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, 2017, filed with the United States Securities and Exchange Commission (the SEC) on August 29, 2017.
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, Parkinsons disease, and high blood pressure.
On April 26, 2016, we formed a subsidiary, Cell MedX (Canada) Corp., (Cell MedX Canada) under the laws of the Province of British Columbia, in anticipation of increased business activity in Canada.
Update on Observational Clinical Study
During the nine-month period ended February 28, 2018, Hamilton Medical Research Group, under the guidance of Dr. Richard Tytus, the lead investigator of the clinical study (the Clinical Study), Cell MedX Corp. commissioned through Nutrasource Diagnostics Inc. (Nutrasource), has completed the Clinical Study and prepared a final clinical report which was submitted to Health Canada for final approval on January 19, 2018.
The objective of the Trial was to assess eBalance therapy as an adjunct treatment for diabetes and related complications in Type 1 and Type 2 diabetics over three months. The secondary endpoints of the Trial observed changes from baseline in the following;
-
Insulin sensitivity
-
Diabetic neuropathy
-
Diabetic foot pain and numbness
-
Wound healing
-
Blood pressure
-
Kidney function
-
Any other changes reported by patients
All 30 subjects (100%) taking part in the Trial followed through to completion. The treatment was considered safe for the purposes of the Trial. There were no significant treatment-related adverse events or negative abnormalities in routine hematology, biochemistry, vital signs or physical findings for the duration of the Trial.
The Trial resulted in several encouraging trends spanning a vast array of areas including HbA1c and secondary efficacy endpoints as noted above.
2
Diabetes
Type I diabetes is an auto-immune disorder which causes the pancreas to produce little or no insulin and leads to high blood glucose levels. Type II diabetes occurs as a result of decreased insulin effectiveness or production which also leads to high blood glucose levels. During the Trial, the effectiveness of the Companys eBalance therapy as an adjunct treatment for diabetes and related complications in Type 1 and Type 2 diabetics was assessed over 3 months.
In non-diabetics, insulin rises sharply after a meal, attaches to a receptor on the surface of muscle tissue, allows glucose to rapidly enter and then dissipates. In Type 2 diabetic, insulin is less able to stimulate the entry of glucose into muscle tissue, leading to high blood glucose levels and sustained elevated levels of insulin.
When hemoglobin (Hb) in the red blood cells combines with glucose, it is referred to as glycated hemoglobin or HbA1c. The amount of glucose that combines with Hb is directly proportional to the total amount of sugar that is in the blood at that time. Measuring HbA1c can provide an estimate of average glucose levels over the 8 to 12 week life span of red blood cells.
The results of the Trial shows that after three months of eBalance treatments, average fasting blood glucose levels declined by 12.3% from 10.5 to 9.2 millimoles per litre. Plasma insulin declined by 46.7% from 168 to 78 picomoles per litre. These results indicate that, on average, the blood glucose uptake was increased and that less insulin was required to achieve that uptake. HbA1c levels declined by 0.16% from 8.36% to 8.20%. A longer double-blind, placebo controlled study may be conducted in the future to determine if the HbA1c levels would be further reduced over a period of time that is longer than the life span of red blood cells.
Blood pressure
After seven weeks of treatments, systolic pressure, the higher amount of pressure in the arteries during the contraction of the heart muscle, declined by 9.6% from 142 to 128 millimeters of mercury and stabilized at the lower level through to the end of the study. During the same period, diastolic pressure, the pressure in the arteries when the heart muscle is between beats, and which is usually represented by a lower number, declined by 10.4% from 78 to 70 millimeters of mercury and also remained at the lower level. The Company has been encouraged to undertake further studies on subjects with higher blood pressures to determine if a proportional effect is obtained.
Pain and numbness
Neuropathy is nerve damage that can occur with diabetes as a result of high blood glucose levels and high blood pressure. The damage most often affects the extremities and causes pain, tingling or numbness in the hands, arms, legs and feet. Only two subjects suffered from pain at the beginning of the Trial and both reported feeling either less pain or reduced coldness or numbness in their extremities. These findings support the Companys in-house informal observation and testing results with a number of people who have used eBalance device. Future studies may recruit subjects who are experiencing pain and loss of feeling.
Kidney function (Nephropathy)
Nephropathy is damage caused to the small blood vessels in the kidneys by high blood glucose levels and high blood pressure that prevents them from functioning properly or even causes them to fail completely. When the blood vessels in the kidneys are injured, the kidneys cannot clean the blood properly. The body will retain more water and salt than it should, which can result in weight gain and edema. The decrease in eGFR (estimated glomerular filtration rate) observed in the Trial and a reduction in edema seen in our informal testing may warrant further investigation to assess the effect of eBalance treatments on kidney function in diabetics.
Recent Corporate Developments
The following corporate developments occurred during the quarter ended February 28, 2018, and up to the date of the filing of this report:
Product Development Agreement
On October 16, 2017, we entered into a production development agreement (the Development Agreement) with Western Robotics Ltd. (Western Robotics) with an objective to enhance our eBalance Pro Wellness device based on the Companys eBalance microcurrent technology and new findings that became evident as part of the Clinical Study and the Companys ongoing in-house observations. The Company agreed to pay Western Robotics CAD$250,000 as non-refundable engineering fee, of which CAD$125,000 (USD$97,010) has been paid as of the date of this Quarterly Report on Form 10-Q.
3
Change in Management
On December 1, 2017, we entered into a management consulting agreement (the Agreement) with Dr. Terrance Owen. Under the terms of the Agreement, Dr. Owen will act as the Companys Chief Executive Officer for the term of one year, expiring on November 30, 2018, and renewing automatically for consecutive 1-year terms. Dr. Owen will be paid a consulting fee of CAD$16,666 per month.
Dr. Owen obtained a BSc (Honours) in Biology from the University of Victoria, an MSc in Biology from the University of New Brunswick, a PhD in Zoology from the University of British Columbia, and an MBA from Simon Fraser University.
From December 1980 to April 2002 Dr. Owen was the President and a director of Helix Biotech, a laboratory providing DNA identity testing services for paternity, immigration, and forensic cases. From July 1995 to June 1998 Dr. Owen was the President, a director and a co-founder of Helix BioPharma Corp, listed on the TSX Venture Exchange (TSX:HBP), a generic pharmaceutical company. From 2000 to 2013, Dr. Owen was the President, CEO, director and co-founder of ALDA Pharmaceuticals Corp., an infection control company now named Vanc Pharmaceuticals Inc. (TSX-V:VANC). Dr. Owen was also a co-founder of Champion Pain Care Corporation (OTCQB:CPAI) and was appointed as its CEO from October 2013 to June 2015, as a Director from October 2013 to February 2017, and as CFO from March 2015 to February 2017.
On December 1, 2017, Mr. McEnulty, our director and former Chief Executive Officer, tendered his resignation from his position as CEO. Mr. McEnulty will continue to serve on the Companys board of directors and as its President.
On March 23, 2018, the Companys board of directors appointed Dr. George Adams to the Board of Directors.
Dr. Adams brings to the Company a wealth of expertise in successfully developing and rolling out various medical devices to global markets. Dr. Adams is currently a Director and Chief Executive Officer of VentriPoint Diagnostics Ltd. (TSXV:VPT). Dr. Adams is a scientist and a serial entrepreneur with extensive public market experience. His previous positions include CEO of Amorfix Life Sciences (TSX:AMF), Chairman of Sernova Corp (TSXV:SVA) and President and CEO of the UT Innovations Foundation. Prior to this, Dr. Adams held research and executive positions with Boston Scientific Inc., Pfizer Inc., Corvita Canada Inc., University of Ottawa and Canadian Red Cross.
Dr. Adams has been instrumental in founding over 32 companies and has been a director of 10 venture capital funds, 10 start-up companies and two Centres of Excellence. Dr. Adams was awarded a World Economic Foundation Technology Pioneer for 2007 and TBI Company of the year in 2009. Dr. Adams has 124 scientific publications and is a reviewer for major scientific journals, federal granting agencies and Centres of Excellence. Dr. Adams obtained his BASc and MASc from the University of Waterloo and his PhD in Blood and Cardiovascular Disease, from McMaster University.
We have not finalized the compensation package for Dr. Adams, however, the management anticipates the compensation will commensurate with that received by other directors, including participation in grants of stock options.
Units issued on conversion of deposits
On February 7, 2018, we agreed to convert the CAD$75,000 deposit we received on distribution contract into 240,000 units of our common stock at a price of $0.25 per unit consisting of one common share and one share purchase warrant entitling the holder to purchase one additional common share for a period of three years after closing at an exercise price of $0.50 per share if exercised during the first year, $1.00 per share if exercised during the second year, and $1.50 per share if exercised during the third year.
Non-brokered Private Placement Financing
On March 19, 2018, the Company announced that the Companys management arranged a non-brokered private placement offering (the Offering) set at a price of $0.10 per Unit for up to 10,000,000 Units for total gross proceeds of $1,000,000.
4
Each Unit sold under the Offering will consist of one common share and one share purchase warrant (the Warrant) priced at $0.25 which will expire on the second year anniversary of the date of issuance of the Warrant. Each Warrant can be exercised into one common share, subject to acceleration to 30 calendar days should common shares of the Company trade at $0.50 or greater for 10 consecutive trading days.
The Units will be 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.
The Units to U.S. Persons will be issued pursuant to the provisions of Rule 506(b) of Regulation D of the Act who qualify as accredited investors as that term is defined under Regulation D of the Act.
We are planning to use the proceeds from the Offering to fund our current business operations and to continue the ongoing development of a third generation of our eBalance Pro Device.
Results of Operations for the Three and Nine Months ended February 28, 2018 and 2017
Our operating results for the three- and nine-month periods ended February 28, 2018, and 2017, and the changes in the operating results between those periods are summarized in the table below.
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
February 28,
2018
|
February 28,
2017
|
Percentage
Increase /
(Decrease)
|
February 28,
2018
|
February 28,
2017
|
Percentage
Increase /
(Decrease)
|
Sales
|
$
|
-
|
$
|
516
|
(100.0)%
|
$
|
-
|
$
|
6,220
|
(100.0)%
|
Cost of goods sold
|
|
-
|
|
460
|
(100.0)%
|
|
-
|
|
4,051
|
(100.0)%
|
Gross margin
|
|
-
|
|
56
|
(100.0)%
|
|
-
|
|
2,169
|
(100.0)%
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
37,461
|
|
24,014
|
56.0%
|
|
115,018
|
|
60,535
|
90.0%
|
Consulting fees
|
|
64,483
|
|
73,263
|
(12.0)%
|
|
709,364
|
|
224,010
|
216.7%
|
General and
administrative expenses
|
|
79,779
|
|
121,379
|
(34.3)%
|
|
167,840
|
|
216,842
|
(22.6)%
|
Research and
development costs
|
|
111,171
|
|
52,782
|
110.6%
|
|
200,165
|
|
192,807
|
3.8%
|
Stock-based
compensation
|
|
1,541
|
|
22,453
|
(93.1)%
|
|
108,472
|
|
100,656
|
7.8%
|
Total operating expenses
|
|
294,435
|
|
293,891
|
0.2%
|
|
1,300,859
|
|
794,850
|
63.7%
|
Accretion expense
|
|
-
|
|
8,906
|
(100)%
|
|
-
|
|
22,636
|
(100.0)%
|
Interest
|
|
1,376
|
|
1,836
|
(25.1)%
|
|
9,617
|
|
22,827
|
(57.9)%
|
Loss on settlement of
debt
|
|
-
|
|
-
|
n/a
|
|
-
|
|
805,353
|
(100.0)%
|
Net loss
|
$
|
(295,811)
|
$
|
(304,577)
|
(2.9)%
|
$
|
(1,310,476)
|
$
|
(1,643,497)
|
(20.3)%
|
Revenues
We did not generate any revenue during the three- and nine-month periods ended February 28, 2018. Our revenue during the comparative periods ended February 28, 2017, consisted of sales of consumables for the spa industry. Due to the current concentration on the research and development of our eBalance Technology and devices based on this technology, as well as the divestiture of Avyonce Cosmedics Inc. (Avyonce), our former subsidiary, in Fiscal 2017, we do not expect to have significant operating revenue in the foreseeable future.
Operating Expenses
During the three-month period ended February 28, 2018, our operating expenses increased by 0.2% from $293,891 incurred during the three months ended February 28, 2017, to $294,435 incurred during the three months ended February 28, 2018. The largest factor contributing to the operating expenses was associated with $111,171 we spent on the research and development of our third generation eBalance Pro Device, representing a 110.6% increase as compared to $52,782 we spent on the research and development during a three-month period ended February 28, 2017. The second largest expense item was associated with our general and administrative costs of $79,779, a 34.3% decrease as compared to $121,379 we spent on general and administrative fees during the three-month period ended February 28, 2017. Our consulting fees represented the third largest expense category for the three-month period ended February 28, 2018.
5
During the nine-month period ended February 28, 2018, our operating expenses increased by 63.7% from $794,850 incurred during the nine months ended February 28, 2017, to $1,300,859 incurred during the nine months ended February 28, 2018. The most significant changes were as follows:
·
During the nine-month period ended February 28, 2018, our consulting fees increased by $485,354, from $224,010 we incurred during the nine-month period ended February 28, 2017 to $709,364 we incurred during the nine months ended February 28, 2018. The increase was mainly associated with a fair market value of the options to acquire up to 1,750,000 shares of our common stock we granted to our consultants for business development services.
·
Our research and development fees for the nine-month period ended February 28, 2018, increased by $7,358, from $192,807 we incurred during the nine-month period ended February 28, 2017, to $200,165 we incurred during the nine months ended February 28, 2018. The higher research and development fees during the current period were associated with our development agreement with Western Robotics, whom we engaged to assist us with enhancement of our eBalance Pro Wellness device. We paid Western Robotics $97,010 (CAD$125,000), and agreed to pay further CAD$125,000 upon approval and completion of the third generation eBalance Pro Device.
·
Our stock-based compensation for the nine-month period ended February 28, 2018, increased by $7,816, from $100,656 we incurred during the nine months ended February 28, 2017, to $108,472 we incurred during the nine months ended February 28, 2018. The stock-based compensation included $89,556 (2017 - $Nil) in fair market value of the options to acquire up to 300,000 shares of our common stock we granted to Ms. Silina pursuant to the stock option agreement with her, and $18,916 (2017 - $89,056) in fair market value of the options to acquire up to 2,400,000 shares of our common stock we granted to Dr. Sanderson pursuant to his option agreement with us. The stock-based compensation for the nine-month period ended February 28, 2017, also included $11,600 in fair market value of the options to acquire up to 2,500,000 shares of our common stock we granted to Mr. McEnulty pursuant to the stock option agreement with him.
·
Our general and administrative fees for the nine-month period ended February 28, 2018, decreased by $49,002, or 22.6%, from $216,842 we incurred during the nine-month period ended February 28, 2017, to $167,840 we incurred during the nine months ended February 28, 2018. The largest factors that contributed to this change were associated with decreased corporate communication fees of $4,669 (2017 - $92,823), travel and entertainment expenses of $10,195 (2017 - $25,358), and professional fees of $10,176 (2017 - $16,926). These decreases were in part offset by increased management fees of $81,130 (2017 - $41,400), as a direct result of us appointing a new CEO and director, Mr. Owen, and by increased accounting and audit fees of $10,654 (2017 - $4,940). Our foreign exchange expense increased by 20,973 to $23,107, as compared to $2,134 we incurred during the nine-month period ended February 28, 2017.
·
During the nine-month period ended February 28, 2018, we recorded $115,018 in amortization on our equipment we use in observations and research and development. During the comparative period ended February 28, 2017, our amortization expense was $60,535. The increased amortization resulted from the change in the estimated useful life of the underlying equipment from three to two years.
Other Items
·
During the nine-month period ended February 28, 2018, we accrued $9,617 (2017 - $22,827) in interest associated with the outstanding notes payable. Of this interest, $4,456 (2017 - $6,186) was accrued on notes payable we issued to Mr. Jeffs, a major shareholder.
·
During the nine-month period ended February 28, 2017, we recorded $22,636 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. The term loan was fully accreted as at March 3, 2017, as such, we did not record any accretion expense during the nine-month period ended February 28, 2018.
6
·
During the nine-month period ended February 28, 2017, we recorded $805,353 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. We did not record any loss on settlement of debt associated with the debt restructure we finalized on October 12, 2017.
Liquidity and Capital Resources
Working Capital
|
|
|
|
|
|
| |
|
As at
February 28,
2018
|
|
As at
May 31,
2017
|
|
Percentage
Change
|
Current assets
|
$
|
84,127
|
|
$
|
100,157
|
|
(16.0)%
|
Current liabilities
|
|
1,001,324
|
|
|
1,463,055
|
|
(31.6)%
|
Working capital deficit
|
$
|
(917,197)
|
|
$
|
(1,362,898)
|
|
(32.7)%
|
As of February 28, 2018, we had a cash balance of $24,048, a working capital deficit of $917,197 and cash flows used in operations of $418,664 for the period then ended. During the nine-month period ended February 28, 2018, we funded our operations with $370,000 we received from subscriptions to the units of our common stock, which we issued on October 12, 2017, $19,318 (CAD$25,000) we received from Mr. Jeffs, a major shareholder, and $6,000 we received from an unrelated party. 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 February 28, 2018. The amount of cash that 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 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 raises substantial doubt that we will be able to continue as a going concern.
Cash Flows
|
|
|
|
| |
|
Nine months ended
February 28,
|
|
2018
|
|
2017
|
Cash flows used in operating activities
|
$
|
(418,664)
|
|
$
|
(560,130)
|
Cash flows used in investing activities
|
|
-
|
|
|
(110,234)
|
Cash flows provided by financing activities
|
|
372,614
|
|
|
650,649
|
Effects of foreign currency exchange on cash
|
|
2,604
|
|
|
1,294
|
Net decrease in cash during the period
|
$
|
(43,446)
|
|
$
|
(18,421)
|
Net Cash Used in Operating Activities
Net cash used in operating activities during the nine months ended February 28, 2018, was $418,664. This cash was primarily used to cover our cash operating expenses of $548,986, to increase our inventory by $6,037, work in progress recorded as part of inventory by $15,166, and current assets by $5,527. In addition, we used our cash to reduce our accrued liabilities by $74,200. These uses of cash were offset by increases in our accounts payable and amounts due to related parties of $95,224 and $76,440, and $59,588 in unearned revenue associated with a deposit we received on eBalance distribution contract, which we have converted to units of our common stock on February 7, 2018.
7
Net cash used in operating activities during the nine months ended February 28, 2017, was $560,130. This cash was primarily used to cover our cash operating expenses of $629,246, to increase our current assets by $38,344, and to reduce our accrued liabilities by $28,630. These uses of cash were offset by decrease in our inventory of $959, and by increases in our accounts payable and amounts due to related parties of $69,472 and $34,188, respectively. In addition, we recorded $31,471 in unearned revenue associated with the deposits we received on the eBalance Pro Wellness devices.
Non-cash transactions
During the nine-month period ended February 28, 2018, our net loss was affected by the following expenses that did not have any impact on cash used in operations:
·
$108,472 in stock-based compensation, of which $89,556 was associated with the fair value of the options to purchase up to 300,000 shares of our common stock we granted to Ms. Silina, our CFO, as compensation for her services; and $18,916 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, our Chief Medical Officer;
·
$522,407 in fair value of option to acquire up to 1,750,000 shares our common stock we issued for consulting services;
·
$9,617 in interest we accrued on the outstanding notes payable. Of this interest, $4,456 was accrued on the notes payable we issued to Mr. Jeffs, a major shareholder;
·
$115,018 in amortization expense we recorded on the equipment we use in our research of the eBalance Technology; and
·
$5,976 in unrealized foreign exchange, which resulted from fluctuations of Canadian dollar and European Euro denominated transactions.
During the nine-month period ended February 28, 2017, 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.
·
$100,656 in stock-based compensation, of which $89,056 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;
·
$22,827 in interest we accrued on the outstanding notes payable. Of this interest, $6,186 was accrued on the notes payable we issued to Mr. Jeffs, our major shareholder;
·
$22,636 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;
·
$60,535 in amortization expense we recorded on the equipment we use in our research of the eBalance Technology; and
·
$2,244 increase in the loss on foreign exchange, which resulted from fluctuations of Canadian dollar and European Euro denominated transactions
8
Net Cash Provided by Financing Activities
During the nine-month period ended February 28, 2018, we borrowed a total of $19,318 (CAD$25,000) from a major shareholder and $6,000 from an unrelated party. The loans are unsecured, payable on demand and bear interest at 6% per annum, compounded monthly. In addition to the loans, we received $350,000 from subscriptions to the units of our common stock under the Offering, which we closed on October 12, 2017. During the same period we repaid net of $22,704 in non-interest bearing advances with an unrelated party.
On September 15, 2017, we received a notice from Mr. Jeffs that he had assigned the rights to $7,984 due to him under the demand notes payable and $54,516 due to him under the Term Loan to two unaffiliated parties. The assignees notified the Company of their intention to convert the debt acquired by them from Mr. Jeffs into the shares of the Companys common stock as part of the proposed debt restructuring initiative (the Debt Restructuring), which we completed on October 12, 2017.
On February 7, 2018, we converted CAD$75,000 associated with a deposit on eBalance distribution contract we received in the first quarter of our Fiscal 2018 to units of our common stock at $0.25 per unit. The cash deposit we received was originally recorded as unearned revenue in net cash used in operating activities.
During the nine-month period ended February 28, 2017, we borrowed a total of $186,336 from unrelated parties and $104,129 (CAD$136,500) from our major shareholder. These loans are unsecured, payable on demand and bear 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.
Net Cash Used in Investing Activities
We did not have any investing activities during the nine-month period ended February 28, 2018.
During the nine-month period ended February 28, 2017, we paid $110,234 for the equipment which is being used in our observational studies, and of this amount $96,217 (Euro 89,040) was associated with the manufacturing of our eBalance Pro second generation wellness devices.
Going Concern
The notes to our unaudited interim consolidated financial statements at February 28, 2018, disclose our uncertain ability to continue as a going concern. We are a development stage company with limited operations. To date we have been able to generate only minimal revenue from the operations of our former wholly owned subsidiary, Avyonce, which we divested in January 2017. 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 $5,814,519 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.
9
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.