,750,000 shares, each) at an initial price of $0.05 per share.

In addition, we renegotiated our consulting arrangements with Ms. Arnett and Mr. Hargreaves. Based on the Letter Agreement, we agreed to pay each of Ms. Arnett and Mr. Hargreaves CAD$5,000 per month, beginning effective August 1, 2016, for a duration of six (6) months.

Appointment of Director

On September 26, 2016, the board of directors of the Company unanimously resolved to fix the number of directors at three, and appointed Yanika Silina, our current Chief Financial Officer, as a director to fill the vacancy created by the increase in the number of directors. We did not enter into any new compensation arrangements with Ms. Silina in connection with her appointment as a director of the Company.

Private Placement Offering

On October 12, 2016, we closed a non-brokered private placement offering (the “Offering”) at a price of $0.15 per unit, by issuing 2,383,333 units for cash proceeds of $357,500 and 6,711,272 units to the holders of our notes payable for debt settlement of $1,006,691. Each unit sold under the Offering 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 five years after closing at an exercise price of $0.50 per share if exercised during the first year, $0.75 per share if exercised during the second year, $1.00 per share if exercised during the third year, $1.25 per share if exercised during the fourth year, and at $1.50 per share if exercised during the fifth year.

Loan Agreements

During the quarter ended November 30, 2016, we did not enter into any loan agreements, subsequent to November 30, 2016, we entered into loan agreements for a total of CAD$55,000, of which CAD$15,000 were loaned to us by Mr. Richard Jeffs, our major shareholder. The loans bear interest at 6% per annum, compounded monthly, are unsecured and payable on demand.

On September 30, 2016, Mr. Jeffs notified us that he had assigned all rights to his claims against the Company in the amount of $250,000 to two unaffiliated parties (the “Assignees”). The full amount of debt assigned to the Assignees was converted into the units of the Company’s common stock as part of the Offering.

Appointment of a Member of Advisory Board and a Distributor

On November 16, 2016, the Company appointed Gregory Pek to the Company’s advisory board and as a distributor for Hong Kong and the Philippines. Mr. Pek will assist the Company in a wide range of functions including, but not limited to, input into the structure of the observational clinical studies and developing marketing strategies in Asia, overall business strategy, and financing.

Update on Observational Clinical Study

During the period ended November 30, 2016, the Company, with the assistance of Nutrasource Diagnostics Inc., has secured the main research facility in Hamilton, Ontario, completed an investigational protocol as well as Informed Consent and Ethics Board submission documentation, in an anticipation to enter regulated clinical trials (the “Study”). The Company received Health Canada’s approval to commence the Study on January 12, 2017. The detailed information of the Study will be posted on clinicaltrials.gov upon approval of government regulatory agencies.

eBalance Pro Wellness Devices

In December 2016 the Company received the first shipment of its eBalance Pro wellness devices. The Company plans to use several of these devices in its observations and in the Study, as well as for securing Medical CE Marking in Europe.

Results of Operations for the Three and Six Months Ended November 30, 2016 and 2015

Our operating results for the three and six month periods ended November 30, 2016 and 2015, and the changes in the operating results between those periods are summarized in the table below.

	Three Months Ended									Six Months Ended
	November 30, 2016			November 30, 2015			Percentage Change			November 30, 2016			November 30, 2015			Percentage Change

Sales	$	336		$	3,767			(91.1	)%	$	5,704		$	5,649			1.0	%
Cost of goods sold		180			2,897			(93.8	)%		3,591			4,102			(12.5	)%
Gross margin		156			870			(82.1	)%		2,113			1,547			36.6	%
Operating expenses
Amortization		18,510			2,587			615.5	%		36,521			6,500			461.9	%
Consulting fees		75,607			103,252			(26.8	)%		150,747			189,710			(20.5	)%
General and administrative expenses		51,239			52,721			(2.8	)%		95,463			120,683			(20.9	)%
Research and development costs		67,173			25,185			166.7	%		140,025			578,724			(75.8	)%
Stock-based compensation		29,306			290,281			(89.9	)%		78,203			606,866			(87.1	)%
Total operating expenses		241,835			474,026			(49.0	)%		500,959			1,502,483			(66.7	)%
Accretion expense		(7,473	)		-			n/a			(13,730	)		-			n/a
Gain on sale of equipment		-			-			n/a			-			2,979			(100.0	)%
Interest		(5,596	)		(6,458	)		(13.3	)%		(20,991	)		(11,085	)		89.4	%
Loss on settlement of debt		(805,353	)		-			n/a			(805,353	)		-			n/a
Net loss	$	(1,060,101	)	$	(479,614	)		121.0	%	$	(1,338,920	)	$	(1,509,042	)		(11.3	)%

Revenues

Our revenue during the three-month period ended November 30, 2016, and during the comparative period ended November 30, 2015, consisted of sales of consumables for the spa industry. During the six-month period ended November 30, 2016 and 2015, our revenue consisted of sales of spa equipment, consumables and services. Due to the current concentration on research and development of our eBalance Technology and devices based on this technology, we do not expect to have significant operating revenue in the foreseeable future.

Operating Expenses

During the three-month period ended November 30, 2016, our operating expenses decreased by 49% from $474,026 incurred during the three months ended November 30, 2015, to $241,835 incurred during the three months ended November 30, 2016. The decrease was mainly associated with reduced consulting fees, mainly to Ms. Arnett and Mr. Hargreaves, as well as the decrease in stock-based compensation, mainly due to vesting terms of the options granted during our Fiscal 2015 and 2016. These reductions were in part offset by increases to our research and development fees, as well as the amortization we recorded on equipment we use in our observational trials.

During the six-month period ended November 30, 2016, our operating expenses decreased by 66.7% from $1,502,483 incurred during the six months ended November 30, 2015, to $500,959 incurred during the six months ended November 30, 2016. The most significant year-to-date changes were as follows:

●	Our research and development fees for the six-month period ended November 30, 2016, decreased by $438,699, from $578,724 we incurred during the six months ended November 30, 2015 to $140,025 we incurred during the six months ended November 30, 2016. The higher research and development fees during the comparative period were directly attributed to $496,345 we recorded as fair value of options to acquire up to 2,500,000 shares of our common stock which we granted to Ms. Arnett and Mr. Hargreaves in connection with our acquisition from them of the eBalance Technology pursuant to our Technology Purchase Agreement, as amended.
●	Our stock-based compensation for the six-month period ended November 30, 2016, decreased by $528,663, from $606,866 we incurred during the six months ended November 30, 2015 to $78,203 we incurred during the six months ended November 30, 2016. The stock-based compensation included $66,603 (2015 - $159,924) in fair market value of the options we granted to Dr. Sanderson pursuant to his consulting agreement with us, and $11,600 (2015 - $446,942) in fair market value of the options we granted to Mr. McEnulty pursuant to his option agreement with us.
●	During the six-month period ended November 30, 2016, our consulting fees decreased by $38,963, from $189,710 we incurred during the six months ended November 30, 2015, to $150,747 we incurred during the six months ended November 30, 2016. The decrease was mainly associated with a change in consulting arrangements with Ms. Arnett and Mr. Hargreaves - the vendors of our eBalance Technology and our officers.
●	Our general and administrative fees for the six-month period ended November 30, 2016, decreased by $25,220, or 20.9%, from $120,683 we incurred during the six months ended November 30, 2015 to $95,463 we incurred during the six months ended November 30, 2016. The largest factors that contributed to this decrease were associated with a reduction in our corporate communication fees of $9,459, accounting and audit fees of $9,822, rent of $12,820, and salaries and wages of $7,480. These decreases were in part offset by increases in travel fees of $15,172, loss on foreign exchange of $1,968, and professional fees of $1,594.
●	During the six-month period ended November 30, 2016, we recorded $36,521 in amortization on our equipment used in observations and research and development. During the comparative period ended November 30, 2015, our amortization expense was $6,500.

Other Items

●	During the six-month period ended November 30, 2016, we accrued $20,991 (2015 - $11,085) in interest associated with the outstanding notes payable. Of this interest, $5,549 was accrued on notes payable we issued to Mr. Jeffs, our major shareholder.
●	During the six-month period ended November 30, 2015, we recorded $2,979 in a gain on sale of equipment which we sold to Mr. Hargreaves for total proceeds of $19,301. We did not have similar transactions during the six-month period ended November 30, 2016.
●	During the six-month period ended November 30, 2016, we recorded $13,730 (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.
●	During the six-month period ended November 30, 2016, we recorded $805,353 (2015 - $Nil) in loss on settlement of debt when our debt holders chose to convert $1,006,691 owed to them into units of our common stock as part of the non-brokered private placement financing we closed on October 12, 2016 (the “Offering”). The loss resulted from the difference between the conversion price, being $0.15 per unit, and the fair market value of our common stock on the closing of the Offering, being $0.27 per share.

Liquidity and Capital Resources

Working Capital

	As at			As at
	November 30, 2016			May 31, 2016			Percentage Change
Current assets	$	192,834		$	61,844			211.8	%
Current liabilities		880,320			1,681,479			(47.6	)%
Working capital deficit	$	(687,486	)	$	(1,619,635	)		(57.6	)%

As of November 30, 2016, we had a cash balance of $117,980, a working capital deficit of $687,486 and cash flows used in operations of $403,305 for the period then ended. During the six-month period ended November 30, 2016, we funded our operations with $357,500 we received from subscriptions to the units of our common stock we issued as part of our Offering, $73,754 (CAD$96,500) we received from Mr. Jeffs, our major shareholder, and with $75,000 we received from non-related parties. See “Net Cash Provided By Financing Activities”.

We did not generate sufficient cash flows from our operating activities to satisfy our cash requirements for the period ended November 30, 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 remaining notes payable. There is no assurance that we will be able to generate sufficient cash from our operations to repay the amounts owing under these notes and advances payable, or to service our other debt obligations. If we are unable to generate sufficient cash flow from our operations to repay the amounts owing when due, we may be required to raise additional financing from other sources. The outcome of these matters cannot be predicted with any certainty at this time and rasies substantial doubt that we will be able to continue as a going concern.

Cash Flows

	Six months ended
	November 30, 2016			November 30, 2015
Cash flows used in operating activities	$	(403,305	)	$	(163,040	)
Cash flows used in investing activities		(14,940	)		(32,838	)
Cash flows provided by financing activities		508,938			196,200
Effects of foreign currency exchange on cash		(274	)		(37	)
Net increase in cash during the period	$	90,419		$	285

Net Cash Used in Operating Activities

Net cash used in operating activities during the six months ended November 30, 2016, was $403,305. This cash was primarily used to cover our cash operating expenses of $388,386, to increase our current assets by $40,213, which included partial payments we made on manufacturing of our eBalance Pro Wellness devices, and to reduce our accrued liabilities by $29,553. These uses of cash were offset by decrease in our inventory of $797, and by increases in our accounts payable and amounts due to related parties of $12,358 and $30,221, respectively. In addition, we recorded $11,471 in unearned revenue associated with the deposit we received on the eBalance Pro Wellness device, which we received in December 2016.

Net cash used in operating activities during the six months ended November 30, 2015, was $163,040. This cash was primarily used to cover our cash operating expenses of $379,051, and to increase our inventory and decrease the accrued liabilities by $94 and $21,024, respectively. These uses of cash were offset by decreases in other current assets of $8,349, and increases in our accounts payable and amounts due to related parties of $81,663 and $140,525, respectively. In addition, we received $6,592 as payments for the spa equipment, which we recorded as unearned revenue pending delivery of the equipment to our customers.

Non-cash transactions

During the six-month period ended November 30, 2016, our net loss was affected by the following expenses that did not have any impact on cash used in operations:

·		$805,353 in loss on settlement of debt we recorded when our debt holders chose to convert $1,006,691 owed to them into units of our common stock as part of the Offering. The loss resulted from the difference between the conversion price, being $0.15 per unit, and the fair market value of our common stock on the closing of the Offering, being $0.27 per share.
·		$78,203 in stock-based compensation, of which $66,603 was associated with the fair value of the options to purchase up to 2,400,000 shares of our common stock we granted to Dr. Sanderson as compensation for his appointment as our Chief Medical Officer; and $11,600 was associated with the fair value of the options to purchase up to 2,500,000 shares of our common stock we granted to Mr. Frank McEnulty, our CEO and President;

·		$20,991 in interest we accrued on the outstanding notes payable. Of this interest, $5,549 was accrued on the notes payable we issued to Mr. Jeffs, our major shareholder;
·		$13,730 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; and

$36,521 in amortization expense we recorded on the equipment we use in our research of the eBalance Technology.

The above expenses were in part offset by $4,264 decrease in the loss on foreign exchange, which resulted from fluctuations of Canadian dollar and European Euro denominated transactions.

During the six-month period ended November 30, 2015, our net loss was affected by the following amounts that did not have any impact on cash used in operations:

·		$6,500 in amortization expense we recorded on the equipment that is being used in our research of the eBalance Technology;
·		$606,866 in stock-based compensation, of which $159,924 was associated with the fair value of the options to purchase up to 2,400,000 shares of our common stock we granted to Dr. Sanderson as compensation for his appointment as our Chief Medical Officer; and $446,942 was associated with the fair value of the options to purchase up to 2,500,000 shares of our common stock we granted to Mr. Frank McEnulty, our CEO and President;

·		$496,345 in stock-based compensation associated with the fair value of the options to purchase up to 2,500,000 shares of our common stock, which we granted 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, which vested on August 26, 2015; and
·		$20,364 in stock-based compensation associated with the fair value of the options to purchase up to 150,000 shares of our common stock, which we granted to Mr. Bulwa, as part of his Consulting Agreement with us.

The above expenses were in part offset by the following non-cash transactions:

·		$8,190 decrease in the loss on foreign exchange, which resulted from fluctuations of Canadian dollar and European Euro denominated transactions; and
·		$2,979 gain we recorded on the sale of our equipment to Ms. Arnett and Mr. Hargreaves; $19,301 in proceeds from the sale were used to reduce amounts owed to Mr. Hargreaves and Ms. Arnett for services they provided to the Company.

Net Cash Provided by Financing Activities

During the six-month period ended November 30, 2016, we borrowed a total of $75,000 from unrelated parties and $73,754 (CAD$96,500) from our major shareholder. These loans were unsecured, payable on demand and bore interest at 6% per annum, compounded monthly. In addition to the loans, we received $2,684 in non-interest bearing advances from an unrelated party. During the same period we received $357,500 from subscriptions to the units of our common stock under the Offering, which we closed on October 12, 2016.

During the six months ended November 30, 2015, we borrowed a total of $242,000 from unrelated parties. The loans were unsecured, payable on demand and bore interest at 6% per annum, compounded monthly. During the same period we repaid $45,800 in non-interest bearing advances to a non-related party.

Net Cash Used in Investing Activities

During the six-month period ended November 30, 2016, we paid $14,940 for the equipment which is being used in our observational studies.

During the six-month period ended November 30, 2015, we paid $32,838 for the equipment which is being used in our ongoing research and development of the eBalance Technology and devices as well as in our observational studies.

Going Concern

The notes to our unaudited interim consolidated financial statements at November 30, 2016, disclose our uncertain ability to continue as a going concern. We are development stage company with limited operations. To date we have been 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 $4,593,517 since inception and increased financing 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 interim 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.

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

None.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

None

Item 4. Controls and Procedures

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

An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2016. 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 November 30, 2016, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

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

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

Risks Associated with our Company and our Industry

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 services 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 proven. We have yet to prove our eBalance Technology through clinical trials and we have yet to develop any products through which we would be able to start generating revenue. Financial losses should be expected to continue in the near future and at least until such time that we enter commercial production of devices based on the eBalance Technology, of which there is no assurance. As a new business we face all the risks of a ‘start-up’ venture including unforeseen costs, expenses, problems, and management limitations and difficulties. Since inception, we have accumulated deficit of $4,593,517 and there is no guarantee, that we may ever be able to turn a profit or locate additional opportunities, hire additional management and other personnel.

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

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

Risks related to our stock

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

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

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

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

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

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

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

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

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

·		contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
·		contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws;

·		contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;
·		contains a toll-free telephone number for inquiries on disciplinary actions;

·		defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and
·		contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation.

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

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

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

	(a)	we would not be able to pay our debts as they become due in the usual course of business; or
	(b)	except as may be allowed by our Articles of Incorporation, our total assets would be less than the sum of our total liabilities plus the amount that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders who may have preferential rights and whose preferential rights are superior to those receiving the distribution.

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

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

In January 2015 we 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 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, expiring on December 31, 2015. We issued the shares on September 20, 2016. Since the expiration date of the warrants had passed, the warrants were not issued.

On October 12, 2016, we closed a non-brokered private placement offering (the “Offering”) at a price of $0.15 per unit (each an “October Unit”), by issuing 9,094,605 October Units for total gross proceeds of $1,364,191.

Each October Unit sold under the Offering 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 five years after closing at an exercise price of $0.50 per share if exercised during the first year, $0.75 per share if exercised during the second year, $1.00 per share if exercised during the third year, $1.25 per share if exercised during the fourth year, and at $1.50 per share if exercised during the fifth year. As part of the Offering, the holders of the notes payable, which were due on demand, chose to convert a total of $1,006,691 owed to them into October Units of the Company’s common stock.

7,195,958 October Units were issued pursuant to the provisions of Regulation S of the United States Securities Act of 1933, as amended (the “Act”) to the persons who are not residents of the United States and are otherwise not “U.S. Persons” as that term is defined in Rule 902(k) of Regulation S of the Act. Remaining 1,898,647 October Units were issued pursuant to the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D on the basis of representations provided by the debt holder that it was an accredited investor, as that term is defined in Regulation D.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

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 February 28, 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 February 28, 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. (13)
10.16			Loan Agreement and Note Payable dated June 17, 2015 among Cell MedX Corp., and City Group LLC. (13)
10.17			Loan Agreement and Note Payable dated June 29, 2015 among Cell MedX Corp., and Richard N. Jeffs. (13)
10.18			Loan Agreement and Note Payable dated July 7, 2015 among Cell MedX Corp., and City Group LLC. (13)
10.19			Loan Agreement and Note Payable dated July 9, 2015 among Cell MedX Corp., and Richard N. Jeffs. (13)
10.20			Loan Agreement and Note Payable dated July 15, 2015 among Cell MedX Corp., and Richard N. Jeffs. (13)
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.
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.
10.33			Loan Agreement and Note Payable dated March 2, 2016, among Cell MedX Corp., and Tradex Capital Corp.
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. (18)
10.37			Loan Agreement and Note Payable dated March 31, 2016 among Cell MedX Corp., and Richard N. Jeffs. (18)
10.38			Loan Agreement and Note Payable dated April 29, 2016, among Cell MedX Corp., and Richard N. Jeffs. (18)
10.39			Loan Agreement and Note Payable dated June 1, 2016, among Cell MedX Corp., and Tradex Capital Corp. (18)
10.40			Loan Agreement and Note Payable dated June 2, 2016, among Cell MedX Corp., and Richard N. Jeffs. (18)
10.41			Loan Agreement and Note Payable dated June 29, 2016, among Cell MedX Corp., and Tradex Capital Corp. (18)
10.42			Loan Agreement and Note Payable dated June 30, 2016, among Cell MedX Corp., and Richard N. Jeffs. (18)
10.43			Loan Agreement and Note Payable dated August 8, 2016, among Cell MedX Corp., and Richard N. Jeffs. (18)
10.44			Loan Agreement and Note Payable dated August 22, 2016, among Cell MedX Corp., and Tradex Capital Corp. (18)
10.45			Letter Agreement dated September 26, 2016, between Jean Arnett, Brad Hargreaves and Cell MedX Corp. (19)
14.1			Code of Ethics (3)

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 Quarterly Report on Form 10-Q for the three and six month periods ended November 30, 2016 and 2015 formatted in XBRL (extensible Business Reporting Language):
			(1) Consolidated Balance Sheets at November 30, 2016 (unaudited), and May 31, 2016.
			(2) Unaudited Condensed Interim Consolidated Statements of Operations for the Three and Six Months Ended November 30, 2016 and 2015.
			(3) Unaudited Condensed Interim Consolidated Statement of Stockholders’ Deficit for the Six-month period ended November 30, 2016.
			(4) Unaudited Condensed Interim Consolidated Statements of Cash Flows for the Six months ended November 30, 2016 and 2015.

(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
(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 April 14, 2015
(13)		Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on September 3, 2015
(14)		Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on January 14, 2016
(15)		Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on October 15, 2015
(16)		Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on March 9, 2016
(17)		Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on April 14, 2016
(18)		Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the SEC on September 13, 2016
(19)		Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 29, 2016

SIGNATURES

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

		Cell MedX Corp.

Date:	January 17, 2017	By:	/s/ Frank E. McEnulty
			Frank E. McEnulty
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date:	January 17, 2017	By:	/s/Yanika Silina
			Yanika Silina
			Chief Financial Officer
			(Principal Accounting Officer)