UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2021 |
(Mark One)
oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Event requiring this shell company report _____________
For the transition period from ___________________ to ______________________
Commission file number: 000-51848000-51848
(Exact name of Registrant as specified in its charter)
(Translation of Company’s name into English)
(Jurisdiction of incorporation or organization)
7001120 – 1199789 West HastingsPender Street, VancouverBritish Columbia V6E 3T5, V6C1H2
Contact person: Hector Bremner, Phone: (604)773-8943 Email hector.bremner@avricorehealth.com
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered |
Not Applicable | Not Applicable |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Common Shares Without Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. December 31, 2019 52,472,6192021
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o☐ Nox ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Yes o☐ Nox ☒
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x☐ Noo ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer o☐ Accelerated filer o☐ Non-Accelerated filerx ☒ Emerging growth company o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):
Large accelerated filer o Accelerated filer o Non-Accelerated filer x Emerging growth company o
If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standardsas issued | Other |
by the International Accounting Standards Board |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
|
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ Nox ☒
(APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)
Indicate by check mark whether the Company has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o☐ No o☐
The information set forth in this Annual Report on Form 20-F is as at December 31, 20192021 unless an earlier or later date is indicated.
FORM 20-F ANNUAL REPORT
ii |
ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS4
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE4
ITEM 4. INFORMATION ON THE COMPANY11
ITEM 4A UNRESOLVED STAFF COMMENTS15
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS15
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES23
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS33
ITEM 8. FINANCIAL INFORMATION34
ITEM 9. THE OFFER AND LISTING34
ITEM 10. ADDITIONAL INFORMATION37
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK45
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES45
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES46
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS46
ITEM 15. CONTROLS AND PROCEDURES46
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT47
ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES48
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES49
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS49
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT49
ITEM 16G. CORPORATE GOVERNANCE49
ITEM 16H. MINE SAFETY DISCLOSURE49
ITEM 17. FINANCIAL STATEMENTS50
ITEM 18. FINANCIAL STATEMENTS50
Nomenclature
In this Annual Report on Form 20-F, which we refer to as the “Annual Report”, except as otherwise indicated or as the context otherwise requires, the terms “Company”, “Avricore”, “we”, “our” or “us” refers to Avricore HeatlhHealth Inc. and its subsidiaries.
You should rely only on the information contained in this Annual Report. We have not authorized anyone to provide you with information that is different. The information in this Annual Report may only be accurate on the date of this Annual Report or on or as at any other date provided with respect to specific information.
The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name “Duft Biotech Capital Ltd.”
On November 13, 2003, the Company acquired the assets of ALDA Pharmaceuticals Inc. (“API”), a private company founded in 1996.
On November 26, 2003 the Company changed its name to ALDA Pharmaceuticals Corp. (“the Company”). The Company is still a British Columbia, Canada, company.
Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value. There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.
On July 24, 2013 the Company changed its name to NUVA Pharmaceuticals Inc. (“the Company”). The Company is still a British Columbia, Canada, company.
On July 28, 2014 the Company changed its name to VANC Pharmaceuticals Inc. (“the Company”). The Company is still a British Columbia, Canada, company.
On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTab Inc. (“HealthTab”), a private company. HealthTab’s primary asset is intellectual property and certain trademarks and web domains related to the design of the HealthTabTM system, being a lab-accurate, point of care testing platform.
On November 5, 2018 the Company changed its name to Avricore Health Inc. (the “Company”). The Company is still a British Columbia, Canada, company.
On December 28, 2018, the Company acquired HealthTab Inc. (“HealthTab”), a private company.
BUSINESS OF AVRICORE HEALTH INC.
Avricore Health Inc. (TSXV: AVCR) is a total healthpharmacy service innovator capitalizingfocused on technological advancementsacquiring and consumer health trends bydeveloping early-stage technologies aimed at moving pharmacy forward. Through its flagship offering consumersHealthTab™ (a wholly owned subsidiary), it provides a turnkey point-of-care testing platform, creating value for stakeholders and health providers pharmagenomic point-of-care technologies (POCT).better outcomes for patients.
FINANCIAL AND OTHER INFORMATION
The Company’s reporting currency and domestic currency is Canadian Dollars. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$). Comparisons of historic exchange rates between the US$ and the CDN$ are contained in Section 3.A.3.
1 |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review of Prospects”. These statements may be identified by the use of words like “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial
performance, events or trends. In particular, these include statements about the Company’s strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.
Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors” and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.
Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, no assurances can be given as to future results, levels of activity, achievements or financial condition.
Canada uses the metric measurement system and all of the measures used by the Company adhere to the standards of the metric system.
PART I
ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
3.A.1. Selected Financial Data[Reserved]
The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Annual Report.
The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.
The Company’s year end is December 31, 2019.
Table No. 3 is derived from the audited financial statements of the Company, which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). IFRS represents standards and interpretations approved by the International Accounting Standards Board (“IASB”), and are comprised of IFRS, International Accounting Standards (“IASs”), and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRICs”) or the former Standing Interpretations Committee (“SICs”) and effective for the Company’s reporting period ended December 31, 2019.
Table No. 3
Selected Financial Data
(CDN$)
|
Year Ended Dec 31, 2019 | * Year Ended Dec 31, 2018 | * Year Ended Dec 31, 2017 | * Year Ended Dec 31, 2016 | * Stub Year Ended Dec 31, 2015 | * Year Ended Jun 30, 2015 |
IFRS |
|
|
|
|
|
|
Revenue from continuing operations | 33,000 | 15,295 | - | - | - | - |
Net loss from continuing operations | (1,916,252) | (3,458,141) | (1,297,576) | (1,645,214) | (1,164,312) | (1,647,969) |
Net loss from discontinued operations | (189,356) | (678,661) | (1,439,141) | (968,690) | (26,102) | (552,679) |
Basic and diluted loss per share Continuing operations Discontinued operations |
(0.04) (0.00) |
(0.10) (0.02) |
(0.07) (0.08) |
(0.11) (0.07) |
(0.09) (0.00) |
(0.14) (0.05) |
Dividends Per Share | - | - | - | - | - | - |
Weighted Average Shares | 47,292,091 | 33,869,642 | 18,393,169 | 14,907,103 | 13,961,051 | 11,818,217 |
Period-end Shares | 52,472,619 | 40,103,665 | 27,860,623 | 15,001,297 | 14,276,307 | 13,804.780 |
|
|
|
|
|
|
|
Working capital (deficit) | (465,454) | 439,228 | 1,272,259 | 1,886,976 | 3,207,630 | 3,305,603 |
Sponsorship liability | - | - | - | - | - | - |
Long-term debt | - | - | - | - | - | - |
Share capital | 21,400,106 | 20,783,372 | 18,340,491 | 16,320,006 | 15,775,145 | 15,262,357 |
Shareholders’ equity (deficit) | (465,451) | 885,966 | 2,498,097 | 1,917,993 | 3,246,975 | 3,353,461 |
Total Assets | 208,399 | 1,200,205 | 2,900,186 | 2,275,335 | 3,493,205 | 3,540,585 |
|
|
|
|
|
|
|
US GAAP |
|
|
|
|
|
|
Net Loss from continuing operations | (1,916,252) | (3,458,141) | (1,297,576) | (1,645,214) | (1,164,312) | (1,647,969) |
Net Loss from discontinued operations | (189,356) | (678,661) | (1,439,142) | (968,690) | (26,102) | (552,679) |
Loss per share Continuing operations Discontinued operations |
(0.04) (0.00) |
(0.10) (0.02) |
(0.07) (0.08) |
(0.11) (0.07) |
(0.09) (0.00) |
(0.14) (0.05) |
Shareholders’ Equity (Deficit) | (465,451) | 885,966 | 2,498,097 | 1,917,993 | 3,246,975 | 3,353,461 |
Total Assets | 208,399 | 1,200,205 | 2,900,186 | 2,275,335 | 3,493,205 | 3,540,585 |
* During the year ended December 31, 2019, the Company discontinued operations of its OTC pharmaceuticals products business division business segment. Therefore, certain reclassifications have been made to the prior periods’ consolidated financial statements to confirm to the current period’s presentation on the consolidated statements of financial position, comprehensive loss and changes in equity.
In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).
Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of year ended December 31, 2019 and four most recent fiscal years, December 31, 2018, December 31, 2017, December 31, 2016, the stub year ending December 31 2015, and the fiscal year ended June 30, 2015, the average rates for the period and the range of high and low rates for the period. The data for each month during the most recent eleven months is also provided.
For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
Table No. 4
U.S. Dollar/Canadian Dollar
Period | Average | High | Low | Close |
|
|
|
|
|
Year Ended 12/31/19 | $ 1.33 | $ 1.36 | $ 1.30 | $ 1.30 |
Year Ended 12/31/18 | 1.30 | 1.37 | 1.23 | 1.36 |
Year Ended 12/31/17 | 1.30 | 1.37 | 1.21 | 1.25 |
Year Ended 12/31/16 | 1.13 | 1.17 | 1.10 | 1.17 |
Stub Year Ended 12/31/15 | 1.33 | 1.39 | 1.26 | 1.38 |
Year Ended 6/30/15 | 1.19 | 1.28 | 1.06 | 1.25 |
|
|
|
|
|
Three Months Ended 12/31/19 | $ 1.32 | $ 1.33 | $ 1.30 | $ 1.30 |
Three Months Ended 9/30/19 | 1.32 | 1.33 | 1.30 | 1.32 |
Three Months Ended 6/30/19 | 1.34 | 1.35 | 1.31 | 1.31 |
Three Months Ended 3/31/19 | 1.32 | 1.36 | 1.31 | 1.34 |
Three Months Ended 12/31/18 | $ 1.33 | $ 1.37 | $ 1.32 | $ 1.36 |
Three Months Ended 9/30/18 | 1.30 | 1.33 | 1.29 | 1.29 |
Three Months Ended 6/30/18 | 1.30 | 1.33 | 1.25 | 1.31 |
Three Months Ended 3/31/18 | 1.27 | 1.31 | 1.23 | 1.29 |
Three Months Ended 12/31/17 | $ 1.28 | $ 1.29 | $ 1.25 | $ 1.25 |
Three Months Ended 9/30/17 | 1.25 | 1.30 | 1.21 | 1.25 |
Three Months Ended 6/30/17 | 1.34 | 1.37 | 1.30 | 1.30 |
Three Months Ended 3/31/17 | 1.32 | 1.35 | 1.30 | 1.33 |
Three Months Ended 12/31/16 | $ 1.14 | $ 1.17 | $ 1.12 | $ 1.17 |
Three Months Ended 9/30/16 | 1.12 | 1.14 | 1.11 | 1.12 |
Three Months Ended 6/30/16 | 1.12 | 1.17 | 1.10 | 1.12 |
|
|
|
|
|
November 2020 |
| $ 1.33 | $ 1.30 | $ 1.31 |
October 2020 |
| 1.33 | 1.31 | 1.32 |
September 2020 |
| 1.34 | 1.31 | 1.32 |
August 2020 |
| 1.34 | 1.30 | 1.32 |
July 2020 |
| 1.36 | 1.34 | 1.35 |
June 2020 |
| 1.37 | 1.34 | 1.36 |
May 2020 |
| 1.41 | 1.36 | 1.36 |
April 2020 |
| 1.42 | 1.39 | 1.39 |
March 2020 |
| 1.45 | 1.34 | 1.42 |
February 2020 |
| 1.34 | 1.32 | 1.35 |
January 2020 |
| 1.32 | 1.30 | 1.32 |
3.B. Capitalization and Indebtedness
Not applicable.
3.C. Reasons for the Offer and Use of Proceeds
Not applicable.
3.D. Risk Factors
Risks pertaining to the Company:
The Company'sCompany’s limited operating history makes it difficult to evaluate the Company’s current business and forecast future results.
Since its inception, the Company has had limited revenues and has experienced significant operating losses each year. These losses are due to substantial expenditures on intellectual property protection, product development and product testing of commercial and consumer infection control product and pre-clinical testing for registration of a number of therapeutic products and over-the-counter (OTC) pharmaceutical products with Health Canada and the FDA. Sales of T36® Antiseptic Hand Sanitizer products were discontinued in the year ended December 31, 2012. During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business. The Company has changed its direction, and its current operations consist of developing and implementing its pharmagenomicHealthTab™ point-of-care technologiestechnology (POCT). Currently the Company is engaged in the rollout of the HealthTab™ point-of-care testing platform to 450 Shoppers Drug Mart and affiliated Loblaws locations nation-wide. As a result, future sales of the Company’s products are difficult to predict.
2 |
The Company has no significant source ofcommenced generating operating cash flow, andhowever failure to generate sufficient revenues and cash flow in the future could cause the Company to go out of business.
The Company has no history of pre-tax profit and in the previous four years has had only limited annual revenues for each of the years it has been operating. The Company sustained operating losses for each of its fiscal years and has sustained significant accumulated operating losses. The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. Based upon current plans to introduce its productsHealthTab™ into new markets in Canada and internationally, develop new products, maintain the Company’s public listing on the TSX-Venture Exchange (the “Exchange”) and support the continued registration of its securities in the US, the Company expects tomay incur operating losses in future periods. These losses will occur because there are continuing expenses associated with the marketing and productionroll out of the Company’s products,HealthTab™ network, legal and accounting fees, the maintenance of its public listing and other expenses associated with running an operating business. Even if the Company becomes operationally profitable, from the introduction and sale of new products, the Company will need to raise significant amounts of new funding to expand these activities. Also, the Company may not be successful in generating significant revenues in the future. At the time of this report, the Company has sufficient funds to continue the salesroll out of its productsHealthTab™ network but it willmay be unable to do so without securing further financing. The Company may not be successful in generating revenues or raising capital in the future. Failure to generate revenues or raise capital could cause the Company to cease operations,
If the Company raises further funds through equity issuances, the price of its securities could decrease due to the dilution caused by the sale of additional shares.
Additional funds raised by the Company through the issuance of equity or convertible debt securities will cause the Company’s current shareholders to experience dilution and possibly lower the trading price of its shares. Such securities may grant rights, preferences or privileges senior to those of the Company’s common shareholders.
The Company has issued a limited number of shares out of its authorized capital of an unlimited number of common shares, which could be dilutive and negatively affect the share price.
Having an unlimited number of authorized but unissued common shares could allow the Company’s Directors and Officers to issue a large number of shares without shareholder approval, leading to significant dilution of current shareholders and possible lowering of the share price.
The Company could enter into debt obligations and not have the funds to repay these obligations.
The Company does not have any contractual restrictions on its ability to incur debt and, accordingly, the Company could incur significant amounts of indebtedness to finance its operations. Any such indebtedness could contain covenants, which would restrict the Company’s operations. The Company might not be able to repay indebtedness.
The Company could enter into contractual obligations and not have the funds to pay for these obligations.
The Company does not have any contractual restrictions on its ability to enter into binding agreements and, accordingly, the Company could incur significant obligations to third parties including financial obligations. Any such obligations could restrict the Company’s operations and the Company might not be able to pay for its commitments. If the Company cannot meet its commitments, legal action could be taken against the Company. Any such actions could further restrict the Company’s ability to conduct its business or could cause the Company to go out of business.
3 |
The Company has a history of generating limited revenuesand the continuing failure to generate further revenues could cause the Company to cease operations.
The Company has no history of pre-tax profit and in the previous four years has had only limited annual revenues for each of the years it has been operating. The Company sustained operating losses for each of its fiscal years and has sustained significant accumulated operating losses. The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. The Company may not be successful in generating revenues or raising capital in the future. Failure to generate revenues or raise capital could cause the Company to cease operations.
The Company’s information technology systems are susceptible to certain risks, including cyber security breaches, which could adversely impact the Company’s operations and financial condition.
The Company’s operations involve information technology systems that process, transmit and store information about our suppliers, customers, employees, and financial information. These systems face threats including telecommunication failures, natural disasters, and cyber security threats, including computer viruses, unauthorized access to our systems, and other security issues. While the Company has implemented security measures to protect these systems, such threats change and evolve almost daily. There is no guarantee these actions will secure the information systems against all threats and vulnerabilities. The compromise or failure of these information systems could have a negative effect on the Company’s operations and financial condition.
As the Company is a Canadian company, it may be difficult for U.S. shareholders of the Company to effect service on the Company or to realize on judgments obtained in the United States.
The Company is a Canadian corporation. All of its directors and officers are residents of Canada and a significant part of its assets are, or will be, located outside of the United States. As a result, it may be difficult for shareholders resident in the United States to effect service within the United States upon the Company, directors, officers or experts who are not residents of the United States, or to realize in the United States judgments of courts of the United States predicated upon civil liability of any of the Company, directors or officers under the United States federal securities laws. If a judgment is obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities laws against the Company or its directors or officers, it will be difficult to enforce the judgment in the Canadian courts against the Company and any of the Company’s non-U.S. resident executive officers or directors. Accordingly, United States shareholders may be forced to bring actions against the Company and its respective directors and officers under Canadian law and in Canadian courts in order to enforce any claims that they may have against the Company or its directors and officers. Nevertheless, it may be difficult for United States shareholders to bring an original action in the Canadian courts to enforce liabilities based on the U.S. federal securities laws against the Company and any of the Company’s non-U.S. resident executive officers or directors.
The Company’s future performance is dependent on key personnel. The loss of the services of any of the Company’s executives or Board of Directors could have a material adverse effect on the Company.
The Company’s performance is substantially dependent on the performance and continued efforts of the Company’s executives and its Board of Directors. The loss of the services of any of the Company’s executives or Board of Directors could have a material adverse effect on the Company’s business, results of operations and financial condition. There is no assurance that key personnel can be replaced with people with similar qualifications within a reasonable period of time. If any or all Directors resign, there is no assurance that new Directors can be found to replace any directors who resign.
The Company has not declared any dividends since its inception in 2000 and has no present intention of paying any cash dividends on its common shares in the foreseeable future.
The Company has not declared any dividends since its inception in 2000 and has no present intention of paying any cash dividends on its common shares in the foreseeable future. The payment by the Company of dividends, if any, in the future, rests in the discretion of the Company'sCompany’s Board of Directors and will depend, among other things, upon the Company'sCompany’s earnings, its capital requirements and financial condition, as well as other relevant factors.
There is no assurance that the Company will be able to secure the funds needed for future development, and failure to secure such funds could lead to a lack of opportunities for growth.
A lack of funds would also impair the Company’s ability to establish marketing and sales plans.roll out the HealthTab™ network. If adequate financing is not available when required, the Company may be required to delay, scale back or eliminate various activities and may be unable to continue in operation. The Company may seek such additional financing through debt or equity offerings, but there can be no assurance that such financing will be available on terms acceptable to the Company or at all. Any equity offering will result in dilution to the ownership interests of the Company’s shareholders and may result in dilution to the value of such interests.
4 |
The Company and the Company’s products have limited brand awareness which limits the ability of the Company to gain credibility from prospective customers and to sell its products into new markets.
Market knowledge of the Company’s name is limited. The Company will need to devote considerable resources to educate new markets about the products the Company offers. In establishing new markets, the Company will be competing with companies that are potentially already entrenched in such markets or may be better funded than the Company. The ability of the Company to raise brand awareness will depend on its ability to raise the money required to undertake such an intensive marketing effort. As noted elsewhere, there is no assurance that the Company can raise funds required for such an investment in marketing.
The Company has limited sales and marketing experience and can provide no assurance that the Company can keep its current customers or gain new ones.
The Company has limited experience in marketing and selling its products and the Company has no sales or marketing staff. The Company will have to expend substantial funds to promote and develop its products. The Company’s success in this regard will depend on the quality of its products and its ability to develop and implement an effective sales and marketing strategy. Failure to achieve the marketing objectives will have a material adverse effect on the Company and on its results of operations and financial condition.
Conflicts of interest may exist for Directors and Officers which may inhibit their ability to act in the best interests of the Company and its shareholders leading to possible impairment of the Company’s ability to achieve its business objectives.
The directors and officers of the Company will not be devoting all of their time to the affairs of the Company. Some of the directors and officers of the Company are directors and officers of other companies. The directors and officers of the Company will be required by law to act in the best interests of the Company. They will have the same obligations to the other companies in respect of which they act as directors and officers. Discharge by the directors and officers of their obligations to the Company may result in a breach of their obligations to the other companies and, in certain circumstances, this could expose the Company to liability to those companies. Similarly, discharge by the directors and officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests of the Company. Such conflicting legal obligations may expose the Company to liability to others and impair its ability to achieve its business objectives.
Management of the Company can, through their stock ownership in the Company, influence all matters requiring approval by the Company’s shareholders.
Management of the Company at the time of this report, collectively own approximately 13.5%8.68% of the Company'sCompany’s issued and outstanding common shares at that date. These shareholders, if acting together, could significantly influence all matters requiring approval by the Company'sCompany’s shareholders, including the election of directors and the approval of mergers or other business combination transactions. Management may not make decisions that will maximize shareholder value and may make decisions that will contribute to or cause the entrenchment of management.
The value and transferability of the Company shares may be adversely impacted by the limited trading market for the Company’s common shares.
The Company’s common shares are currently quoted on the TSX Venture Exchange under the symbol “AVCR” and on the OTCQB under the symbol “AVCRF”. No assurance can be given that a market for the Company’s common shares will be quoted on an exchange in the U.S. or on the Over the Counter Bulletin Board. The Company’s common shares may be subject to illiquidity and investors may not be able to sell their shares in a timely manner.
The value and transferability of the Company shares may be adversely impacted by the penny stock rules.
The sale or transfer of the Company common shares by shareholders in the United States may be subject to the so-called "penny“penny stock rules."” Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a "penny stock"“penny stock” (as defined in Rule 3a51-1) or effect the purchase of a penny stock by any person unless:
(a)Such sale or purchase is exempt from Rule 15g-9;
(a) | Such sale or purchase is exempt from Rule 15g-9; |
(b) | Prior to the transaction the broker or dealer has (1) approved the person’s account for transaction in penny stocks in accordance with Rule 15g-9, and (2) received from the person a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and |
(c) | The purchaser has been provided an appropriate disclosure statement as to penny stock investment. |
(b)Prior to the transaction the broker or dealer has (1) approved the person's account for transaction in penny stocks in accordance with Rule 15g-9, and (2) received from the person a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and
(c)The purchaser has been provided an appropriate disclosure statement as to penny stock investment.
The SEC adopted regulations generally define a penny stock to be any equity security other than a security excluded from such definition by Rule 3a51-1. Such exemptions include, but are not limited to (1) an equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operations for at least three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average revenue of at least $6,000,000 for the preceding three years; (2) except for purposes of Section 7(b) of the Exchange Act and Rule 419, any security that has a price of $5.00 or more; and (3) a security that is authorized or approved for authorization upon notice of issuance for quotation on the NASDAQ Stock Market, Inc.'s’s Automated Quotation System. It is likely that the Company’s common shares, assuming a market were to develop in the US, will be subject to the regulations on penny stocks. Consequently, the market liquidity for the common shares may be adversely affected by such regulations limiting the ability of broker/dealers to sell the Company’s common shares and the ability of shareholders to sell their securities in the secondary market in the US Moreover, the Company shares may only be sold or transferred by the Company shareholders in those jurisdictions in the US in which an exemption for such "secondary trading"“secondary trading” exists or in which the shares may have been registered.
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There is no guarantee that there is a market for the Company’s common shares in the United States.
Although the Company’s common shares were added to the OTC Bulletin Board System on April 20, 2009 under the symbol “APCSF”, and the Company’s common shares are currently trading on the OTCQB under the symbol “AVCRF”, trading of the company’sCompany’s shares is very limited. The Company cannot guarantee that there will be a market for the Company’s common shares in the United States or that there will any significant amount trading in the company’sCompany’s shares for the foreseeable futurefuture. The Company cannot guarantee that it will continue to maintain a listing in the United States or that it will not be found in default of existing regulations or new regulations and be suspended from trading or delisted.
Risks Pertaining to the Industry
Registration of products may not occur in a timely manner which could lead to delays in product introductions, reduced revenue expectations and extra costs to conduct further tests to satisfy regulatory agencies.
Government agencies, such as the EPA and the Food and Drug Administration (“FDA”) in the United States and Health Products and Food Branch in Canada, need to provide approvals of the Company’s products prior to any sales of these products. To obtain such approvals, the Company must submit extensive amounts of information on the efficacy, toxicology, carcinogenicity, mutagenicity and other testing of the products that it is trying to register. After all of the information is provided, the agencies can request supplemental information and further testing. Once all of the requirements for documentation are satisfied, the agencies can take an indeterminate amount of time to provide approvals for the Company to market its products. Significant delays could lead to slower revenue growth than anticipated. In addition, regulatory delays can allow time for competitors to devise strategies to prevent or reduce market penetration. There is no assurance that government agencies will accept for registration anya risk of the Company’s products.competition from alternative POCT platforms.
The Company
Although competition is very dependent on the registration and sale of its commercial, retail and pharmaceutical products.
If the Company is not successful in achieving regulatory approval of its products, its ability to generate revenues will be impaired. Even if registrations are successful, there is no guarantee that thecurrently limited competitors may emerge offering alternative platforms. The Company will be able to
maintain the registrationscompeting with companies that are potentially already entrenched in some markets or be able to pass inspections by the regulatory authorities that permit the sale of the Company’s products. In the event of a failed inspection, it is possible that the Company may be ordered to stopbetter funded than the sale of its products or undertake a recall of products that the regulatory authorities deem to be non-compliant with existing regulations. If the Company is ordered to recall or stop the sale of any of its products, the ability of the Company to generate revenues will be impaired. If such a recall or suspension of sales occurs, there is no guarantee that the Company will, at any future date, be able to resume the sale of the suspended or recalled products.Company.
There is a risk that the Company’s intellectual property infringes upon the rights of other companies, which could lead to reduced revenues, reduced margins due to sanctions against the Company, outright withdrawal or prohibition of products or trademarks from the market and significant costs for legal defense against infringement claims, re-branding of products and revised marketing materials.
The Company is unaware of any infringement claims being made against the Company or its products or processes at the time of writing. In the future, there can be no assurances that third parties will not assert infringement claims in the future or require the Company to obtain a license for the intellectual property rights of such third parties. There can be no assurance that such a license, if required, will be available on reasonable terms or at all. If the Company does not obtain such a license, it could encounter delays in the introductionroll out of products or could find that the development, manufacture or sale of products requiring such a license could be prohibited.
There may be limited ability to defend the patents if and when they are issued, leading to loss of sales that might otherwise be realized if the Company was in a position to defend its patents.
Litigation among pharmaceutical companies can be intense and costly. The Company might not have the financial ability to defend its patents, if issued, against larger industry players. Litigation may be necessary to enforce patents issued or assigned to the Company, or to determine the scope and validity of a third party's proprietary rights. Additionally, there can be no assurances that the Company would prevail in any such action. An adverse outcome in litigation or as part of an interference or other proceeding in a court or patent office could subject the Company to significant liabilities, require disputed rights to be licensed from other parties or require the Company to cease using certain technology or products, any of which could have a material adverse effect on the Company’s business.HealthTab™ network.
ITEM 4. INFORMATION ON THE COMPANY
4.A. History and Development of the Company
Capital Pool Company
The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name “Duft Biotech Capital Ltd.” and was classified as a Capital Pool Company (“CPC”) on the TSX Venture Exchange. Under the policies of the TSX Venture Exchange, the principal business of a CPC is to identify and evaluate opportunities for acquisition. The completion of such an acquisition is referred to as a Qualifying Transaction. A CPC does not carry on any business other than the identification and evaluation of assets or businesses in connection with potential Qualifying Transactions, does not have business operations or assets other than seed capital and has no written or oral agreements for the acquisition of an asset or business at the time of formation.
A “Qualifying Transaction”, pursuant to the policies of the TSX Venture Exchange, is a transaction whereby a capital pool company:
(a)Issues or proposes to issue, in consideration for the acquisition of significant assets or businesses, common shares or securities convertible, exchangeable or exercisable into common shares, which, if fully converted, exchanged or exercised would represent more than 25 percent of its common shares issued and outstanding immediately prior to the issuance;
(a) | Issues or proposes to issue, in consideration for the acquisition of significant assets or businesses, common shares or securities convertible, exchangeable or exercisable into common shares, which, if fully converted, exchanged or exercised would represent more than 25 percent of its common shares issued and outstanding immediately prior to the issuance; |
(b) | Enters into an arrangement, amalgamation, merger or reorganization with another issuer with significant assets, whereby the ratio of securities which are distributed to the security holders of the capital pool company and the other issuer results in the security holders of the other issuer acquiring control of the resulting entity; or |
(c) | Otherwise acquires significant assets other than cash. |
(b)Enters into an arrangement, amalgamation, merger or reorganization with another issuer with significant assets, whereby the ratio of securities which are distributed to the security holders of the capital pool company
and the other issuer results in the security holders of the other issuer acquiring control of the resulting entity; or
(c)Otherwise acquires significant assets other than cash.
On December 28, 2017,November 13, 2003, the Company completedacquired the acquisitionassets of all the common shares of HealthTab. HealthTab’s primary asset is intellectual property and certain trademarks and web domains related to the design of the HealthTab system, beingALDA Pharmaceuticals Inc. (“API”), a lab-accurate, point of care testing platform.private company founded in 1996.
Financings
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Financings
The Company has financed its operations since inception through funds raised in a series of private placements of common shares:
Fiscal Year Ended | Nature of Share Issuance | Number of Shares | Amount ($) | |
30-Jun-2001 | Private Placement @ | $0.34 | 294,119 | $100,000 |
30-Jun-2002 | Canadian Prospectus Offering (IPO) @ | $0.68 | 300,000 | $204,000 |
30-Jun-2003 | Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @ | $0.68 | 37,500 | $25,500 |
30-Jun-2004 | Private Placement @ | $0.60 | 86,667 | $52,000 |
| Private Placement @ | $0.80 | 1,550,000 | $1,240,000 |
30-Jun-2005 | Private Placement @ | $0.40 | 750,000 | $300,000 |
30-Jun-2006 | Private Placement @ | $0.20 | 979,000 | $195,800 |
| Private Placement @ | $0.20 | 275,000 | $55,000 |
30-Jun-2007 | Private Placement @ | $0.20 | 357,500 | $71,500 |
| Private Placement @ | $0.40 | 2,000,000 | $800,000 |
30-Jun-2008 | Private Placement @ | $0.48 | 500,000 | $240,000 |
| Private Placement @ | $0.60 | 875,000 | $525,000 |
30-Jun-2009 | N/A |
|
| N/A |
30-Jun-2010 | Private Placement @ | $1.00 | 1,500,000 | $1,500,000 |
30-Jun-2011 | Private Placement @ | $0.40 | 818,750 | $327,500 |
| Private Placement @ | $0.40 | 500,000 | $200,000 |
30-Jun-2012 | Private Placement @ | $0.40 | 140,000 | $56,000 |
30-Jun-2013 | Private Placement @ | $0.40 | 2,000,000 | $800,000 |
30-Jun-2014 | Private Placement @ | $0.40 | 937,500 | $375,000 |
30-Jun-2015 | Private Placement @ | $0.60 | 1,901,833 | $1,141,100 |
Stub period ended 31-Dec-2015 | N/A |
|
| N/A |
31-Dec-2016 | N/A |
|
| N/A |
31-Dec-2017 | Private Placement @ | $0.15 | 10,585,326 | $1,587,799 |
31-Dec-2018 | Private Placement @ | $0.15 | 5,327,335 | $799,100 |
31-Dec-2019 | Private Placement @ | $0.05 | 6,852,400 | $342,620 |
31-Dec-2019 | Private Placement @ | $0.07 | 4,206,435 | $294,450 |
31-Dec-2020 | Private Placement @ | $0.10 | 6,260,000 | $626,000 |
Fiscal Year Ended | Nature of Share Issuance | Number of Shares | Amount ($) | |||||||||||
30-Jun-2001 | Private Placement @ | $ | 0.34 | 294,119 | $ | 100,000 | ||||||||
30-Jun-2002 | Canadian Prospectus Offering (IPO) @ | $ | 0.68 | 300,000 | $ | 204,000 | ||||||||
30-Jun-2003 | Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @ | $ | 0.68 | 37,500 | $ | 25,500 | ||||||||
30-Jun-2004 | Private Placement @ | $ | 0.60 | 86,667 | $ | 52,000 | ||||||||
Private Placement @ | $ | 0.80 | 1,550,000 | $ | 1,240,000 | |||||||||
30-Jun-2005 | Private Placement @ | $ | 0.40 | 750,000 | $ | 300,000 | ||||||||
30-Jun-2006 | Private Placement @ | $ | 0.20 | 979,000 | $ | 195,800 | ||||||||
Private Placement @ | $ | 0.20 | 275,000 | $ | 55,000 | |||||||||
30-Jun-2007 | Private Placement @ | $ | 0.20 | 357,500 | $ | 71,500 | ||||||||
Private Placement @ | $ | 0.40 | 2,000,000 | $ | 800,000 | |||||||||
30-Jun-2008 | Private Placement @ | $ | 0.48 | 500,000 | $ | 240,000 | ||||||||
Private Placement @ | $ | 0.60 | 875,000 | $ | 525,000 | |||||||||
30-Jun-2009 | N/A | N/A | ||||||||||||
30-Jun-2010 | Private Placement @ | $ | 1.00 | 1,500,000 | $ | 1,500,000 | ||||||||
30-Jun-2011 | Private Placement @ | $ | 0.40 | 818,750 | $ | 327,500 | ||||||||
Private Placement @ | $ | 0.40 | 500,000 | $ | 200,000 | |||||||||
30-Jun-2012 | Private Placement @ | $ | 0.40 | 140,000 | $ | 56,000 | ||||||||
30-Jun-2013 | Private Placement @ | $ | 0.40 | 2,000,000 | $ | 800,000 | ||||||||
30-Jun-2014 | Private Placement @ | $ | 0.40 | 937,500 | $ | 375,000 | ||||||||
30-Jun-2015 | Private Placement @ | $ | 0.60 | 1,901,833 | $ | 1,141,100 | ||||||||
Stub period ended 31-Dec-2015 | N/A | N/A | ||||||||||||
31-Dec-2016 | N/A | N/A | ||||||||||||
31-Dec-2017 | Private Placement @ | $ | 0.15 | 10,585,326 | $ | 1,587,799 | ||||||||
31-Dec-2018 | Private Placement @ | $ | 0.15 | 5,327,335 | $ | 799,100 | ||||||||
31-Dec-2019 | Private Placement @ | $ | 0.05 | 6,852,400 | $ | 342,620 | ||||||||
31-Dec-2019 | Private Placement @ | $ | 0.07 | 4,206,435 | $ | 294,450 | ||||||||
31-Dec-2020 | Private Placement @ | $ | 0.10 | 6,260,000 | $ | 626,000 | ||||||||
31-Dec-2021 | Private Placement @ | $ | 0.10 | 8,740,000 | $ | 874,000 | ||||||||
31-Dec-2021 | Private Placement @ | $ | 0.22 | 7,000,000 | $ | 1,540,000 |
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4.B. Business Overview
Operations & Principal Activities
Avricore Health Inc. is a total healthpharmacy service innovator capitalizingfocused on technological advancementsacquiring and consumer health trends,developing early-stage technologies aimed at moving pharmacy forward. Through its flagship offering consumersHealthTab™ (a wholly owned subsidiary), it provides a turnkey point-of-care testing platform, creating value for stakeholders and health providersbetter outcomes for patients.
During the ability to take controlyear ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business and ceased production and sales of spendingall generic and health outcomes.over-the-counter pharmaceuticals.
The company had delivered an effective range of generic pharmaceuticals in the past as VANC Pharmaceuticals Inc. Since it’s repositioning in late 2017 and official rebranding in late 2018 the company’s new focus is now on health innovations in revolutionary point-of-care-technologies (POCT) for targeted health therapies.
Avricore sees the community pharmacy as underutilized and has identified an opportunity as a healthcare centre and is committed to supporting their ability to deliver innovation to the modern healthcare consumers. Our companyPharmacies face reduced revenues as a result of disruptions to the sector and regulatory changes. As a result, pharmacy owners are actively looking for innovations in service and value-added services, like HealthTab™, to support their business growth beyond the traditional dispensing model. Community pharmacy is expected to focus increasingly on cognitive services with attendant point of care testing in the future.
The Company hopes to improve health outcomes for patients and lower overall healthcare system costs in this way, bridging traditional healthcare platforms with disruptive innovations and eventually achieving the healthcare cost savings government and private payors are seeking to achieve
This is all possible thanks to ourthe Company’s HealthTab™ technology, which provides lab-accurate results for specific blood work within 12 minutes. Installed at the pharmacy and administered by the attending pharmacist, the patient can quickly access up to 21 bio-markers. The advantage of this innovation is that a consumer can quickly access data on their health with a simple patient assisted finger prick to share with their physician and healthcare team, track their health overtime, measure the impacts of therapies they are under takingundertaking and screen for potential health risks.
HealthTab™ allows for these innovations to be accessed in a low barrier manner at the community pharmacy level for a balanced cost. The pharmacist is also is able to benefit from this new revenue stream, build a deeper relationship with clientele and fully realize their ability to deliver lower cost healthcare support.
Currently,
During the company has beenyear ended December 31, 2021, the Company was engaged in pilot programs in Shoppers Drug Mart locations across the countyCanada to optimize thisthe HealthTab™ offering. Pharmacist and patient feedback has beenwas gathered from these programs to support a broader launch into several pharmacy chains. Currently there are late stage discussions with major pharmacy chains, as well as a strong prospect list for future expansion. the Company is engaged in the rollout of the HealthTab™ point-of-care testing platform to 450 Shoppers Drug Mart and affiliated Loblaws locations nation-wide.
The Company has ceased production and sales of all generic and over-the-counter pharmaceuticals including Hemafer, CortiVera 0.5% creams and ointments, and SennAce.
Avricore is focused on expanding and further deploying its HealthTabHealthTab™ to best meet the current community pharmacy sector’s needs. CommunityThe Company is also in late stage discussions with other Canadian and international major pharmacy is expectedchains, and has a strong prospect list for future expansion.
The Company promotes a cleaner and greener economy and continues to focus increasingly on cognitive services with attendant point of care testing in the future. These offer the pharmacy new ways to generate revenue as their margins are being reduced by changes in generic drug reimbursement with the Pan-Canadian Select Molecule Price Initiative for Generic Drugs that has come into effect on the 1st April 2018.
Management has laid the foundations and positioned the Company to capitalize on the changing community pharmacy environment. Over the next several months Avricore will embark on, and announce, several initiatives that will result in growthdrive towards sustainability, including regular evaluations of its core business - point of care testing. sourcing and shipping procedures to ensure they are environmentally friendly.
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·Pharmacies continue to face severely reduced revenues as a result of pricing changes by the Government of Canada, as well as regional government actions against rebates. As a result, pharmacy owners are actively looking for innovations in service and value-added services, like HealthTab, to support their businesses growth beyond the traditional dispensing model.
·Since being acquired by Avricore Health Inc., HealthTab has focused on streamlining operations to reduce the time and costs associated with new deployments.
·Key developments in the later quarters of the year ended December 31, 2021 have included:
oExpanding HealthTab into more pharmacy locations in Ontario.
oDeveloping 7 new pharmacy partner locations in Ontario with a major chain in the GTA were launched in Q4.
● | 20 (increased from an initial 11) participating Shoppers Drug Mart® pharmacies, 15 in Ontario and 5 in British Columbia, received their HealthTab™ systems and offered screening tests to patients. The program’s primary focus was to screen patients at-risk for diabetes and cardiovascular disease. In-store signage and print material let customers know they are able to request HealthTab™ tests, and existing patients were made aware through direct outreach from their Shoppers Drug Mart® pharmacist based on their health profile. Additionally, the first ever third-party HealthTab™ advertising campaign actively marketed the program publicly in the participating region. | |
● | Signing of a non-exclusive, pilot supplier distribution agreement in Canada between HealthTab™ Inc., and Abbott, with respect to the handheld blood chemistry analyzer, i-STAT Alinity. The agreement allows HealthTab™ to distribute Abbott’s point-of-care i-STAT Alinity and its associated tests for creatinine in Canadian pharmacies to better support patients with important information about their renal function. | |
● | The first Shoppers Drug Mart® pharmacy selected to receive the system to begin beta-testing HealthTab™’s systems, reported that more than 90 patients were tested and over 600 results were reported over the initial trial period between July 5 – July 18 , 2021 at this single location. | |
● | Signing master agreement to pilot Healthtab™ platform for diabetes management in select Shoppers Drug Mart® pharmacies. | |
● | Amendment to the Distribution Agreement added the Abbott’s popular ID NOW™ molecular testing device which will add onsite testing and reporting capabilities for SARS-CoV-2 as well as Respiratory Syncytial Virus, Influenza A & B and Strep – a powerful combination for detecting infections before they spread. | |
● | Partnered with Ellerca Health Inc. to offer joint diabetes screening and management support. | |
● | Signing of a Distribution Agreement with Abbott Rapid Diagnostics, to integrate new devices into Avricore’s HealthTab™ to expand its real-time data reporting system capabilities. | |
● | Expanding partnership with Ontario Pharmacists Association (OPA) to promote HealthTab™ to pharmacies conducting COVID-19 testing and government for real-time reporting of test results. | |
● | Developing new pilot programs with national pharmacy chains. | |
● | Advancing discussions with lab service providers. | |
● | Continuing to negotiate new POC service integrations to expand the HealthTab™ testing menu. | |
● | Refining HealthTab™’s de-centralized clinical trials capabilities to monetize de-identified data associated with high-value Real-World Evaluation (RWE). | |
● | Moving forward with negotiations across several target demographics, domestically and internationally, with life-science companies, host-locations and Clinical Research Organizations (CRO). |
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oExpansion in service billables with eight locations in the GTA showing an increase over 30% YoY. Key developments subsequent to December 31, 2021 have included:
·Continued to negotiate new PoC service integrations to expand the HealthTab testing menu.
● | Expanded the pilot program from 20 to 53 participating Shoppers Drug Mart® pharmacies, 48 in Ontario and 5 in British Columbia. | |
● | Signed a new Master Service Agreement and Statement of Work with Shoppers Drug Mart pharmacies to significantly expand the HealthTab point-of-care testing platform to up to 450 locations nation-wide, with affiliated locations under the Loblaw family of brands being included. | |
● | Rollout of the HealthTab™ point-of-care testing platform to 450 Shoppers Drug Mart and affiliated Loblaws locations nation-wide. |
Non-Prescription and Generic Products
Hema-Fer
·The Company has discontinued Hema-Fer in 2019. In line with this decision, existing inventory was rolled out but no further production was initiated.
Industry Trends
HealthTab Market Fast Facts
● | Point of Care Testing Market to reach $93.21 Billion USD in 2030 (Source) | |
● | Nearly 13.6 Million Canadians expected to be diabetic or prediabetic by 2030, with many undiagnosed (Source) | |
● | Over 1 in 3 Americans, approximately 88 million people, have pre-diabetes (Source) | |
● | Close to 160,000 Canadians 20 years and older are diagnosed with heart disease each year, often it’s only after a heart attack they are diagnosed (Source) | |
● | There are more than 10,000 pharmacies in Canada, 88,000 pharmacies in the US, nearly 12,000 in the UK. |
According to PWC Canada’s most recent consumer survey (https://www.pwc.com/ca/en/industries/retail-consumer/consumer-insights-2019/bringing-health-care-online.html?icid=cnsmr-mrkts-feature-ct-lp-bringing-health-care-online-en), Canadians consumers have been utilizing technology to take better control of their health and 75% of them have as many as three health related apps installed on their mobile device.
They also state: “Many Canadians are willing to share their personal information to facilitate ease of access to personal health information through digital channels. Think of accessing lab or diagnostic test results online days after getting the test, instead of having to wait for results and visiting the doctor, or waiting for a phone call.”
The internet of things has hit healthcare consumer trends in a large way and consumers are benefitting from faster, lower cost analysis direct to their device. The Global Consumer Insights Survey (GCIS) demonstrated the rapid shift with more than two-thirds of those surveyed stating they trusted tech companies - not known to be in healthcare, but in hardware, software and online shopping - to access healthcare services.
67% of consumers stated they were either “somewhat comfortable or very comfortable” with accessing healthcare products and services from a company with all their information collated in one place. This means companies offering health insurance, over-the-counter medications, or digital diagnostics.
Healthcare data, its capture, analysis and delivery to the consumer is a top market priority as consumers are looking to take greater control, however; those same consumers are looking to companies to manage the security of that data well and use it ethically.
The MIT Technology Review has looked at consumer pay genomic services, largely offered online, and have found that 26 Million (https://www.technologyreview.com/s/612880/more-than-26-million-people-have-taken-an-at-home-ancestry-test/) people have taken one of these tests. “You may discover unexpected facts about yourself or your family when using our services,” warns the most popular company’s privacy statement(https://www.ancestry.com/cs/legal/privacystatement). “Once discoveries are made, we can’t undo them.”
In addition to the shift in direct access healthcare technology is offering, policy changes toward healthcare policy is also creating dynamics within the market.
The Ontario Pharmacy Evidence Network’s most recent paper (https://www.open-pharmacy-research.ca/wp-content/uploads/Future-of-Pharmacy-White-Paper-REVISED-for-posting-Jan-2019.pdf) looked at a wide ranging of policy changes affecting Ontario alone. They found an industry going through “significant changes” thanks to the Patients First Action Plan and the Proposal to Strengthen Patient-Centered Health Care in Ontario are driving a more date-driven and patient centered approach.
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It has also meant that pharmacy has had to contend with offering greater service innovation with less revenues, as controls placed on generic drug pricing and limits on certain revenue streams, like manufacture rebates, have come into effect.
“As pharmacies develop their own technology,” the authors state “the integration of health care provider records and the emergence of patient-controlled or viewable health records are important areas of health care transformation.”
This means consumers want better data control about their health and the market will need to deliver.
Manufacturing - The Company has discontinued the manufacturing of OTC and generic drugsdrugs.
4.C. Organization structure
The Company is not part of a group and has two wholly-owned subsidiaries, VANC Marine Pharmaceuticals Inc. and HealthTab Inc., each of which are incorporated in British Columbia. VANC Marine Pharmaceuticals Inc. is currently inactive.
4.D. Property, Plant and Equipment
The Company has no facilities.
The Company uses outside manufacturers for its production needs.
Item 4A UNRESOLVED STAFF COMMENTSUnresolved Staff Comments
Not applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of the financial condition and operational performance should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto prepared in accordance with IFRS.
5. A. Operating Results of the Company
Overview
In December 2015,the last several years, the Company’s primary focus was on expanding its HealthTab™ point-of-care testing platform in pharmacies across Canada and beyond and begin to generate more substantial revenues. The pilot project announced with Shoppers Drug Mart® was successfully executed, despite operating under the extraordinary impacts of the COVID-19 pandemic. Currently the Company commercialized its first OTC product: Cortiveraäis engaged in the rollout of the HealthTab™ point-of-care testing platform to 450 Shoppers Drug Mart and Cortivera Plusä foraffiliated Loblaws locations nation-wide. The Company is in discussions with multiple pharmacy groups to expand the Canadian and international HealthTab™ network.
The most recent financials demonstrated that fiscal 2021 saw a wide range of minor skin irritations, allergic reactionsyear-over-year 372% increase in revenues and eczema. In March 2016, the Company launched Hema-Fer™,has maintained strong fiscal discipline, maintaining a premium natural iron supplement. In May 2016,moderate operating cost model, conserving cash, and limiting exposure to further equity dilution while executing on the Company launched Cortivera-H, a 1% hydrocortisone cream sold in large format jars for pharmacy dispensary use. In February 2017, the Company launched SennAce, a vegetable sourced laxative also targeted for pharmacy dispensary use. In May 2017, the Company entered into an agreement with bioLytical to be the exclusive distributor to Canadian pharmaciesbuild out of HealthTab™.
Management’s focus is on expansion of the INSTI HIV 1/HIV 2 Rapid Antibody Test. The Company made the decision at the end of 2017business to strategically wind down the generic products portfolionew markets, locations and focus on the growth of Hema-Fer™.
The Company acquired Corozon platform in 2018, however, as the full launchjurisdictions; cost control and positive cash flows to ensure sustainable operations of the Corozon platform was postponed, the value of the Corozon platform was written down to $1 as at December 31, 2018.Company.
During 2019, the Company discontinued Hema-Fer™, thereby, exiting the OTC business completely to focus on the development and growth of its POCT segment, HealthTab.
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Results of Operations for the years ended December 31, 2019, 20182021, 2020 and 20172019
Revenue from the continuing operations was $33,000$122,808 for the year ended December 31, 2021 (2020 - $33,030; 2019 (2018 - $15,295; 2017 - $nil)$33,000). This represents the revenue earned by the POTC HealthTab™ business segment acquired in 2018.
Gross revenue from the discontinued operations, OTC product line, was $129,776$nil for the year ended December 31, 2021 (2020 - $Nil; 2019 (2018 - $812,666; 2017 - $1,617,083)$129,776). Net sales were 101,934 (2018$nil (2020 - $494,737; 2017$nil, 2019 - $537,714)$101,934) after
the cost of customer marketing and promotional incentives of $27,842 (2018$nil (2020 - $317,929; 2017$nil, 2019 - $1,079,369)$27,842). The decrease in the gross revenues for the year ended December 31, 2019 is due to transition from the Company went through during the period. The Company discontinued its OTC product segment to focus on the development and growth of POCT business.
Manufacturing – The Company has discontinued the manufacturing of OTC and generic drugs.
Marketing and Communication expenses
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| ||
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 |
| $ | $ | $ |
Marketing | 44,693 | 164,420 | 10,890 |
Shareholder communications | 202,550 | 119,167 | 62,500 |
| 247,243 | 283,587 | 73,390 |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Marketing | - | 2,279 | 44,693 | |||||||||
Shareholder communications | 329,342 | 28,972 | 202,550 | |||||||||
329,342 | 31,251 | 247,243 |
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General and Administrative expenses
| Year ended | Year ended | Year ended |
| December 31, 2019 | December 31, 2018 | December 31, 2017 |
| $ | $ | $ |
Bank service charges | 5,916 | 3,969 | 2,480 |
Filing and registration fees | 72,076 | 94,029 | 74,898 |
Foreign exchange | 150 | 692 | 3,630 |
Insurance | 33,557 | 18,147 | 34,573 |
Office maintenance | 49,713 | 86,700 | 180,984 |
Payroll | - | 68,417 | 79,847 |
Rent | 15 | 50,336 | 49,229 |
Investor relations | 1,990 | 9,974 | 7,174 |
Travel | 35,420 | 45,426 | 41,246 |
| 198,837 | 377,690 | 474,061 |
Year ended | Year ended | Year ended | ||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Bad debt | - | 2,977 | - | |||||||||
Bank service charges | 6,806 | 5,910 | 5,916 | |||||||||
Filing and registration fees | 59,635 | 37,715 | 72,076 | |||||||||
Foreign exchange | 153 | 6,350 | 150 | |||||||||
Insurance | 44,784 | 38,283 | 33,557 | |||||||||
Investor relations | 5,312 | 1,265 | 1,990 | |||||||||
Office maintenance | 30,738 | 17,550 | 49,713 | |||||||||
Payroll | 8,380 | - | - | |||||||||
Rent | 12,810 | 5,268 | 15 | |||||||||
Travel | 14,382 | 5,259 | 35,420 | |||||||||
183,000 | 120,577 | 198,837 |
Share-based compensation
Share-based compensation for the year ended December 31, 20192021 of $86,420 (2018: $372,137; 2017 - $311,389)$495,791 (2020: $130,219; 2019: $86,420) is a non-cash item that represents the allocation of the fair value of options over the vesting period.
Write-down of Intangible Assets:
During the year ended December 31, 2019 the Company performed an assessment and determined that the carrying value of the intangible asset exceeded the recoverable amount and accordingly recognized impairment of the intangible asset related to Emerald acquisition in the amount of $313,514. The impairment can be reversed in future periods when there is a change in circumstances and the estimates used to determine the asset'sasset’s recoverable amount.
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Discontinued Operations
During the yearyears ended December 31, 2018, the Company performed an assessment2021, 2020 and determined that the carrying value of the intangible assets exceeded the recoverable amount and accordingly recognized impairment of the intangible assets related to HealthTab acquisition and Corozon Platform acquisition in the amount of $964,173.
Discontinued Operations
During the year ended December 31, 2019, 2018 and 2017, the loss attributable to the discontinued operations are as follows:
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 |
| $ | $ | $ |
Sales | 129,776 | 812,666 | 1,617,083 |
Marketing, promotional activities | (27,842) | (317,929) | (1,079,369) |
Net Revenue | 101,934 | 494,737 | 537,714 |
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Cost of Sales | 33,481 | 172,136 | 290,871 |
Gross profit (loss) | 68,453 | 322,601 | 246,843 |
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Expenses |
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Amortization | 6,301 | 9,266 | 9,529 |
Product registration and development | 5,458 | 251,508 | 242,303 |
General and administrative | - | 40,967 | 65,404 |
Selling and marketing | 121,405 | 472,496 | 622,771 |
| 133,164 | 774,237 | 940,007 |
Other income (expense) |
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|
|
Write-down of inventories | (109,941) | (227,025) | (745,977) |
Write-down of equipment | (14,704) | - | - |
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|
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Net loss from discontinued operations | (189,356) | (678,661) | (1,439,141) |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Sales | - | - | 129,776 | |||||||||
Marketing, promotional activities | - | - | (27,842 | ) | ||||||||
Net Revenue | - | - | 101,934 | |||||||||
Cost of Sales | - | - | 33,481 | |||||||||
Gross profit (loss) | - | - | 68,453 | |||||||||
Expenses | ||||||||||||
Amortization | - | - | 6,301 | |||||||||
Product registration and development | - | - | 5,458 | |||||||||
Selling and marketing | - | - | 121,405 | |||||||||
- | - | 133,164 | ||||||||||
Other income (expense) | ||||||||||||
Write-down of inventories | - | - | (109,941 | ) | ||||||||
Write-down of equipment | - | - | (14,704 | ) | ||||||||
Net loss from discontinued operations | - | - | (189,356 | ) |
Product Registration and Development cost consists of the product registration, in-licensing, renewal of licenses, other regulatory fees and regulatory personal salaries and consulting fees to support the OTC and generic product lines.
The decrease in the Marketing and Promotional expense compared to prior periods is due to restructuring of the Sales department.
5. B. Liquidity and capital resources
Liquidity
Liquidity
The Company’s operations have been financed through the issuance of common shares. Management anticipates that additional financings or capital requirements to fund the current commercial operations and working capital will be required to grow the business to the sustainable level.
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Cash flows
Sources and Uses of Cash:
| Year ended | Year ended | Year ended |
| December 31, 2019 | December 31, 2018 | December 31, 2017 |
| $ | $ | $ |
Cash used in operating activities | (862,334) | (1,410,890) | (1,040,775) |
Cash provided by (used in) operating activities of discontinued operations | 175,927 | (314,157) | (726,521) |
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Cash used in investing activities | - | (150,000) | (132,552) |
Cash used in investing activities of discontinued operations | - | (5,000) | - |
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|
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Cash provided by financing activities | 615,764 | 1,404,756 | 2,032,099 |
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|
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Net change in cash and cash equivalents | (70,643) | (475,291) | 132,251 |
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|
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Cash and Cash Equivalents | 13,799 | 84,442 | 559,733 |
|
|
|
|
Year ended | Year ended | Year ended | ||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Cash used in operating activities | (1,234,154 | ) | (1,223,396 | ) | (862,334 | ) | ||||||
Cash provided by (used in) operating activities of discontinued operations | - | - | 175,927 | |||||||||
Cash used in investing activities | (140,364 | ) | - | - | ||||||||
Cash used in investing activities of discontinued operations | - | - | - | |||||||||
Cash provided by financing activities | 3,084,798 | 1,512,312 | 615,764 | |||||||||
Net change in cash and cash equivalents | 1,710,280 | 288,916 | (70,643 | ) | ||||||||
Cash and Cash Equivalents | 2,012,995 | 302,715 | 13,799 |
Capital resources
Management devotes financial resources to the Company’s operations, sales and commercialization efforts, and business development. The Company will require cash to support working capital.
At December 31, 2019,2021, the Company had a working capital of $2,074,533, compared to a deficit of $465,454, compared to working capital of $439,228$714,044 at December 31, 2018.2020. The Company believes that its cash on hand, the expected future cash inflows from the sale of its products, net proceeds from the closing of private placements and proceeds from loans, stock options and warrants exercised, if any, will be sufficient to finance the Company’s working capital and operational needs for at least the next 6 months. If the Company’s existing cash resources together with the cash the Company generates from the sales of its products are insufficient to fund its working capital and operational needs, the Company may need to sell additional equity or debt securities or seek additional financing through other arrangements.
Subsequent to
During the year ended year December 31, 2019,2020, the Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000. The Loan is for a term of one year from the date of receipt of the funds, bears interest at a rate of 10% per annum and is secured with all of the present and after-acquired property of the Company. The loan is subject to an interest reserve of $100,000 held back from the loan advance. The Company has the right to repay all or any portion of the loan at any time without penalty. The Company has paid a loan application fee in the amount of $30,000 and issued 3,480,000 bonus shares to the lender representing 20% of the aggregate sum of the loan.
Critical Accounting Policies
The consolidated financial statements of In 2021, the Company presentrepaid the reporting period from January 1, 2019 to December 31, 2019. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
These accounting principles require the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated
financial statements. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised. Actual results may differ from these estimates under different assumptions or conditions. Significant areas requiring management estimates include accounting for amounts recorded in connection recoverability of inventory valuation, reporting of revenue recognition, useful lives of depreciable assets, intellectual property, income taxes and accounting for share-based compensation expense.
The significant accounting policies that the Company believes are the most critical in fully understanding and evaluating the Company’s reported financial results include inventory, revenue recognition, stock-based compensation and fair value measurements of financial instruments. These and other significant accounting policies are described more fully in Note 2 and 3 of the Company’s annual consolidated financial statements for the year ended December 31, 2019.
Inventory
Inventories consist of raw materials comprising the ingredients used to manufacture OTC pharmaceuticals, as well as the packaging for these products, and finished goods comprising Canadian generic pharmaceuticals. All inventories are recorded$1,000,000 loan at the lower of cost on a weighted average basis and net realizable value. The stated value of all inventories includes purchase, shipping and freight, and quality control testing. A regular review is undertaken to determine the extent of any provision for obsolescence.
Revenue recognition
The Company’s revenues are generated from operating leases of the POC system and sale of testing panels. Revenue comprises the fair value of the consideration received or receivable and it is shown net of tax and discounts.its maturity. The Company also earned revenue from the sale of OTC pharmaceuticals, however, the Company discontinued this segment during the year ended December 31, 2019.
The Company recognizes revenue to depict the transfer of goods and services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services by applying the following steps:
•Identify the contract with a client;
•Identify the performance obligations in the contract;
•Determine the transaction price;
•Allocate the transaction price to the performance obligations; and
•Recognize revenue when, or as, the Company satisfies a performance obligation.
Revenue may be earned over time as the performance obligations are satisfied or at a point in time which is when the entity has earned a right to payment, the customer has possession of the asset and the related significant risks and rewards of ownership, and the customer has accepted the asset.
The Company's arrangements with clients can include multiple performance obligations. When contracts involve various performance obligations, the Company evaluates whether each performance obligation is distinct and should be accounted for as a separate unit of accounting under IFRS 15, Revenue from Contracts with Customers.
The Company determines the standalone selling price by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include discounting practices, the size and volume of our transactions, our marketing strategy, historical sales and contract prices. The determination of standalone selling prices is made through consultation with and approval by management, taking into consideration our go-to-market strategy. As the Company's go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in relative standalone selling prices.
The Company generally receives payment from its clients after invoicing within the normal 28-day commercial terms. If a client is specifically identified as a credit risk, recognition of revenue is stopped except to the extent of fees that have already been collected.
Share-based payments
The Company operates an incentive share purchase option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes option pricing model, which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
Significant estimates and judgments
Significant estimates used in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements are as follows:
Inventory valuation
The Company estimates the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by regulatory changes or other market-driven changes that may reduce future selling prices. In determining net realizable value, the Company considers such factors as turnover, historical experience, expiry dates and shelf life of the products. A change to these assumptions could impact the Company’s inventory valuation and gross margin. The Company attempts to sell products with short shelf life with significant rebates. Any unsold products with short shelf life and expired products are written-off.
Revenue recognition
Revenue is recognized when the revenue recognition criteria expressed in the accounting policy stated above for Revenue Recognition have been met. Judgment may be required when allocating revenue or discounts on sales amongst the various elements in a sale involving multiple deliverables.
Useful lives of depreciable assets
The Company reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utilization of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utilization of certain equipment.
Intellectual property
The recoverability of the carrying value of the intellectual property is dependent on successful development and commercial stage to the point where revenue is possible. The carrying value of these assets is reviewed by management when events or circumstances indicate that its carrying value may not be recovered. If impairment is determined to exist, an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount.
Share-based payments
The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.
The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield.
Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.
Income taxes
Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full.
Changes in Significant Accounting Policies
Effective January 1, 2019, the Company adopted IFRS 16 Leases using the modified retrospective approach. The modified retrospective approach does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings and applies the standard prospectively. have any off-balance sheet arrangements.
A contract is, or contains, a lease if the contract conveys a lessee the right to control the use of lessor’s identified asset for a period of time in exchange for consideration.
Upon the adoption of IFRS 16, the Company adopted the following significant accounting policy effective January 1, 2019:
The Company as a lessee
A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Depreciation is recognized on the right-of-use asset over the lease term. Interest expense is recognized on the lease liabilities using the effective interest rate method and payments are applied against the lease liability.
On adoption of IFRS 16, the Company recognized lease liabilities of $68,253 in relation to lease arrangements measured at the present value of the remaining lease payments, adjusted by commitments in relation to arrangements not containing leases, short-term and low-value leases, and discounted using the Company’s incremental borrowing rate as of January 1, 2019. The incremental borrowing rate used to determine the lease liabilities at adoption was 12%. The associated right-of-use assets were measured at the amount equal to the lease liabilities on January 1, 2019, with no impact on deficit. See Note 8 – "Right-of-Use Assets" and Note 12 – "Lease Liabilities" for additional information regarding the Company's leases.
Key areas where management has made judgments, estimates, and assumptions related to the application of IFRS 16 include:
- The incremental borrowing rates are based on judgments including economic environment, term, currency, and the underlying risk inherent to the asset. The carrying balance of the right-of-use assets, lease liabilities, and the resulting interest expense and depreciation expense, may differ due to changes in the market conditions and lease term.
-Lease terms are based on assumptions regarding extension terms that allow for operational flexibility and future market conditions.
The Company as a lessor
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. All other leases are classified as finance leases.
Leases of the Company’s POTC systems to customers are classified are operating leases. Lease payments from operating leases are recognized as income on a straight-line basis. All costs, including depreciation, incurred in earning the operating lease income are recognized as an expense. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as an expense over the lease term on the same basis as the lease income. The depreciation for depreciable underlying assets subject to operating leases is in accordance with depreciation policy for the Company’s equipment.
Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.
5.C. Research and development, patents and licenses etc.
The Company will not be devoting resources to research, development and patents going forward. The Company is now focused on the growth of the POTC segment HealthTab.HealthTab™.
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5.D. Trend information
There is a significant trend toward consumer point of care testing. Healthcare data, its capture, analysis and delivery to the consumer is a top market priority as consumers are looking to take greater control, however; those same consumers are looking to companies to manage the security of that data well and use it ethically.
5.E. Off-balance sheet arrangements
The Company does not have any off-balance sheet arrangements.
5.F. Tabular disclosure of contractual obligations
Subsequent to the year ended December 31, 2019, the Company terminated its lease agreement for its office premise. Pursuant to the cancelation, the Company forfeited its deposit of $8,420 and paid the outstanding rent for the months of January to March, 2020. As at December 31, 2019 total future minimum lease payments under these contracts were as follows:
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5.G. Safe Harbor
This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review and Prospects”. These statements may be identified by the use of words like “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Company’s strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.
Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other
things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors” and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth certain information as of December 31, 20192021 and as of the date of this report about the Company’s current directors and senior management. There have been no subsequent changes to the Company’s current directors and senior management, except as footnoted below:
Table No. 6:
Directors and Senior Management:
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| Other Reporting Companies in Canada or the United States | ||||||
| Age | Position | Company | Position | ||||
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| CEO, Director |
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| N/A | ||
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Kiki Smith |
| 55 | CFO & Corporate Secretary | A.I.S. Resources Limited Ultra Goldex Resources Corp. | Director Senior Officer Senior Officer | |||
Rodger Seccombe | 41 | CTO, Director | N/A | N/A | ||||
David Hall |
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| Director | RepliCel Life Sciences Inc. | Director | |||
Alan Arnstein |
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| Director | N/A | N/A | |||
Robert Sindelar |
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| Director | N/A | N/A | |||
David Farnfield |
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| Director | N/A | N/A | |||
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(1) Appointed Director on April 2, 2020
Mr. Bob Rai, President and Director, is a registered and practicing pharmacist and a professional member of the College of Pharmacists of British Columbia, with over 25 years of pharmaceuticals and pharmacy management experience. Mr. Rai has operated a chain of The Medicine Shoppe Pharmacies in Greater Vancouver for the past 24 years. In 1998, Mr. Rai and his partners pioneered and revolutionized the online pharmacy business to the United States. The online sales and distribution of prescription medicines saw unprecedented industry growth and, as other operators followed suit, the business concept became a billion-dollar industry across Canada within a year and a half Mr. Rai also serves on the board of directors of Emerald Health Therapeutics Inc., a public company listed on the TSX Venture Exchange (the "TSXV"), Mr. Rai served as President of the Philippines Canada Trade Council from 2006-2007, and held the position of Vice-President from 2004-2006. In 2013, Mr. Rai was the recipient of the Queen’s Diamond Jubilee Medal for his 25 years of community and volunteer work, which has included serving on the Alumni UBC Advisory Council representing the Faculty of Pharmaceutical Science. Mr. Rai sat on the board of directors of St Paul's Hospital Foundation and is a past board member of the Tapestry Foundation for Providence Health Care. He was a member of the Rotary Club of Vancouver-Fraserview including one year of service as President. He is a Paul Harris Fellow Award recipient. Mr. Rai served on the Cabinet for 8 years and then two years as Chair of "A Night of Miracles" for BC Children’s Hospital in 2017 and
2018. Mr Rai was appointed as CEO of the Company in 2017 and took the charge as President of the Company in October 2019.
Mr. Bremner, CEO and Director, has an extensive branding and business development experience. He joined Avricore in January 2019 as an advisor, and then as Executive Vice- President in June, providing strategic guidance on product offering, market development and communications. In April 2020, he was appointed Director of the Company. Mr. Bremner founded Vancouver based TOUCH Marketing in 2007, whose innovative marketing, communications and project management strategies earned him a strong reputation for delivering results. He previously served as a key advisor in the offices of BC’s Minister of International Trade, the Minister of Tourism and Small Business, as well as the Ministry of Natural Gas Development and Deputy Premier. After leaving the BC Government, Mr. Bremner joined Vancouver based communications firm Pace Group as Vice President of Public Affairs. In 2017, Mr. Bremner was elected to Vancouver City Council in a rare by-election, having a dramatic impact on the city’s political culture and policy approaches related to the ongoing housing crisis.
Ms. Kiki Smith CPA, CGA, CFO and Corporate Secretary, Ms. Smith brings more than two decades of experience in managing and financing junior listed companies in the technology, mining exploration and food production sectors, including debt and equity financings, corporate structure design and management, cash flow management and forecasting, legal and regulatory compliance, investor communications, stakeholder engagement and risk management. She holds a BA in Economics from the University of British Columbia and a Certified Professional Accountant designation from the Certified Professional Accountants Association of British Columbia.
Mr. Rodger Seccombe, Chief Technology Officer and Director, is a co-founder of HealthTab Inc. He has over 20 years’years of experience as an operations oriented financial executive with sector focuses of mining, oillaunching and gas, real estate, advanced technology, food production and investment fund management. She assists private and publicrunning companies in software, healthcare technology, and clean energy. Mr. Seccombe earned a varietyB.Com (hons) from UBC’s Sauder School of financial team roles that bring unique strengths to the Company, such as; mergersBusiness and acquisitions, financial reporting and regulatory compliance. Ms. Smith is a memberChartered Professional Accountant (CPA-CMA). Prior to HealthTab, he designed and developed cloud-based informatics system currently in use by world’s leading medical laboratories and instrument manufacturers. In 2006, he joined the start-up team at Canadian Bioenergy Corporation and helped pioneer the development of the Chartered Professional Accountants of British Columbia with the designations of Certified Professional Accountant and Certified General Accountant and holds a Bachelor’s Degreerenewable fuel industry in Economics from University of British Columbia.Canada.
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Mr. David Hall, Director is currently Chairman of RepliCel Life Sciences (“RepliCel”) and a consultant to the life sciences industry. Mr. Hall served as CEO and President of RepliCel from 2012 through 2015. Prior to RepliCel, Mr. Hall acted as a consultant to the government, pharma industry, biotech, eHealth and NGO’s for two years. For the prior 15 years, Mr. Hall was a business founder, CFO, CCO, Treasurer and Secretary of Angiotech Pharmaceuticals Inc. Mr. Hall is a Past Chair and board member of Life Sciences BC and current Chairman of Providence Health Care Research Institute. He is the author of Life Sciences BC’s position papers for the Premier’s Competition Council Report and Conversation on Health. Mr. Hall was also a member of the BC Task Force on PharmaCare and serves on the board of directors of the Advantage BC. Mr. Hall holds an Honours degree in Economics and an Honours degree in Finance from the University of Manitoba.
Mr. Alan Arnstein, Director previously worked for the Katz Group Canada where he oversaw the development of the Medicine Shoppe from 28 stores to 175 stores (corporate and franchised) before the successful sale to McKesson Canada. Mr. Arnstein also was very involved in expanding the Rexall pharmacy brand across Canada including responsibility for acquiring and consolidating independent pharmacies under the Rexall banner. Mr. Arnstein has played and continues to play an active role in real estate projects including the leasing of the Ice District next to Rogers Place in downtown Edmonton, an estimated $5.5B project.
Mr. Robert Sindelar, Director is a Professor in the Faculty of Pharmaceutical Sciences at the University of British Columbia (UBC) and an Advisor, External Relations to the Centre for Health Evaluation & Outcomes Sciences, Providence Health Care Research Institute and UBC. Dr. Sindelar is also an elected fellow International Pharmaceutical Federation, Chair of the Global Pharmacy Observatory Advisory Board of the International Pharmaceutical Federation, Member of the External Advisory Board, Trinity College Dublin, School of Pharmacy and Pharmaceutical Sciences. Dr. Sindelar is also a past Dean of the Faculty of Pharmaceutical Sciences, UBC, President Providence Health Care Research Institute and VP Research and Academic Affairs, Providence Health Care. Dr. Sindelar earned a B.A., Chemistry from Millikin University, a M.S. and Ph.D. in Medicinal Chemistry and Natural Products from the University of Iowa, College of Pharmacy.
Mr. David Farnfield, Director, is a Yale School of Economics graduate who brings 35 years of experience in commodity, currency and financial futures markets. While serving as Vice President at George Weston Limited, a large food manufacturer and distributor, David oversaw $1B+ in commodity and currency risk while overseeing their commodity division. He has led key negotiations between industry stakeholders on commodity supply agreements and is intimately familiar with product supply agreements. Mr. Farnfield is also a Board member of the Canadian Oilseed Industry Association (Oilseed Innovation Partners) – a non-government agency.
Mr. Rodger Seccombe, Chief Technology Officer (formerly Head of HealthTab Division), is a co-founder of HealthTab Inc. He has over 20 years of experience launching and running companies in software, healthcare technology, and clean energy. Mr. Seccombe earned a B.Com (hons) from UBC’s Sauder School of Business and is a Chartered Professional Accountant (CPA-CMA). Prior to HealthTab, he designed and developed cloud-based informatics system currently in use by world’s leading medical laboratories and instrument manufacturers. In 2006, he joined the start-up team at Canadian Bioenergy Corporation and helped pioneer the development of the renewable fuel industry in Canada.
The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles of the Company.
No Director and/or member of senior management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or member of senior management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.
There are no family relationships between any two or more Directors or members of senior management.
There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.
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6.B. Compensation
Cash Compensation
Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended December 31, 20192021 and two previous years are detailed in Table No. 7 below:
Table No. 7
Annual Compensation of Senior Management
Annual Compensation | Long Term Compensation Awards | |||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Other Annual Compen- sation ($) | Securities Under Option/ SAR’s Granted (#) | FMV (2) Options ($) | ||||||||||||
Hector Bremner | 2021 | Nil | Nil | 185,000 | 325,000 | 73,130 | ||||||||||||
Chief Executive Officer | 2020 | Nil | Nil | 150,000 | 500,000 | 34,857 | ||||||||||||
(Former VP Business Development) | 2019 | Nil | Nil | 76,250 | 290,000 | 10,378 | ||||||||||||
Kiki Smith | 2021 | Nil | Nil | 150,000 | 225,000 | 50,629 | ||||||||||||
Chief Financial Officer | 2020 | Nil | Nil | 120,000 | 210,000 | 14,640 | ||||||||||||
and Corporate Secretary (1) | 2019 | Nil | Nil | 75,000 | 105,000 | 1,422 | ||||||||||||
Rodger Seccombe | 2021 | Nil | Nil | 162,500 | 325,000 | 73,130 | ||||||||||||
Chief Technology Officer | 2020 | Nil | Nil | 120,000 | Nil | Nil | ||||||||||||
2019 | Nil | Nil | 126,667 | 650,000 | 8,802 | |||||||||||||
Sukhwinder (Bob) Rai | 2021 | Nil | Nil | 20,000 | Nil | Nil | ||||||||||||
(Former President and | 2020 | Nil | Nil | 120,000 | Nil | Nil | ||||||||||||
Chief Executive Officer) | 2019 | Nil | Nil | 143,750 | 550,000 | 23,224 | ||||||||||||
Zula Kropivnitski | 2021 | |||||||||||||||||
Former Chief Financial | 2020 | Nil | Nil | Nil | Nil | Nil | ||||||||||||
Officer | 2019 | 14,000 | Nil | Nil | Nil | Nil |
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Share-based payments for options granted were measured using the Black-Sholes option pricing model. |
(1)Consulting/management fees were paid to a consulting company owned by senior management;
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(2)Share-based payments for options granted were measured using the Black-Sholes option pricing model.
Table No. 8
Director Stock Option at December 31, 20192021
| Grant date | FMV(1) - $ | Issued | Vested | Expiry Date |
Bob Rai, CEO, Director | Oct 15, 2019 Apr 1, 2019 Dec 6, 2017 | 2,031 21,193 142,159 | 150,000 @ $0.05 400,000 @ $0.06 550,000 @ $0.28 | 150,000 400,000 550,000 | Oct 15, 2024 Apr 1, 2024 Dec 6, 2022 |
Alan Arnstein, Director | Oct 15, 2019 Apr 1, 2019 Dec 6, 2017 Jul 20, 2017 | 135 1,854 6,462 23,018 | 10,000 @ $0.05 35,000 @ $0.06 25,000 @ $0.28 150,000 @ $0.15 | 10,000 35,000 25,000 150,000 | Oct 15, 2024 Apr 1, 2024 Dec 6, 2022 Jul 20, 2022 |
Hector Bremner Director | Oct 15, 2019 Jan 24, 2019 | 2,031 8,347 | 150,000 @ $0.05 140,000 @ $0.075 | 150,000 140,000 | Oct 15, 2024 Jan 24, 2024 |
David Farnfield Director | Oct 15, 2019 | 4,062 | 300,000 @ $0.05 | 300,000 | Oct 15, 2024 |
David Hall, Director |
Oct 15, 2019 Apr 1, 2019 Dec 6, 2017 | 812 2,914 155,082 | 60,000 @ $0.05 55,000 @ $0.06 600,000 @ $0.28 | 60,000 55,000 600,000 | Oct 15, 2024 Apr 1, 2024 Dec 6, 2022 |
Dr. Robert Sindelar Director |
Oct 15, 2019 Apr 1, 2019 Mar 27, 2018 | 1,219 1,854 17,208 | 90,000 @ $0.05 35,000 @ $0.06 200,000 @ $0.24 | 90,000 35,000 200,000 | Oct 15, 2024 Apr 1, 2024 Mar 27, 2023 |
Sherif Gourgui, Former Director |
Oct 15, 2019 Apr 1, 2019 Dec 6, 2017 Aug 15, 2017 | 68 1,854 6,462 27,222 | 5,000 @ $0.05 35,000 @ $0.06 25,000 @ $0.28 150,000 @ $0.15 | 5,000 35,000 25,000 150,000 | Oct 15, 2024 Apr 1, 2024 Dec 6, 2022 Aug 15, 2022 |
John Papastergiou, Former Director |
Oct 15, 2019 Apr 1, 2019 Dec 6, 2017 Nov 15, 2017 | 135 2,648 6,462 18,636 | 10,000 @ $0.05 50,000 @ $0.06 25,000 @ $0.28 150,000 @ $0.15 | 10,000 50,000 25,000 150,000 | Oct 15, 2024 Apr 1, 2024 Dec 6, 2022 Nov 15, 2022 |
Grant date | FMV(1) - $ | Issued | Vested | Expiry Date | ||||||||||||
Hector Bremner, Director | Mar 22, 2021 Dec 8, 2020 Oct 15, 2019 Jan 24, 2019 | 73,130 34,857 2,031 8,347 | 325,000 @ 0.25 500,000 @ 0.08 150,000 @ $0.05 140,000 @ $0.075 | 325,000 500,000 150,000 140,000 | Mar 22, 2026 Dec 8, 2025 Oct 15, 2024 Jan 24, 2024 | |||||||||||
Rodger Seccombe, Director | Mar 22, 2021 Oct 15, 2019 | 73,130 8,802 | 325,000 @ 0.25 650,000 @ $0.05 | 325,000 650,000 | Mar 22, 2026 Oct 15, 2024 | |||||||||||
Alan Arnstein, Director | Mar 22, 2021 Oct 15, 2019 Apr 1, 2019 | 16,876 135 1,854 | 75,000 @ 0.25 10,000 @ $0.05 35,000 @ $0.06 | 75,000 10,000 35,000 | Mar 22, 2026 Oct 15, 2024 Apr 1, 2024 | |||||||||||
David Farnfield, Director | Mar 22, 2021 Oct 15, 2019 | 16,876 4,062 | 75,000 @ 0.25 300,000 @ $0.05 | 75,000 300,000 | Mar 22, 2026 Oct 15, 2024 | |||||||||||
David Hall, Director | Mar 22, 2021 Oct 15, 2019 Apr 1, 2019 | 16,876 812 2,914 | 75,000 @ 0.25 60,000 @ $0.05 55,000 @ $0.06 | 75,000 60,000 55,000 | Mar 22, 2026 Oct 15, 2024 Apr 1, 2024 | |||||||||||
Dr. Robert Sindelar, Director | Mar 22, 2021 Oct 15, 2019 Apr 1, 2019 | 16,876 1,219 1,854 | 75,000 @ 0.25 90,000 @ $0.05 35,000 @ $0.06 | 75,000 90,000 35,000 | Mar 22, 2026 Oct 15, 2024 Apr 1, 2024 | |||||||||||
Bob Rai, Former Director | Oct 15, 2019 Apr 1, 2019 | 2,031 21,193 | 150,000 @ $0.05 400,000 @ $0.06 | 150,000 400,000 | Oct 15, 2024 Apr 1, 2024 | |||||||||||
Sherif Gourgui, Former Director | Oct 15, 2019 Apr 1, 2019 | 68 1,854 | 5,000 @ $0.05 35,000 @ $0.06 | 5,000 35,000 | Oct 15, 2024 Apr 1, 2024 | |||||||||||
John Papastergiou, Former Director | Oct 15, 2019 Apr 1, 2019 | 135 2,648 | 10,000 @ $0.05 50,000 @ $0.06 | 10,000 50,000 | Oct 15, 2024 Apr 1, 2024 |
(1) Share-based payments for options granted were measured using the Black-Sholes option pricing model.
The following table gives certain information concerning stock option exercises during Fiscal 20192021 by the Company’s Senior Management and Directors. It also gives information concerning stock option values.
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Table No. 9
Aggregated Stock Options Exercises in the year ended December 31, 20192021
Fiscal Year-end Unexercised Stock Options
Fiscal Year-end Stock Option Values
Senior Management/Directors
Name | Number of Shares Acquired on Exercise | Aggregate Value Realized | Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Un-exercisable | Number of Shares Acquired on Exercise | Aggregate Value Realized | Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Un-exercisable | |||||||||
Total | 169,000 | $37,180 | $0 | 45,000 | $ | 2,600 | $ | 247,705 |
Director Compensation: The Company has no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.
Stock Options: The Company may grant stock options to Directors, Senior Management and employees. Refer to ITEM #6.E., "Share Ownership"“Share Ownership” and Table No. 8 for information about stock option grants.
Other Compensation: No Senior Manager or Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer'sofficer’s cash compensation, and all Senior Managers or Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.
Bonus/Profit Sharing/Non-Cash Compensation: Except for the stock option program discussed in ITEM #6.E., the Company had no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company'sCompany’s Directors or Senior Management.
Pension/Retirement Benefits: No funds were set aside or accrued by the Company during the year ended December 31, 20192021 to provide pension, retirement or similar benefits for Directors or Senior Management.
6.C. Board Practices
6.C.1. Terms of Office.
At every Annual General Meeting of the Company, the Directors are elected by the shareholders and serve as Directors until the next Annual General Meeting is held.
6.C.2. Directors’ Service Contracts.
The Company retains its Officers as independent consultants. The Company will not be required to make contributions for employment insurance, Canada Pension, workers’ compensation or other similar levies in respect of the fee for services to be paid to the Officers. Each Officer agrees to pay all required contributions and deductions for income taxes, workers’ compensation and employment insurance and shall indemnify and save the Company harmless from and against all claims, actions, losses, expenses, costs or damages which the Company or its officers, employees or agents may suffer as a result of the Officer’s non-compliance with this requirement.
Each Officer agrees to provide sufficient time and attention to the business and affairs of the Company, to adviSeadvise and counsel the Board of Directors of the Company and to channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Company. All information communicated to the Company will be the property of the Company.The Officers acknowledge that each is a “person in a special relationship”, as that expression is defined in the securities laws of various provinces of Canada, and may receive material information concerning the business and affairs of the Company that has not been generally disclosed, and covenant and agree that they will not purchase or sell any securities of the Company until such information has been generally disclosed.The Company is aware that the Officers may provide services to certain other companies from time to time as disclosed above. The Officers agree that they will not provide services to any other companies without the written approval of the Company.
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The Company will pay a consulting fee in the amount of (Cdn) $12,500 per month to Hector Bremner for CEO services through a consulting agreement.
The Company will pay a consulting fee in the amount of (Cdn) $10,000 per month to a company controlled by Kiki Smith for CFO and Corporate Secretarial services through a consulting agreement.
The Company will pay a consulting fee in the amount of (Cdn) $10,000 per month to Rodger Seccombe for CTO services through a consulting agreement.
The fees payable will be reviewed annually, and may be adjusted by the Company in consultation with the Officers to reflect general economic conditions, changes in the duties provided under this Agreement or performance by the Officers. The Officers are entitled to participate in the Company’s incentive stock option plan (Exhibit 4.m). The Company will reimburse the Officers for all reasonable travelling and other out-of-pocket expenses incurred in connection with services provided to the Company. The Officers will be entitled to participate in any benefit programs established by the Company. To date, no such plans are in place.
Inventions of any type made by the Officers become the sole property of the Company which will hold all intellectual property rights for such inventions. If the Company chooses to patent, copyright, trademark or otherwise protect the inventions, the Officers will assign their rights to the Company. The Officers will treat all information of the company as confidential except any information that is presently in the public domain, any information that subsequently becomes part of the public domain, any information obtained by the Officers from a third party with a valid right to disclose it or any information that was independently developed by the Officers or was in their possession prior to receipt from the Company.
The Officers agree that they shall not engage in any activity that is contrary to or detracts from the performance of the business of the Company, will not receive any personal benefit from any party having business with the Company without the approval of the Board of Directors of the Company and, during the term of the agreement and for a period of one year afterwards, will not compete with the Company or solicit customers or employees of the Company.
The Officers may terminate their respective agreements with the Company by giving thirty (30) days written notice to the Company. The Company may waive such notice and, if it does so, such agreements will cease on the date the Company waives such notice.The Company may terminate the agreements without notice or payment in lieu of notice for breach of the agreement.The Company may terminate any agreement at its sole discretion and for any reason upon giving the Officer written notice of termination provided that the Company pays, in lieu of notice, three (3) months fee severance.The Company may terminate any agreement without notice or payment in lieu of notice upon a change of control of the holding company of the Officer or the death or permanent disability of the Officer.Upon termination of an agreement, the Officer will promptly return all property. Each agreement may be subject to the acceptance by TSX Venture Exchange and a refusal to do so shall not constitute a default of the Company.
6.C.3. Board of Director Committees.
The Company has an Audit Committee, which is governed by an Audit Committee Charter (filed as Exhibit hereto) and recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are: David Hall (Chairman), Robert Sindelar (Director) and Alan Arnstein (Director). The Audit Committee met three timesonce during the year ended December 31, 20192021 to discuss and recommend approval by the Board of the Company’s audited and quarterly financial statements. Q1The interim financial statements and related Management Discussion and Analysis waswere approved by joint consent resolution.
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6.D. Employees
As of December 31, 2019,2021, the Company employed no employees. The Company engaged the services of President, Chief Executive Officer, Chief Financial Officer and Corporate Secretary, and Head of HealthTab Division through consulting service contracts.
6.E. Share Ownership
Table No. 10 lists, as of the date of this report, Directors and Senior Management who beneficially own the Company'sCompany’s voting securities, consisting solely of common shares, and the amount of the Company'sCompany’s voting securities owned by the Directors and Senior Management as a group.
Table No. 10
Shareholdings of Directors and Senior Management
Title of Class | Name of Beneficial Owner | Number of Shares | Options and Warrants |
Percent of Class * | Name of Beneficial Owner | Number of Shares | Options and Warrants | Percent of Class * | ||||||||
Bob Rai | 2,561,333 | 1,033,334 warrants 1,026,072 options | 3.67% | Hector Bremner | 1,350,000 | 350,000 warrants 1,815,000 options | 1.37 | % | ||||||||
Common | Hector Bremner | 750,000 | 250,000 warrants 290,000 options | 1.07% | Kiki Smith | 916,000 | 180,000 warrants 435,000 options | 0.93 | % | |||||||
Common | Kiki Smith | 680,000 | 560,000 warrants | 0.97% | Rodger Seccombe | 4,311,111 | 450,000 warrants 1,125,000 options | 4.39 | % | |||||||
Common | Rodger Seccombe | 3,861,111 | 150,000 options | 5.53% | Robert Sindelar | 560,000 | Nil warrants 400,000 options | 0.57 | % | |||||||
Common | Robert Sindelar | 280,000 | 280,000 warrants 325,000 options | 0.40% | Alan Arnstein | - | 250,000 options | 0.00 | % | |||||||
Common | Alan Arnstein | - | 220,000 options | - | David Farnfield | 620,000 | Nil warrants 500,000 options | 0.63 | % | |||||||
Common | David Farnfield | 500,000 | 500,000 warrants 300,000 options | 0.72% | David Hall | 767,618 | 333,333 warrants 1,240,000 options | 0.78 | % | |||||||
Common | David Hall | 747,618 | 533,333 warrants 715,000 options | 1.07% | ||||||||||||
| Total Directors/Management | 9,380,062 | 3,156,667 warrants 3,026,072 options | 13.44% | Total Directors/Management | 8,524,729 | 1,313,333 warrants 6,715,000 options | 8.68 | % |
* Based on 69,795,58498,205,264 shares outstanding as at December 4, 2020November 11, 2022
Stock Options: The terms of incentive options grantable by the Company are done in accordance with the rules and policies of the TSX Venture Exchange and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options and any amendments thereto. The Company adopted a formal written stock option plan (the "Plan"“Plan”) on December 13, 2005. At each Annual General Meeting of the Company, the Plan is presented to and voted on by the shareholders of the Company. If approved, the terms and conditions of the Plan remain in force for the subsequent year. The Stock Option Plan was amended and passed by a majority of shareholders at the Annual General Meeting held on September 15, 2017 and most recently reapproved on April 2, 2020.16, 2021. A copy of the Stock Option Plan is provided as Exhibit 15(b) attached hereto. It will remain in effect until the next Annual General Meeting of Shareholders.
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Such “terms and conditions”, including the pricing of the options, expiry and the eligibility of personnel for such stock options, are described below. The terms of the original Stock Option Plan and the major changes in the Stock Option Plan (the “Plan”) are described below and provided as Exhibit 15(b) attached hereto.
The principal purposes of the Company’s stock option program are to (a) assist the Company in attracting, retaining, and motivating directors, officers and employees of the Company and, (b) to closely align the personal interests of such directors, officers and employees with the interests of the Company and its shareholders.
The Plan provides that stock options may be granted to service providers for the Company. The term “service providers” means:
(a)Any full or part-time employee or Officer, or insider of the Company or any of its subsidiaries;
(a) | Any full or part-time employee or Officer, or insider of the Company or any of its subsidiaries; |
(b) | Any other person employed by a company or individual providing management services to the Company; |
(c) | Any other person or company engaged to provide ongoing consulting services for the Company or any entity controlled by the Company or |
(d) | Any individual engaged to provide services that promote the purchase or sale of the issued securities (any person in (a), (b), (c) or (d) hereinafter referred to as an “Eligible Person”); and |
(e) | Any registered retirement savings plan established by such Eligible Person, or any corporation controlled by such Eligible Person, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Person and/or spouse, children and/or grandchildren of such Eligible Person. |
(b)Any other person employed by a company or individual providing management services to the Company;
(c)Any other person or company engaged to provide ongoing consulting services for the Company or any entity controlled by the Company or
(d)Any individual engaged to provide services that promote the purchase or sale of the issued securities (any person in (a), (b), (c) or (d) hereinafter referred to as an “Eligible Person”); and
(e)Any registered retirement savings plan established by such Eligible Person, or any corporation controlled by such Eligible Person, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Person and/or spouse, children and/or grandchildren of such Eligible Person.
For stock options to Employees, Consultants or Management Company Employees, the Company must represent that the optionee is a bona fide Employee, Consultant or Management Company Employee as the case may be. The terms “insider” “Controlled” and “subsidiary” shall have the meanings ascribed thereto in the Securities Act (Ontario) from time to time. Subject to the foregoing, the board of directors or Committee, as applicable, shall have full and final authority to determine the persons who are to be granted options under the Plan and the number of shares subject to each option.
The Plan shall be administered by the Board of Directors of the Company or a committee established by the Board of Directors for that purpose. Subject to approval of the granting of options by the Board of Directors or Committee, as applicable, the Company shall grant options under the Plan.
The Plan provides that the aggregate number of shares of the Company, which may be issued and sold under the Plan, will not exceed 10% of the issued shares of the Company. The Company shall not, upon the exercise of any option, be required to issue or deliver any shares prior to (a) the admission of such shares to listing on any stock exchange on which the Company’s shares may them be listed, and (b) the completion of such registration or other qualification of such shares under any law, rules or regulation as the Company shall determine to be necessary or advisable. If any shares cannot be issued to any optionee for whatever reason, the obligation of the Company to issue such shares shall terminate and any option exercise price paid to the Company shall be returned to the optionee.
If a stock option expires or otherwise terminates for any reason without having been exercised in full, the number of common shares reserved for issuance under that expired or terminated stock option shall again be available for the purposes of the Plan. Any stock option outstanding when the Plan is terminated will remain in effect until it is exercised or it expires. The Plan provides that it is solely within the discretion of the Board to determine who should receive stock options and in what amounts, subject to the following conditions:
(a)Options will be non-assignable and non-transferable except that they will be exercisable by the personal representative of the option holder in the event of the option holder’s death;
(a) | Options will be non-assignable and non-transferable except that they will be exercisable by the personal representative of the option holder in the event of the option holder’s death; |
(b) | Under the Plan, options may be exercisable for a maximum of ten years from grant date; |
(c) | Under the Plan, options to acquire more than 5% of the issued shares of the Company may be granted to any one individual in any 12-month period the approval of the disinterested shareholders of the Company; |
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(d) | Options to acquire no more than 2% of the issued shares of the Company may be granted to any one consultant in any 12-month period; |
(e) | Options to acquire no more than an aggregate of 2% of the issued shares of the Company may be granted to an employee conducting investor relations activities (as defined in TSX Venture Exchange Policy 1.1), in any 12 month period; |
(f) | Options to acquire no more than 10% of the issued shares of the Company may be granted to any insiders in any 12-month period; |
(g) | Under the Plan, options held by an option holder who is a director, employee, consultant or management company employee are no longer required to expire within 90 days after the option holder ceases to be a director, employee, consultant or management company employee; |
(h) | Under the Plan, options held by an option holder who is engaged in investor relations activities are no longer required expire within 30 days after the option holder ceases to be employed by the Company to provide investor relations activities; and |
(i) | In the event of an option holder’s death, the option holder’s personal representative may exercise any portion of the option holder’s vested outstanding options for a period of one year following the option holder’s death. |
(b)Under the Plan, options may be exercisable for a maximum of ten years from grant date;
(c)Under the Plan, options to acquire more than 5% of the issued shares of the Company may be granted to any one individual in any 12-month period the approval of the disinterested shareholders of the Company;
(d)Options to acquire no more than 2% of the issued shares of the Company may be granted to any one consultant in any 12-month period;
(e)Options to acquire no more than an aggregate of 2% of the issued shares of the Company may be granted to an employee conducting investor relations activities (as defined in TSX Venture Exchange Policy 1.1), in any 12 month period;
(f)Options to acquire no more than 10% of the issued shares of the Company may be granted to any insiders in any 12-month period;
(g)Under the Plan, options held by an option holder who is a director, employee, consultant or management company employee are no longer required to expire within 90 days after the option holder ceases to be a director, employee, consultant or management company employee;
(h)Under the Plan, options held by an option holder who is engaged in investor relations activities are no longer required expire within 30 days after the option holder ceases to be employed by the Company to provide investor relations activities; and
(i)In the event of an option holder’s death, the option holder’s personal representative may exercise any portion of the option holder’s vested outstanding options for a period of one year following the option holder’s death.
The Plan provides that other terms and conditions may be attached to a particular stock option, such terms and conditions to be referred to in a schedule attached to the option certificate. Stock options granted to directors, senior officers, employees or consultants will vest when granted unless otherwise determined by the Board of Directors on a case by case basis, other than stock options granted to consultants performing investor relations activities, which will vest in stages over 12 months with no more than one-fourth of the options vesting in any three month period.
The price at which an option holder may purchase a common share upon the exercise of a stock option will be as set forth in the option certificate issued in respect of such option and in any event will not be less than the discounted market price of the Company’s common shares as of the date of the grant of the stock option (the “Award Date”). The market price of the Company’s common shares for a particular Award Date will typically be the closing trading price of the Company’s common shares on the day immediately preceding the Award Date, or otherwise in accordance with the terms of the Plan. Where there is no such closing price or trade on the prior trading day “market price” shall mean the average of the most recent bid and ask of the shares of the Company on any stock exchange on which the shares are listed or dealing network on which the shares of the Company trade.
In no case will a stock option be exercisable at a price less than the minimum prescribed by each of the organized trading facilities or the applicable regulatory authorities that would apply to the award of the stock option in question.
Common shares will not be issued pursuant to stock options granted under the Plan until they have been fully paid for by the option holder. The Company will not provide financial assistance or loans to option holders to assist them in exercising their stock options.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders
As of December 31, 2019,2021, all shareholders have the same voting rights attached thereto as all other common shares of the Company. As of December 31, 2019,2021, the Company is not aware of any companies or individuals that hold more than 5% of the Issued and Outstanding Common Shares.
7.A.1.a. Holdings By Major Shareholders.
Refer to ITEM #6.E and Table No. 10.
25 |
7.A.1.b. Significant Changes in Major Shareholders’ Holdings.
---No
—No Disclosure Required---Required—
7.A.1.c. Different Voting Rights.
The Company’s major shareholders do not have different voting rights.
7.A.2. Canadian Share Ownership.
On December 31, 2019,2021, the Company’s shareholders’ list showed 52,472,61997,535,264 common shares outstanding, an estimated 2131 registered shareholders. The Company’s transfer agent provides that there are 2131 registered shareholders with Canadian addresses.
7.A.3. Control of the Company
The Company is a publicly owned Canadian corporation, the shares of which are owned primarily by Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Development of the Company”, and ITEM #6.E., “Share Ownership”.
7.A.4. Change of Control of Company Arrangements
---No
—No Disclosure Necessary---Necessary—
7.B. Related Party Transactions
Related party transactions are described in Note 1518 to the consolidated financial statements and are shown below. The remuneration of the Company’s directors and other members of key management, being the President, Chief Executive Officer and Chief Financial Officer, who have the authority and responsibility for planning, directing and controlling the activities of the Company, consist of the following:
| Year Ended | Year Ended | Year Ended |
| December 31, 2019 | December 31, 2018 | December 31, 2017 |
| $ | $ | $ |
Accounts payable and accrued liabilities | 321,656 | - | 13,152 |
|
|
|
|
Expenditures: |
|
|
|
Management fees | 175,000 | 150,000 | 60,010 |
Consulting fees | 218,936 | - | - |
Salaries and benefits | - | - | 132,613 |
Share-based compensation | 41,383 | 289,008 | 280,864 |
Professional Fees | 89,000 | 37,440 | - |
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Accounts payable and accrued liabilities | - | - | 321,656 | |||||||||
Expenditures: | ||||||||||||
Management fees | 205,000 | 270,000 | 175,000 | |||||||||
Consulting fees | 162,500 | 120,000 | 218,936 | |||||||||
Share-based compensation | 264,393 | 58,159 | 41,383 | |||||||||
Professional Fees | 150,000 | 120,000 | 89,000 |
Share-based compensation relates to stock options granted and vested to management and directors of the Company during the twelve months ended December 31, 2019.2021. All related party transactions were in the normal course of business operations.
Audit Fees
For the year ended December 31, 2019,2021, the Company expects to pay Manning Elliot LLP audit fees of $26,000.$33,500.
Indirect Payments
---No—No Disclosure Required---Required—
Shareholder Loans
---No—No Disclosure Required---Required—
Amounts Owing to Senior Management/Directors
--No—No Disclosure Required--Required—
26 |
7.C. Interests of Experts and Counsel
---No
—No Disclosure Required---Required—
ITEM 8. FINANCIAL INFORMATION
8.A. Consolidated Statements and Other Financial Information
The consolidated financial statements of the Company comply with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
Basis of preparation
The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The consolidated financial statements are presented in Canadian dollars unless otherwise noted.
Significant estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised.
8.A.7. Legal/Arbitration Proceedings
There are no legal proceedings against the Company.
8.B. Significant Changes
During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business. The Company is now focused on the HealthTab - Point of Care Business in Canada.
There are no significant changes.
27 |
ITEM 9. THE OFFER AND LISTING
9.A. Common Share Trading Information
The Company'sCompany’s common shares trade on the TSX Venture Exchange in Toronto, Ontario, Canada, under the symbol "AVCR"“AVCR”. The Company also trades on the Pink Sheets under the symbol “AVCRF”.
Table No. 11 lists the high, low and closing sales prices on the TSX Venture Exchange for the last twelve fiscal quarters, and last five fiscal years.
Table No. 11
TSX Venture Exchange
Common Shares Trading Activity
Canadian Dollars
High | Low | Closing | ||||||||||
Fiscal Quarter Ended March 31, 2022 | 0.17 | 0.11 | 0.13 | |||||||||
Fiscal Quarter Ended December 31, 2021 | 0.175 | 0.11 | 0.16 | |||||||||
Fiscal Quarter Ended September 30, 2021 | 0.22 | 0.15 | 0.15 | |||||||||
Fiscal Quarter Ended June 30, 2021 | 0.285 | 0.12 | 0.17 | |||||||||
Fiscal Quarter Ended March 31, 2021 | 0.69 | 0.09 | 0.235 | |||||||||
Fiscal Quarter Ended December 31, 2020 | 0.14 | 0.08 | 0.095 | |||||||||
Fiscal Quarter Ended September 30, 2020 | 0.15 | 0.02 | 0.15 | |||||||||
Fiscal Quarter Ended June 30, 2020 | 0.07 | 0.015 | 0.03 | |||||||||
Fiscal Quarter Ended March 31, 2020 | 0.04 | 0.01 | 0.035 | |||||||||
Fiscal Quarter Ended December 31, 2019 | 0.06 | 0.015 | 0.03 | |||||||||
Fiscal Quarter Ended September 30, 2019 | 0.07 | 0.02 | 0.03 | |||||||||
Fiscal Quarter Ended June 30, 2019 | 0.15 | 0.05 | 0.065 | |||||||||
Fiscal Quarter Ended March 31, 2019 | 0.10 | 0.055 | 0.06 | |||||||||
Fiscal Quarter Ended December 31, 2018 | 0.225 | 0.075 | 0.10 | |||||||||
Fiscal Quarter Ended September 30, 2018 | 0.19 | 0.1 | 0.15 | |||||||||
Fiscal Quarter Ended June 30, 2018 | 0.25 | 0.15 | 0.18 | |||||||||
Fiscal Quarter Ended March 31, 2018 | 0.75 | 0.175 | 0.175 | |||||||||
Fiscal Quarter Ended December 31, 2017 | 0.415 | 0.120 | 0.320 | |||||||||
Fiscal Quarter Ended September 30, 2017 | 0.220 | 0.140 | 0.195 | |||||||||
Fiscal Year Ended December 31, 2021 | 0.69 | 0.09 | 0.16 | |||||||||
Fiscal Year Ended December 31, 2020 | 0.15 | 0.01 | 0.095 | |||||||||
Fiscal Year Ended December 31, 2019 | 0.15 | 0.015 | 0.03 | |||||||||
Fiscal Year Ended December 31, 2018 | 0.75 | 0.075 | 0.10 | |||||||||
Fiscal Year Ended December 31, 2017 | 0.49 | 0.12 | 0.32 |
28 |
Canadian Dollars
| High | Low | Closing |
|
|
|
|
Fiscal Quarter Ended September 30, 2020 | 0.15 | 0.02 | 0.15 |
Fiscal Quarter Ended June 30, 2020 | 0.07 | 0.015 | 0.03 |
Fiscal Quarter Ended March 31, 2020 | 0.04 | 0.01 | 0.035 |
Fiscal Quarter Ended December 31, 2019 | 0.06 | 0.015 | 0.03 |
Fiscal Quarter Ended September 30, 2019 | 0.07 | 0.02 | 0.03 |
Fiscal Quarter Ended June 30, 2019 | 0.15 | 0.05 | 0.065 |
Fiscal Quarter Ended March 31, 2019 | 0.10 | 0.055 | 0.06 |
Fiscal Quarter Ended December 31, 2018 | 0.225 | 0.075 | 0.10 |
Fiscal Quarter Ended September 30, 2018 | 0.19 | 0.1 | 0.15 |
Fiscal Quarter Ended June 30, 2018 | 0.25 | 0.15 | 0.18 |
Fiscal Quarter Ended March 31, 2018 | 0.75 | 0.175 | 0.175 |
Fiscal Quarter Ended December 31, 2017 | 0.415 | 0.120 | 0.320 |
Fiscal Quarter Ended September 30, 2017 | 0.220 | 0.140 | 0.195 |
|
|
|
|
Fiscal Year Ended December 31, 2018 | 0.75 | 0.075 | 0.10 |
Fiscal Year Ended December 31, 2017 | 0.49 | 0.12 | 0.32 |
Fiscal Year Ended December 31, 2016 | 0.231 | 0.214 | 0.22 |
Stub year Ended December 31, 2015 | 0.485 | 0.25 | 0.47 |
Fiscal Year Ended June 30, 2015 | 0.94 | 0.07 | 0.44 |
|
|
|
|
9.A.5. Common Share Description
Registrar/Common Shares Outstanding/Shareholders
Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.
There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.
Computershare Trust Company of Canada (located at 2nd Floor, 510 Burrard Street, Vancouver, British Columbia Canada V6C 3B9) is the registrar and transfer agent for the common shares.
Stock Options
Refer to ITEM 6.E., Table No. 10 (Aggregate Option Exercises)
The changes in share options including those granted to directors, officers, employees and consultants during the years ended December 31, 2019, 20182021, 2010 and 20172019 are summarized as follows:
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 | Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||||||||||||||||
| Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | ||||||||||||||||||
Beginning Balance | 2,539,000 | $0.23 | 2,420,000 | $0.24 | 1,460,938 | $1.38 | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 | 2,539,000 | $ | 0.23 | |||||||||||||||
Options granted | 3,095,000 | $0.06 | 665,000 | $0.23 | 2,420,000 | $0.24 | 2,840,000 | $ | 0.22 | 1,730,000 | $ | 0.08 | 3,095,000 | $ | 0.06 | |||||||||||||||
Expired/Cancelled | (319,000) | $0.22 | (415,000) | $0.24 | (1,460,938) | $1.38 | - | - | (160,000 | ) | $ | 0.07 | (319,000 | ) | $ | 0.22 | ||||||||||||||
Exercised | (73,928) | $0.28 | (131,000) | $0.23 | - | - | (1,666,020 | ) | $ | 0.08 | (105,000 | ) | $ | 0.05 | (73,928 | ) | $ | 0.28 | ||||||||||||
Ending Balance | 5,241,072 | $0.13 | 2,539,000 | $0.23 | 2,420,000 | $0.24 | 7,880,052 | $ | 0.13 | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 | |||||||||||||||
Exercisable | 5,241,072 | $0.13 | 2,536,500 | $0.23 | 2,420,000 | $0.24 | 7,692,552 | $ | 0.13 | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 |
The following table summarizes information about share options outstanding and exercisable as at December 31, 2019:2021:
Exercise Price | Expiry date | Options | ||
|
| Outstanding | Exercisable | |
$0.15 | July 20, 2022 (1) | 150,000 | 150,000 | |
$0.15 | September 27, 2022 (1) | 150,000 | 150,000 | |
$0.15 | November 20, 2022 (1) | 150,000 | 150,000 | |
$0.28 | December 8, 2022 (1) | 1,181,072 | 1,181,072 | |
$0.24 | March 27, 2023 (1) | 200,000 | 200,000 | |
$0.21 | April 11, 2023 (1) | 175,000 | 175,000 | |
$0.125 | September 12, 2023 (1) | 140,000 | 140,000 | |
$0.075 | January 24, 2024 | 280,000 | 280,000 | |
$0.08 | February 28, 2024 | 140,000 | 140,000 | |
$0.06 | April 1, 2024 | 615,000 | 615,000 | |
$0.05 | October 1, 2024 | 2,060,000 | 2,060,000 | |
|
| 5,241,072 | 5,241,072 |
Exercise Price | Expiry date | Options | ||||||||||
Outstanding | Exercisable | |||||||||||
$ | 0.15 | June 21, 2022 | 140,000 | 140,000 | ||||||||
$ | 0.17 | July 2, 2022 | 500,000 | 500,000 | ||||||||
$ | 0.10 | (1) | July 20, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (1) | September 27, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (1) | November 20, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (2) | December 8, 2022 | 675,052 | 675,052 | |||||||
$ | 0.10 | (3) | March 27, 2023 | 200,000 | 200,000 | |||||||
$ | 0.17 | March 31, 2023 | 250,000 | 62,500 | ||||||||
$ | 0.10 | (4) | April 11, 2023 | 150,000 | 150,000 | |||||||
$ | 0.075 | January 24, 2024 | 280,000 | 280,000 | ||||||||
$ | 0.08 | February 28, 2024 | 140,000 | 140,000 | ||||||||
$ | 0.06 | April 1, 2024 | 175,000 | 175,000 | ||||||||
$ | 0.05 | October 1, 2024 | 1,480,000 | 1,480,000 | ||||||||
$ | 0.08 | November 18, 2025 | 780,000 | 780,000 | ||||||||
$ | 0.08 | December 8, 2025 | 710,000 | 710,000 | ||||||||
$ | 0.19 | January 28, 2026 | 150,000 | 150,000 | ||||||||
$ | 0.25 | March 22, 2026 | 1,800,000 | 1,800,000 | ||||||||
7,880,052 | 7,692,552 |
(1) Options repriced from $0.15 to $0.10 subsequent toduring the year ended December 31, 20192020
(2) Options repriced from $0.28 to $0.10 during the year ended December 31, 2020
(3) Options repriced from $0.24 to $0.10 during the year ended December 31, 2020
(4) Options repriced from $0.21 to $0.10 during the year ended December 31, 2020
29 |
The weighted average remaining life of the stock options outstanding at December 31, 20192021 is 3.94 years.2.73 years (2020: 3.43 years).
Warrants
Table No. 12 lists, as of December 31, 2019,2021, share purchase warrants (options to purchase common shares) outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants. These warrants were issued in conjunction with private placements of the Company’s securities and all holders of the Company’s warrants are resident in Canada.
Table No. 12
Share Purchase Warrants Outstanding
| Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017 | |||
| Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price |
Beginning balance | 13,852,264 | $0.28 | 8,381,326 | $0.20 | - | - |
Warrants issued | 6,852,400 | $0.15 | 8,446,438 | $0.33 | 10,655,326 | $0.20 |
Exercised | - | - | (2,975,500) | $0.20 | (2,274,000) | $0.20 |
Issued and exercisable | 20,704,664 | $0.24 | 13,852,264 | $0.28 | 8,381,326 | $0.20 |
Year Ended December 31, 2021 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | |||||||||||||||||||
Beginning balance | 18,743,226 | $ | 0.16 | 20,704,664 | $ | 0.24 | 13,852,264 | $ | 0.28 | |||||||||||||||
Warrants issued | 16,274,000 | - | 6,485,000 | $ | 0.15 | 6,852,400 | $ | 0.15 | ||||||||||||||||
Exercised | (10,058,660 | ) | $ | 0.16 | - | - | - | - | ||||||||||||||||
Warrants expired | (6,177,500 | ) | $ | 0.15 | (8,446,438 | ) | $ | 0.33 | - | - | ||||||||||||||
Issued and exercisable | 18,781,066 | $ | 0.21 | 18,743,226 | $ | 0.16 | 20,704,664 | $ | 0.24 |
The following table summarizes information about warrants outstanding and exercisable as at December 31, 2019:2021:
Exercise Price | Expiry date | Warrants Outstanding |
$0.20 | June 26, 2022 | 1,791,159 |
$0.20 | August 3, 2022 | 742,667 |
$0.20 | November 27, 2022 | 2,872,000 |
$0.15 | August 13, 2021 | 6,852,400 |
$0.33 | April 15, 2020(1) | 3,030,303 |
$0.33 | July 31, 2020(1) | 5,416,135 |
|
| 20,704,664 |
Exercise Price | Expiry date | Warrants Outstanding | ||||||
$ | 0.20 | June 26, 2022 | 993,666 | |||||
$ | 0.20 | August 3, 2022 | 742,667 | |||||
$ | 0.20 | November 27, 2022 | 770,733 | |||||
$ | 0.15 | January 28, 2022 | 9,018,000 | |||||
$ | 0.30 | February 12, 2022 | 7,256,000 | |||||
18,781,066 |
(1) Expired unexercised subsequently.
The weighted average remaining life of the warrants outstanding at December 31, 20192021 is 1.44 years.0.17 years (2020: 1.03 years).
9.A.6. Differing Rights
---No
—No Disclosure Necessary---Necessary—
9.A.7.a. Subscription Warrants/Right
---No
—No Disclosure Necessary---Necessary—
9.A.7.b. Convertible Securities/Warrants
---No
—No Disclosure Necessary---Necessary—
30 |
9.C. Stock Exchanges Identified
The common shares of the Company are listed on the TSX Venture Exchange which is headquartered in Toronto, Ontario under the symbol “AVCR” and in United States quoted on the Pink Sheets under the symbol “AVCRF”.
Refer to ITEM #9.A.4 for trading information and history. At this time, the Company is not seeking a listing on any other stock exchange.
ITEM 10. ADDITIONAL INFORMATION
10.A. Share Capital
10.A.1. Authorized/Issued Capital.
At December 31, 2021, there were an unlimited number of common shares authorized and 97,535,264 common shares issued and outstanding.
At December 31, 2020, there were an unlimited number of common shares authorized and 69,795,584 common shares issued and outstanding.
At December 31, 2019, there were an unlimited number of common shares authorized and 52,472,619 common shares issued and outstanding.
At December 31, 2018, there were an unlimited number of common shares authorized and 40,103,665 common shares issued and outstanding.
At December 31, 2017, there were an unlimited number of common shares authorized and 27,860,623 common shares issued and outstanding.
At December 31, 2016, there were an unlimited number of common shares authorized and 15,001,297 common shares issued and outstanding.
At December 31, 2015, there were an unlimited number of common shares authorized and 14,276,297 common shares issued and outstanding.
At June 30, 2015, there were an unlimited number of common shares authorized and 13,804,770 common shares issued and outstanding.
At June 30, 2014, there were an unlimited number of common shares authorized and 9,191,768 common shares issued and outstanding.
At June 30, 2013, there were an unlimited number of common shares authorized and 5,404,268 common shares issued and outstanding.
At June 30, 2012, there were an unlimited number of common shares authorized and 1,739,920 common shares issued and outstanding. On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis
At June 30, 2011, there were an unlimited number of common shares authorized and 15,999,200 common shares issued and outstanding.
At June 30, 2010, there were an unlimited number of common shares authorized and 14,680,449 common shares issued and outstanding.
At June 30, 2009, there were an unlimited number of common shares authorized and 12,835,449 common shares issued and outstanding.
At June 30, 2008, there were an unlimited number of common shares authorized and there were 12,377,949 common shares issued and outstanding.
At June 30, 2007, there were an unlimited number of common shares authorized and there were 8,048,101 common shares issued and outstanding.
31 |
At June 30, 2006, there were an unlimited number of common shares authorized and there were 5,200,101 common shares issued and outstanding.
Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.
As of June 30, 2005, there were 25,000,000 common shares authorized and 3,946,101 common shares issued.
As of June 30, 2004, there were 25,000,000 common shares authorized and 3,196,101 common shares issued.
As of June 30, 2003, there were 25,000,000 common shares authorized and 612,868 common shares issued.
As of June 30, 2002, there were 25,000,000 common shares authorized and 594,118 common shares issued.
As of June 30, 2001, there were 25,000,000 common shares authorized and 294,118 common shares issued.
During the last five years, less than 10% of the capital has been “paid for” with assets other than cash.
10.A.2. Shares Not Representing Capital.
---No
—No Disclosure Necessary---Necessary—
10.A.3. Shares Held By Company.
---No
—No Disclosure Necessary---Necessary—
10.A.4. Stock Options/Share Purchase Warrants
---Refer
—Refer to Tables No. 8, No. 11 No. 13.---13.—
10.A.5. Stock Options/Share Purchase Warrants
---Refer
—Refer to Tables No. 8, No. 11 No. 13.---13.—
10.A.6. History of Share Capital
The Company has financed its operations through funds raised in public and private placements of common shares and warrants and from revenues from the sale of its products:products. There is one class of shares with one vote per common share.
Fiscal Year | Nature of Share Issuance | Number of Shares | Amount ($) |
Fiscal 2001 | Private Placement @ $3.40 | 29,411 | $100,000 |
Fiscal 2002 | Canadian Prospectus Offering (IPO) @$6.80 | 30,000 | $204,000 |
Fiscal 2003 | Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @ $6.80 | 3,750 | $25,500 |
Fiscal 2004 | Private Placement @$6.00 | 8,666 | $52,000 |
| Private Placement @$8.00 | 155,000 | $1,240,000 |
Fiscal 2005 | Private Placement @ $4.00 | 75,000 | $300,000 |
Fiscal 2006
| Private Placement @$2.00 Private Placement @$2.00 | 97,900 27,500 | $195,800 $55,000 |
Fiscal 2007 | Private Placement @$6.00 Private Placement @$4.00 | 35,750 200,000 | $71,500 $800,000 |
Fiscal 2008 | Private placement @ $4.80 | 50,000 | $240,000 |
| Private placement @ $6.00 | 87,500 | $525,000 |
Fiscal 2009 | N/A | N/A | N/A |
Fiscal 2010 | Private placement @$10.00 | 150,000 | $1,500,000 |
Fiscal 2011 | Private placement @$4.00 Private placement @$4.00 | 81,875 50,000 | $327,500 $200,000 |
Fiscal 2012 | Private placement @$0.40 | 140,000 | $56,000 |
Fiscal 2013 | Private placement @$0.40 | 2,000,000 | $800,000 |
Fiscal 2014 | Private placement @$0.40 | 937,500 | $375,000 |
Fiscal 2015 | Private placement @$0.60 | 1,901,833 | $1,141,000 |
Fiscal 2016 | N/A | N/A | N/A |
Fiscal 2017 | Private placement @$0.15 | 10,585,326 | $1,587,799 |
Fiscal 2018 | Private placement @$0.15 | 5,327,335 | $799,100 |
Fiscal 2019 | Private placement @$0.05 | 6,852,400 | $342,620 |
Fiscal 2019 | Private placement @$0.07 | 4,206,435 | $294,450 |
Number of Shares | Share Capital | |||||||
$ | ||||||||
Balance, December 31, 2018 | 40,103,665 | 20,783,372 | ||||||
Shares issued for cash, net | 11,058,835 | 465,760 | ||||||
Exercise of stock options | 73,928 | 39,807 | ||||||
Shares issued for services (a) | 125,081 | 11,167 | ||||||
Acquisition of HealthTab Inc.(b) | 1,111,110 | 100,000 | ||||||
Balance, December 31, 2019 | 52,472,619 | 21,400,106 | ||||||
Shares issued for cash | 6,260,000 | 626,000 | ||||||
Exercise of options | 105,000 | 6,672 | ||||||
Shares issued for services (c) | 3,480,000 | 52,200 | ||||||
Acquisition of HealthTab™ Inc. (b) | 2,000,000 | 100,000 | ||||||
Shares issued for debt (d) | 5,477,965 | 136,949 | ||||||
Share issue cost | - | (35,075 | ) | |||||
Balance, December 31, 2020 | 69,795,584 | 22,286,852 | ||||||
Shares issued for cash | 15,740,000 | 2,414,000 | ||||||
Exercise of warrants | 10,058,660 | 1,805,132 | ||||||
Exercise of stock options | 1,666,020 | 312,052 | ||||||
Share issued for services (e) | 275,000 | 38,500 | ||||||
Share issuance costs | - | (238,221 | ) | |||||
Balance, December 31, 2021 | 97,535,264 | 26,618,315 |
(a) The Company issued 125,081 common shares to a vendor valued at $11,167 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018.
32 |
(b) On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTab Inc. Under the share purchase agreement, the consideration paid by the Company included staged cash payment of $200,000 (paid in the fiscal year 2018), issuance of 2,666, 667 common shares (issued in the fiscal year 2018). In addition, in the years ended December 31, 2019 and 2020, common shares with an aggregate value of $200,000 were issued at the deemed price determined based on the market price of the shares at the time of issuance.
(c) The Company issued 3,480,000 common shares valued at $52,200 as bonus shares pursuant to a loan agreement.
(d) The Company issued 5,477,965 common shares in exchange for services received and to settle accounts payables of $136,949. An aggregate of 1,900,000 shares were issued in settlement of $47,500 in amounts owing to certain directors and officers of the Company.
(e) The Company issued 275,000 common shares valued at $38,500 to a consultant in exchange for services received.
Except as disclosed above, no other shares were issued with a consideration other than cash during the years ended December 2019, 2020 and 2021. There were no changes in classes of shares or voting rights.
10.A.7. Resolutions/Authorizations/Approvals
---No
—No Disclosure Necessary---Necessary—
10.B. Memorandum and Articles of Association
The Company’s corporate constituting documents comprising the Notice of Articles and Articles are registered with the British Columbia Registrar of Companies under Incorporation No. BC0607937. A copy of the Articles was filed as an Exhibit 1 with the Company’s initial registration statement on Form 20-F.
The following is a summary of certain provisions of the Company'sCompany’s Notice of Articles and Articles and certain provisions of the British Columbia Business Corporations Act (the “BCA”), applicable to the Company:
Objects and Purposes
The Articles do not specify objects or purposes. Under both the BCA, a British Columbia corporation generally has all the legal powers of a natural person. British Columbia corporations may not undertake certain limited business activities such as operating as a trust company or railroad without alterations to its form of articles and specific government consent.
Share Capital
The authorized capital of the Company consists of an unlimited number of common shares without par value. All of the common shares must be fully paid and are not subject to any future call or assessment. All of the common shares of the Company rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends. The holders of the common shares are entitled to receive notice of all shareholder meetings and to attend and vote at such meetings. Shareholders are not entitled to cumulative voting. Each common share carries with it the right to one vote. The common shares do not have preemptive or conversion rights. In addition, there are no sinking fund or redemption provisions applicable to the common shares or any provisions discriminating against any existing or prospective holders of such securities as a result of a shareholder owning a substantial number of shares.
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Share Certificates
Under the Articles, a shareholder is entitled to a share certificate representing the number of shares of the Company held or a written acknowledgement of the shareholder’s right to obtain such a share certificate.
No Limitation on Foreign Ownership
There are no limitations under the Company’s Articles or in the BCA on the right of persons who are not citizens of Canada to hold or vote common shares.
Dividends
Dividends may be declared by the Board out of available assets and are paid ratably to holders of common shares. No dividend may be paid if the Company is, or would thereby become, insolvent.
Voting Rights
Each of the Company’s common share is entitled to one vote on matters to which common shares ordinarily vote including the annual election of directors, appointment of auditors and approval of corporate changes. There are no cumulative voting rights applicable to the Company.
Borrowing Powers
The Company, if authorized by the directors, may: (a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate; (b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate; (c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and (d) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.
Indemnity Provisions
Under the Articles and the BCA, the Company is now permitted (and is, in some circumstances, required) to indemnify a past or present director or officer of the Company or an associated corporation without obtaining prior court approval in respect of an “eligible proceeding”. An “eligible proceeding” includes any legal proceeding relating to the activities of the individual as a director or officer of the Company. However, under the BCA, the Company will be prohibited from paying an indemnity if: (a) the party did not act honestly and in good faith with a view to the best interests of the Company; (b) the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and (c) the proceeding is brought against the party by the Company or an associated corporation.
Directors – Number and Qualification
The Company’s Articles do not specify a maximum number of directors. The minimum under British Columbia law for a public company is three. The number of directors shall be the number of directors fixed by the directors annually or the number that are actually elected at a general shareholders meeting under the Existing Articles. The number of directors is determined, annually, by shareholders at the annual shareholders meeting and all directors are elected at that time. Under the Articles the directors are entitled between successive annual general meetings to appoint one or more additional directors but not more than one-third of the number of directors fixed at a shareholders’ or actually elected at the preceding annual shareholders’ meeting. Directors automatically retire at the commencement of each annual meeting but may be re-elected thereat.
Directors must be of the age of majority (18), and meet eligibility criteria including being mentally competent, not an un-discharged bankrupt, no fraud related convictions in the previous five years. There are residency requirements and there is no mandatory retirement age either under the Articles or under the BCA. Directors need not own any shares of the Company in order to qualify as directors.
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Directors - Powers and Limitations
Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders as governed by the BCA. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors’ powers, except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors’ resolution. Directors may also by resolution appoint one or more committees other than the executive committee. These committees may be delegated any of the directors’ powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, and the power to appoint or remove officers appointed by the directors.
Under the BCA, directors are obligated to abstain from voting on matters in which they may be financially interested after disclosing in writing such interest. Directors’ compensation is not a matter on which they must abstain. Directors’ borrowing powers are not generally restricted where the borrowing is in the Company’s best interests, but the directors may not authorize the Company to provide financial assistance for any reason where the Company is insolvent or the providing of the guarantee would render it insolvent.
Amendment of Articles and Notice of Articles; Special Transactions
The Articles provide that the general authority required to amend all provisions of the Company’s Articles and the Notice of Articles relating to the authorized share structure is a resolution of the directors and the attachment of special rights and restrictions thereto, including any changes therein, an ordinary resolution. If the amendment prejudices or interferes with the rights or special rights attached to any class of issued shares, by the provisions of the BCA, the consent of the holders of that class of shares by a special separate resolution is also required.
Certain corporate changes or proposed transactions including amalgamation with another company, sale of substantially all of the Company’s assets, re-domiciling out of the jurisdiction of British Columbia, creation of new classes of shares not only require the consent of the holders of common shares by a special separate resolution but generally also give rise to a dissent right which is the right to be paid the fair value of the stockholder’s shares in cash if the required special resolution is actually passed and the Company elects to proceed with the matter notwithstanding receipt of dissent notices. A notice of a shareholders meeting at which such a change or proposed transaction is intended to be considered must include a prominent notice of the dissent right. Dissent provisions are governed by the BCA and not by the Articles of the Company.
Under the Articles, a special separate resolution requires a majority of three-quarters of the votes cast.
Shareholders’ Meetings
In addition to reflecting the present notice and other provisions of the BCA relating to shareholders’ meetings, the Articles provide that shareholders’ meetings may be held at such place as is determined by the directors. Shareholders meetings are governed by the Articles of the Company but many important protections and procedures are contained within the BCA and the Securities Act (British Columbia) and the Securities Act (Alberta) and the respective regulations and rules thereto and the policy statements, notices and blanket orders of the respective commissions of each of British Columbia and Alberta, together with the national policy statements, and national instruments applied by the such commissions (collectively, “Applicable Canadian Securities Law”). The Articles provide that the Company will hold an annual shareholders’ meeting, will provide at least 21 days’ notice and will provide for certain procedural matters and rules of order with respect to conduct of the meeting. The BCA and Applicable Canadian Securities Law superimpose requirements that generally provide that shareholders meetings require not less than a 60 day notice period from initial public notice and that the Company makes a thorough advanced search of intermediary and brokerage registered shareholdings to facilitate communication with beneficial shareholders so that meeting proxy and information materials can be sent via the brokerages to unregistered but beneficial shareholders. The form and content of information circulars and proxies and like matters are governed by Applicable Canadian Securities Law and includes the specifics relating to disclosure requirements for the proxy materials and various corporate actions, background information on the nominees for election for director, executive compensation paid in the previous year and full details of any unusual matters or related party transactions.
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The Company must hold an annual shareholders meeting open to all shareholders for personal attendance or by proxy at each shareholder’s determination. The meeting must be held within 15 months of the previous annual shareholders meeting and must present audited statements which are dated no more than six months prior to such meeting.
Change in Control
The Company has not implemented any shareholders’ rights or other “poison pill” protection against possible take-overs. The Company does not have any agreements which are triggered by a take-over or other change of control. There are no provisions in its articles triggered by or affected by a change in outstanding shares which gives rise to a change in control. There are no provisions in the Company’s material agreements giving special rights to any person on a change in control.
Insider Share Ownership Reporting
The Articles of the Company do not require disclosure of share ownership. Share ownership of director nominees must be reported annually in proxy materials sent to the Company’s shareholders. There are no requirements under the BCA to report ownership of shares of the Company but Applicable Canadian Securities Law requires disclosure of trading by insiders (generally officers, directors and holders of 10% of voting shares) within 5 days of the trade. Controlling shareholders (generally those in excess of 20% of outstanding shares) must provide seven days advance notice of share sales.
Applicable Canadian Securities Law
Applicable Canadian Securities Law governs matters typically pertaining to public companies such as continuous quarterly financial reporting, immediate disclosure of material changes, insider trade reporting, take-over protections to ensure fair and equal treatment of all shareholders, exemption and resale rules pertaining to non-prospectus securities issuances as well as civil liability for certain misrepresentations, disciplinary, appeal and discretionary ruling matters. All of the Company’s shareholders regardless of residence have equal rights under this legislation.
10.C. Material Contracts
There are currently no material contracts.
10.D. Exchange Controls
Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company’s securities, except as discussed in ITEM 10, ”Taxation"“Taxation” below.
Restrictions on Share Ownership by Non-Canadians: There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control"“control” of the Company by a "non-Canadian"“non-Canadian”. The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian"“Non-Canadian” generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians. If a “non-Canadian” (for example, a US resident acquirer) were to acquire such a control position, they would not be required to do any filings or provide any notices to the Ministry of Industry (Canada) unless notified first by that Ministry that their acquisition of control was under review.
Canada has, as does the United States, competition laws designed to promote competition in industry and markets. The Competition Act (Canada) provides Canada’s federal government with the power to review or prevent business transactions, such as acquiring a controlling interest in a company similar to the Company , if it is found that the acquisition of control would reduce competition in a given market or industry. Since the market that the Company competes in is extremely competitive, no single company, including the Company, seems to have significant market power. Acquisition of the Company, therefore, would not lead to reduced competition.
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10.E. Taxation
Canadian Federal Income Tax Considerations:
The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a "U.S. Holder"“U.S. Holder”) who deals at arm'sarm’s length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act"“Act”) and the Canada – United States Income Tax Convention (the "Treaty"“Treaty”), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.
Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 5% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.
In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm'sarm’s length, and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.
The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign
investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2019 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.
Dividends:
A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.
Disposition of Common Shares:
A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The TSX Venture Exchange is a prescribed stock exchange under the Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless:
(a) More than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties,
(b)The common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or
(c)The Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include half of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct half of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.
United States Taxation:
For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company's common shares are a capital asset in U.S. Taxpayer's hands.
For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.
Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply. United States Investors should consult their own tax advisors concerning these requirements.
The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2019 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.
Dividends:
A Holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the “Treaty”), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.
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Disposition of Common Shares:
A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted “taxable Canadian property” as defined by the Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm’s length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The TSX Venture Exchange is a prescribed stock exchange under the Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless:
(a) More than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties,
(b) The common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or
(c) The Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada.
A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include half of the capital gain (taxable capital gain) in computing the Holder’s taxable income earned in Canada. The Holder may, subject to certain limitations, deduct half of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.
United States Taxation:
For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation (“U.S. Taxpayer”) will recognize a gain or loss on the sale of the Company’s common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company’s common shares are a capital asset in U.S. Taxpayer’s hands.
For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company’s common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company’s common shares.
Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply. United States Investors should consult their own tax advisors concerning these requirements.
The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2019 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.
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10.F. Dividends and Paying Agents
The Company has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.
Notwithstanding the aforementioned: the Company is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders. The Company has not nominated any financial institutions to be the potential paying agents for dividends in the United States.
10.G. Statement by Experts
The Company’s auditor for its consolidated financial statements was Manning Elliot for the yearyears ended December 31, 2019, Davidson2021, 2020 & Company LLP for 2018 & 2017 and Adam Sung Kim Ltd. for 2016.2019. Their audit reports for the years ended December 31, 2019, 2018,2021, 2020, and 20172019 are included with the related consolidated financial statements in this Annual Report.
10.H. Document on Display
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— No Disclosure Necessary ---—
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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— No Disclosure Necessary ---—
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.A. Debt Securities
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— No Disclosure Necessary ---—
12.B. Warrants and Rights
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— No Disclosure Necessary ---—
12.C. Other Securities
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— No Disclosure Necessary ---—
12.D. American Depository Shares
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— No Disclosure Necessary ---—
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
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— No Disclosure Necessary ---—
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
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— No Disclosure Necessary ---—
ITEM 15. CONTROLS AND PROCEDURES
The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as of December 31, 2019.2021. The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2019,2021, were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by the Company for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with IFRS as issued by IASB. The Board of Directors is responsible for ensuring that management fulfills its responsibilities. The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review of the interim and annual financial statements. Management reviewed the results of their assessment with the Company’s Audit Committee.
Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all possible misstatements or frauds. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.
To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control – Integrated Framework (2013), which is a suitable, recognized control framework
established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2019.2021.
Limitations on the Effectiveness of Controls
The Company'sCompany’s management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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Attestation Report of the Registered Accounting Firm.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Form 20-F Annual Report.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
There have been no changes in the Company'sCompany’s internal controls over financial reporting during the period covered by this annual report that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting with regard to deficiencies or material weaknesses other than the corrective actions to ensure proper disclosure is included in the Company’s filings under the Exchange Act, including the Form 20-F Annual Report.
ITEM 16. RESERVED
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Mr. David Hall is a financially literate member of the Company’s Audit Committee.
ITEM 16B. CODE OF ETHICS
The Company has not adopted a formal code of ethics because, as a TSX Venture Exchange issuer, the Company is only required have an audit committee.
In lieu of a code of ethics, the Company has adopted the following methodology with respect to corporate governance.
The management of the Company is responsible for establishing and maintaining disclosure controls and procedures for information relating to the Company, including its consolidated subsidiaries. The Company’s
management is also responsible for establishing and maintaining adequate internal control over financial reporting.
The Company’s Board of Directors facilitates its exercise of independent supervision over management by ensuring that the Board of Directors is composed of a majority of independent directors. The Board of Directors, at present, is composed of six directors, four of which are considered to be independent. Two directors, Mr. Bob RaiHector Bremner and Mr. Hector BremnerRodger Seccombe are also a senior officers. In determining whether a director is independent, the Board considers, for example, whether the director has a relationship, which could, or could be perceived to, interfere with the director'sdirector’s ability to objectively assess the performance of management.
The Board of Directors monitors the ethical conduct of Avricore Health and its management and ensures that it complies with applicable legal and regulatory requirements, such as those of relevant securities commissions and stock exchanges. The Board of Directors has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law, as well as the restrictions placed by applicable corporate legislation on the individual director’s participation in decisions of the Board of Directors in which the director has an interest, have been sufficient to ensure that the Board of Directors operates independently of management and in the best interests of the Company.
41 |
The Board of Directors is specifically responsible for approving long-term strategic plans and annual operating plans and budgets recommended by management. Board consideration and approval is also required for all material contracts, business transactions and all debt and equity financing proposals. The independent directors on the Board of Directors are also responsible for approving senior executive compensation and retirement plans.
The Board of Directors delegates to management, through the offices of Chief Executive Officer and Chief Financial Officer, responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing the Company’s cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board of Directors also looks to management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.
Given the relatively small composition of the Board of Directors and the Company’s management over the last several years, the Board of Directors has not appointed a corporate governance committee and these functions are currently performed by the Board of Directors as a whole.
ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES
External Auditor Service Fees
The Company’s auditors were Manning Elliot LLP for the yearyears ended December 31, 2019, 2020 and Davidson & Company LLP during the years ended December 31, 2018 and 2017.2021. The following table sets out the aggregate fees billed by Manning Elliot LLP and Davidson & Company LLP over their engagement with the Company.
Year ended | Audit Fees | Audit Related Fees(1) | Tax Fees(2) | All Other Fees(3) |
December 31, 2019 | $26,000 | $Nil | $Nil | $Nil (0%) |
December 31, 2018 | $65,000 | $Nil | $4,500 | $Nil (0%) |
December 31, 2017 | $35,000 | $Nil | $5,500 | $Nil (0%) |
Year ended | Audit Fees | Audit Related Fees(1) | Tax Fees(2) | All Other Fees(3) | ||||||||||||
December 31, 2021 | $ | 33,500 | $ | Nil | $ | Nil | $ | Nil (0%) | ||||||||
December 31, 2020 | $ | 26,000 | $ | Nil | $ | Nil | $ | Nil (0%) | ||||||||
December 31, 2019 | $ | 26,000 | $ | Nil | $ | Nil | $ | Nil (0%) |
(1)Related to assurance and related services that are reasonably related to the performance of the audit and review of the Company’s financial statements and not included in the amounts noted under Audit Fees.
(1) | Related to assurance and related services that are reasonably related to the performance of the audit and review of the Company’s financial statements and not included in the amounts noted under Audit Fees. |
(2) | Related to fees billed by the Company’s external auditor for professional services rendered for tax compliance, tax advice and tax planning. |
(3) | Related to other accounting services that is excluded from the Audit Fees. |
(2) Related to fees billed by the Company’s external auditor for professional services rendered for tax compliance, tax advice and tax planning.
(3)Related to other accounting services that is excluded from the Audit Fees.
Pre-Approval Policies and Procedures
The Audit Committee has adopted an Audit Committee Charter (see “Exhibit”) governing the provision of audit and non-audit services by the external auditor. This charter requires the Audit Committee to:
1.
1. | recommend to the Board of Directors the external auditor to be nominated by the Board of Directors |
2. | to pre-approve all non-audit services provided by the external auditor. |
42 |
2.to pre-approve all non-audit services provided by the external auditor.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
---Not applicable---
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS
---Not Applicable---
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
On April 2, 2020, the Company’s shareholders appointed Manning Elliott LLP, Chartered Professional Accountants, as the Company’s auditors. There were no disagreements between the Company and its former auditors, Davidson & Company LLP, and Davidson & Company LLP’s report on the financial statements for the prior fiscal period contained no adverse opinions or disclaimer of opinions. The Company did not consult with Manning Elliott LLP during the two fiscal years prior to their engagement regarding the application of accounting principles to any specified transaction or any accounting, auditing or financial reporting issue, or any matter that was subject to a disagreement or reportable event.
The Company has provided Davidson & Company LLP with a copy of this disclosure and they have provided a letter which agrees with the statements made by the Company. A copy of this letter has been filed as an exhibit to the Company’s Form 20-F Annual Report.—Not applicable—
We requested the Company's new independent registered public accounting firm, Manning Elliott LLP, to review the disclosure in response to this Item 16F and provided an opportunity for Manning Elliott LLP to furnish the Company with a letter addressed to the Securities and Exchange Commission containing any new information, clarification of the Company's expression of its views, or the respects in which it does not agree with the statements made by the Company in response to Item 16F. Manning Elliott LLP LLP did not provide any such letter to the Company in response to this request.
ITEM 16G. CORPORATE GOVERNANCE
---Not applicable---
ITEM 16H. MINE SAFETY DISCLOSURE
---Not applicable---
—Not applicable—
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PRESEVNT INSPECTIONS
—Not applicable—
43 |
PART III
ITEM 17. FINANCIAL STATEMENTS
The Company'sCompany’s financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of Manning Elliott LLP, and Davidson & Company LLP, Chartered Professional Accountants, are included herein immediately preceding the audited financial statements. (Manning Elliot LLP, Vancouver, British Columbia; PCAOB ID # 1524)
Audited Financial Statements
--
— included after exhibit list
ITEM 18. FINANCIAL STATEMENTS
The Company has elected to provide financial statements pursuant to ITEM #17.
ITEM 19. EXHIBITS
The financial statements thereto as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The report of the Company’s independent auditors for the audited financial statements are included herein immediately preceding the audited financial statements.
(A) Financial information
(i) | Audited Consolidated Financial Statements for the year ended December 31, 2021. |
44 |
(i)Audited Consolidated Financial Statements for the year ended December 31, 2019.
1.Auditor’s Reports, dated April 29, 2020 and May 30, 2019.
2.Consolidated Statements of Financial Position at December 31, 2019 and 2018.
3.Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019, 2018, and 2017.
4.Consolidated Statements of Changes in Equity (Deficiency) for the years ended December 31, 2019, 2018, and 2017.
5.Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017.
6.Notes to Consolidated Financial Statements.
(B) Index to Exhibits:
1. | |
| |
Amendment to Articles of Incorporation, Name Change, July 28, 2014, filed with Form 6-K, November 18, 2014 | |
Amendment to Articles of Incorporation, Name Change, November 5, 2018, filed with Form 6-K, June 17, 2019 | |
2. | Instruments defining the rights of holders – N/A |
3. | Intentionally deleted. |
4. | Material contracts – N/A |
5. | N/A |
6. | Calculation of earnings per share – N/A |
7. | Explanation of calculation of ratios – N/A |
8. | Subsidiaries - N/A |
9. | Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities – N/A |
10. | Notice required by Rule 104 of Regulation BTR – N/A |
11. | Code of Ethics – N/A |
12.1* | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002 |
12.2* | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002 |
13.1* | Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002 |
13.2* | Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002 |
14. | Legal opinion – N/A |
15. | Additional exhibits: |
a) | Audit Committee Charter | |
b) | Stock Option Plan |
| |
| |
| Inline XBRL Instance Document |
| Inline XBRL Taxonomy Extension Schema Document |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| Inline XBRL Taxonomy Extension Definitions Linkbase Document |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
45 |
Avricore Health Inc.
Consolidated Financial Statements
For the yearyears ended December 31, 2021, 2020 and 2019
F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Avricore Health Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial statementsposition of Avricore Health Inc. and its subsidiaries (the “Company”), which comprise the consolidated statement as of financial position as at December 31, 2019,2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in equity (deficiency) and cash flows for the yearyears ended December 31, 2021, 2020 and 2019, and the related notes including a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”).
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as atof December 31, 20192021 and 2020, and the results of its financial performanceoperations and its cash flows for the yearyears ended December 31, 2021, 2020 and 2019 in accordanceconformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Explanatory Paragraph – Going Concern
Emphasis of Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discusseddescribed in Note 1, to the financial statements, the Company has a working capital deficitnegative operating cash flows and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a reasonable basis for our audit opinion.
Other Matter
The consolidated financial statements for the years ended December 31, 2018 and 2017, which are presented for comparative purposes, were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on May 30, 2019.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, British Columbia
April 29, 2020
We have served as the Company’s auditor since 2019.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Avricore Health Inc. (formerly Vanc Pharmaceuticals Inc.)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of financial position of Avricore Health Inc. (formerly Vanc Pharmaceuticals Inc.) (the “Company”), as of December 31, 2018, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended December 31, 2018 and 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company a of December 31, 2018, and the results of its operations and its cash flows for the years ended December 31, 2018 and 2017 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatementsmisstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
F-2 |
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Manning Elliott LLP
CHARTERED PROFESSIONAL ACCOUNTANTS
Vancouver, Canada
April 22, 2022
We have served as the Company’s auditor since 2017.2020.
F-3 |
“DAVIDSON & COMPANY LLP”
Avricore Health Inc.
Consolidated Statements of Financial Position
As at December 31, 2021 and 2020
(Expressed in Canadian Dollars)
| Note | December 31, 2019 | December 31, 2018 | |
|
| $ | $ | |
ASSETS |
|
|
| |
|
|
|
| |
Current Assets |
|
|
| |
Cash and cash equivalents |
| 13,799 | 84,442 | |
Accounts receivable | 5 | 15,474 | 280,280 | |
Prepaid expenses | 6 | 179,123 | 286,246 | |
Inventories | 7 | - | 102,499 | |
|
| 208,396 | 753,467 | |
|
|
|
| |
Equipment | 9 | - | 21,005 | |
Intangible assets | 10 | 3 | 425,733 | |
Total Assets |
| 208,399 | 1,200,205 | |
|
|
|
| |
LIABILITIES |
|
|
| |
|
|
|
| |
Current Liabilities |
|
|
| |
Accounts payable and accrued liabilities | 11 | 652,460 | 314,239 | |
Lease liabilities | 12 | 21,390 | - | |
|
| 673,850 | 314,239 | |
|
|
|
| |
SHAREHOLDERS’ EQUITY (DEFICIENCY) |
|
|
| |
Share capital | 13 | 21,400,106 | 20,783,372 | |
Subscription |
| 10,000 | - | |
Shares to be issued | 4 | 100,000 | 211,167 | |
Reserves | 13 | 5,358,462 | 5,119,838 | |
Deficit |
| (27,334,019) | (25,228,411) | |
|
| (465,451) | 885,966 | |
Total Liabilities and Shareholders’ Equity (Deficiency) |
| 208,399 | 1,200,205 | |
|
|
|
|
Note | 2021 | 2020 | ||||||||
$ | $ | |||||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | 2,012,995 | 302,715 | ||||||||
Accounts receivable | 5 | 91,548 | 11,928 | |||||||
Prepaid expenses and deposits | 6 | 54,467 | 125,444 | |||||||
Current assets | 2,159,010 | 440,087 | ||||||||
Equipment | 8 | 90,875 | - | |||||||
Intangible assets | 10 | 31,508 | 3 | |||||||
Total Assets | 2,281,393 | 440,090 | ||||||||
LIABILITIES | ||||||||||
Current Liabilities | ||||||||||
Accounts payable and accrued liabilities | 11 | 44,477 | 152,569 | |||||||
Loans payable | 13 | 40,000 | 1,001,562 | |||||||
Liabilities | 84,477 | 1,154,131 | ||||||||
SHAREHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||
Share capital | 14 | 26,618,315 | 22,286,852 | |||||||
Shares subscribed | - | 10,000 | ||||||||
Reserves | 14 | 5,794,718 | 5,497,092 | |||||||
Deficit | (30,216,117 | ) | (28,507,985 | ) | ||||||
Equity | 2,196,916 | (714,041 | ) | |||||||
Total Liabilities and Shareholders’ Equity (Deficiency) | 2,281,393 | 440,090 |
Nature of operations and going concern (Note 1)
Segmented information (Note 19)
Subsequent events (Note 22)24)
Approved and authorized on behalf of the Board of Directors on April 29, 2020.22, 2022.
“Hector Bremner” | “David Hall” | |
Hector Bremner, Director | David Hall, Chairman |
“Sukhwinder Bob Rai”“David Hall”
Sukhwinder Bob Rai, DirectorDavid Hall, Chairman
The accompanying notes are an integral part of these consolidated financial statements
F-4 |
Avricore Health Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the years ended December 31, 2019, 20182021, 2020 and 20172019
(Expressed in Canadian Dollars)
| Note | 2019 | 2018 | 2017 |
|
|
|
|
|
|
| $ | $ | $ |
|
|
|
|
|
Revenue |
| 33,000 | 15,295 | - |
|
|
|
|
|
Cost of Sales |
| 18,502 | 16,258 | - |
|
|
|
|
|
Gross profit (loss) |
| 14,498 | (963) | - |
|
|
|
|
|
Expenses |
|
|
|
|
Amortization |
| 180,469 | 526,243 | 4,325 |
Consulting | 17 | 509,734 | 494,783 | 92,378 |
General and administrative | 15 | 198,837 | 377,690 | 511,820 |
Management fees | 17 | 175,000 | 150,000 | 60,010 |
Professional fees | 17 | 219,948 | 268,621 | 279,097 |
Selling and marketing | 14 | 247,243 | 283,587 | 73,390 |
Share-based compensation | 17 | 86,420 | 372,137 | 311,389 |
|
| 1,617,651 | 2,473,061 | 1,332,409 |
Other income (expense) |
|
|
|
|
Finance costs |
| (5,144) | (102) | (262) |
Gain on debt settlement |
| 3,058 | 5,119 | - |
Interest income |
| 405 | 1,715 | - |
Write down of intangible assets | 10 | (313,514) | (946,173) | - |
Write down of equipment |
| - | (45,114) | - |
Other income |
| 2,096 | 438 | 35,095 |
Net loss from continuing operations |
| (1,916,252) | (3,458,141) | (1,297,576) |
|
|
|
|
|
Loss from discontinued operations | 16 | (189,356) | (678,661) | (1,439,141) |
|
|
|
|
|
Net loss and comprehensive loss for the year |
| (2,105,608) | (4,136,802) | (2,736,717) |
|
|
|
|
|
Basic and Diluted Loss Per Share |
|
|
|
|
Continuing operations |
| (0.04) | (0.10) | (0.07) |
Discontinued operations |
| (0.00) | (0.02) | (0.08) |
|
| (0.04) | (0.12) | (0.15) |
Weighted Average Number of Common Shares Outstanding |
| 47,292,091 | 33,869,642 | 18,393,169 |
|
|
|
|
|
Note | 2021 | 2020 | 2019 | |||||||||||
$ | $ | |||||||||||||
Revenue | 122,808 | 33,030 | 33,000 | |||||||||||
Cost of sales | 92,287 | 15,550 | 18,502 | |||||||||||
Gross profit | 30,521 | 17,480 | 14,498 | |||||||||||
Expenses | ||||||||||||||
Amortization | 8, 9, 10 | 17,984 | - | 180,469 | ||||||||||
Consulting | 18 | 355,350 | 174,321 | 509,734 | ||||||||||
General and administrative | 16 | 183,000 | 120,577 | 198,837 | ||||||||||
Management Fees | 18 | 205,000 | 270,000 | 175,000 | ||||||||||
Marketing and communications | 15 | 329,342 | 31,251 | 247,243 | ||||||||||
Professional fees | 18 | 189,796 | 159,593 | 219,948 | ||||||||||
Share-based compensation | 14, 18 | 495,791 | 130,219 | 86,420 | ||||||||||
Expense, by nature | (1,776,263 | ) | (885,961 | ) | (1,617,651 | ) | ||||||||
Other income (expense) | ||||||||||||||
Finance costs | 13 | (38,438 | ) | (158,952 | ) | (5,144 | ) | |||||||
Gain on settlement and write-off of liabilities | 75,467 | 33,899 | 3,058 | |||||||||||
Write down of intangible assets | - | - | (313,514 | ) | ||||||||||
Write-down on inventories | 7 | - | (180,432 | ) | - | |||||||||
Interest income | 581 | - | 405 | |||||||||||
Other income | - | - | 2,096 | |||||||||||
Net loss from continuing operations | (1,708,132 | ) | (1,173,966 | ) | (1,916,252 | ) | ||||||||
Loss from discontinued operations | - | - | (189,356 | ) | ||||||||||
Net loss and comprehensive loss for the year | (1,708,132 | ) | (1,173,966 | ) | (2,105,608 | ) | ||||||||
Basic and Diluted Loss Per Share | ||||||||||||||
Continuing operations | (0.02 | ) | (0.02 | ) | (0.04 | ) | ||||||||
Discontinued operations | - | - | (0.00 | ) | ||||||||||
Basic and diluted loss per share | (0.02 | ) | (0.02 | ) | (0.04 | ) | ||||||||
Weighted Average Number of Common Shares Outstanding | 92,610,766 | 60,449,165 | 47,292,091 |
Segmented information (Note 19)20)
The accompanying notes are an integral part of these consolidated financial statements
F-5 |
Avricore Health Inc.
Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)
For the years ended December 31, 2019, 20182021, 2020 and 20172019
(Expressed in Canadian Dollars)
| Number of Shares | Share Capital | Shares to be Issued | Shares Subscribed | Warrant Reserve | Option Reserve |
Deficit |
Total |
|
| $ | $ | $ | $ | $ | $ | $ |
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016 | 15,001,297 | 16,320,006 | - | - | 209,774 | 3,743,105 | (18,354,892) | 1,917,993 |
Private placements | 10,585,326 | 1,587,799 | - | - | - | - | - | 1,587,799 |
Share issuance cost | - | (22,114) | - | - | 11,614 | - | - | (10,500) |
Exercise of warrants | 2,274,000 | 454,800 | - | - | - | - | - | 454,800 |
Acquisition of HealthTab Inc. | - | - | 973,333 | - | - | - | - | 973,333 |
Share-based compensation | - | - | - | - | - | 311,389 | - | 311,389 |
Net loss | - | - | - | - | - | - | (2,736,717) | (2,736,717) |
Balance, December 31, 2017 | 27,860,623 | 18,340,491 | 973,333 | - | 221,388 | 4,054,494 | (21,091,609) | 2,498,097 |
Shares issued for cash, net | 5,327,335 | 771,504 | - | - | 9,332 | - | - | 780,836 |
Exercise of warrants | 2,975,500 | 603,310 | - | - | (8,210) | - | - | 595,100 |
Exercise of stock options | 131,000 | 69,001 | - | - | - | (40,181) | - | 28,820 |
Shares issued for services | 233,450 | 43,915 | 11,167 | - | - | - | - | 55,082 |
Acquisition of HealthTab Inc. | 2,666,667 | 773,333 | (773,333) | - | - | - | - | - |
Acquisition of Corozon Platform | 909,090 | 181,818 | - | - | - | - | - | 181,818 |
Acquisition of distribution rights | - | - | - | - | 510,878 | - | - | 510,878 |
Share-based compensation | - | - | - | - | - | 372,137 | - | 372,137 |
Net loss | - | - | - | - | - | - | (4,136,802) | (4,136,802) |
Balance, December 31, 2018 | 40,103,665 | 20,783,372 | 211,167 | - | 733,388 | 4,386,450 | (25,228,411) | 885,966 |
Shares issued for cash, net | 11,058,835 | 465,760 | - | - | 171,310 | - | - | 637,070 |
Exercise of stock options | 73,928 | 39,807 | - | - | - | (19,106) | - | 20,701 |
Shares issued for services | 125,081 | 11,167 | (11,167) | - | - | - | - | - |
Acquisition of HealthTab Inc. | 1,111,110 | 100,000 | (100,000) | - | - | - | - | - |
Shares subscribed | - | - | - | 10,000 | - | - | - | 10,000 |
Share-based compensation | - | - | - | - | - | 86,420 | - | 86,420 |
Net loss | - | - | - | - | - | - | (2,105,608) | (2,105,608) |
Balance, December 31, 2019 | 52,472,619 | 21,400,106 | 100,000 | 10,000 | 904,698 | 4,453,764 | (27,334,019) | (465,451) |
Number of Shares | Share Capital | Shares to be Issued | Shares Subscribed | Warrant Reserve | Option Reserve |
Deficit |
Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Balance, December 31, 2018 | 40,103,665 | 20,783,372 | 211,167 | - | 733,388 | 4,386,450 | (25,228,411 | ) | 885,966 | |||||||||||||||||||||||
Shares issued for cash, net | 11,058,835 | 465,760 | - | - | 171,310 | - | - | 637,070 | ||||||||||||||||||||||||
Exercise of stock options | 73,928 | 39,807 | - | - | - | (19,106 | ) | - | 20,701 | |||||||||||||||||||||||
Shares issued for services | 125,081 | 11,167 | (11,167 | ) | - | - | - | - | - | |||||||||||||||||||||||
Acquisition of HealthTab Inc. | 1,111,110 | 100,000 | (100,000 | ) | - | - | - | - | - | |||||||||||||||||||||||
Share subscriptions received | - | - | - | 10,000 | - | - | - | 10,000 | ||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | 86,420 | - | 86,420 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (2,105,608 | ) | (2,105,608 | ) | ||||||||||||||||||||||
Balance, December 31, 2019 | 52,472,619 | 21,400,106 | 100,000 | 10,000 | 904,698 | 4,453,764 | (27,334,019 | ) | (465,451 | ) | ||||||||||||||||||||||
Shares issued for cash | 6,260,000 | 626,000 | - | - | - | - | - | 626,000 | ||||||||||||||||||||||||
Exercise of options | 105,000 | 6,672 | - | - | - | (1,422 | ) | - | 5,250 | |||||||||||||||||||||||
Shares issued for services | 3,480,000 | 52,200 | - | - | - | - | - | 52,200 | ||||||||||||||||||||||||
Acquisition of HealthTab™ Inc. | 2,000,000 | 100,000 | (100,000 | ) | - | - | - | - | - | |||||||||||||||||||||||
Shares issued for debt | 5,477,965 | 136,949 | - | (10,000 | ) | - | - | - | 126,949 | |||||||||||||||||||||||
Share issue cost | - | (35,075 | ) | - | - | 9,833 | - | - | (25,242 | ) | ||||||||||||||||||||||
Share subscriptions received | - | - | - | 10,000 | - | - | - | 10,000 | ||||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | 130,219 | - | 130,219 | ||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | - | (1,173,966 | ) | (1,173,966 | ) | ||||||||||||||||||||||
Balance, December 31, 2020 | 69,795,584 | 22,286,852 | - | 10,000 | 914,531 | 4,582,561 | (28,507,985 | ) | (714,041 | ) |
The accompanying notes are an integral part of these consolidated financial statements
F-6 |
Avricore Health Inc.
Consolidated Statements of Cash FlowsChanges in Equity (Deficiency)
For the years ended December 31, 2019, 20182021, 2020 and 20172019
(Expressed in Canadian Dollars)
| 2019 | 2018 | 2017 |
| $ | $ | $ |
Operating Activities |
|
|
|
Net loss from continuing operations | (1,916,252) | (3,458,141) | (1,297,576) |
Adjustment for the non-cash items: |
|
|
|
Amortization | 180,469 | 526,243 | 4,325 |
Finance cost | 5,144 | - | - |
Share-based payments | 86,420 | 372,137 | 311,389 |
Write down of intangible assets | 313,514 | 946,173 | - |
Write down of equipment | - | 45,114 | - |
Gain on debt settlement | (3,058) | (5,119) | - |
Services paid/to be paid in shares | - | 55,082 | - |
|
|
|
|
Change in working capital items: |
|
|
|
Prepaid expenses and deposits | 107,123 | 161,269 | (870) |
Accounts payable and accrued liabilities | 364,306 | (53,648) | (58,043) |
Net cash used in operating activities | (862,334) | (1,410,890) | (1,040,775) |
Net cash provided by (used in) operating activities of discontinued operations | 175,927 | (314,157) | (726,521) |
| (686,407) | (1,725,047) | (1,767,296) |
|
|
|
|
Investing Activities |
|
|
|
Intangible assets | - | (50,000) | - |
Acquisition net of cash received | - | (100,000) | (128,768) |
Net cash used in investing activities | - | (150,000) | (128,768) |
Net cash used in investing activities of discontinued operations | - | (5,000) | (3,784) |
| - | (155,000) | (132,552) |
|
|
|
|
Financing Activities |
|
|
|
Proceeds from issuance of shares, net | 637,070 | 780,836 | 1,577,299 |
Subscriptions received | 10,000 | - | - |
Proceeds from exercise of options | 20,701 | 28,820 | - |
Proceeds from exercise of warrants | - | 595,100 | 454,800 |
Lease payments | (52,007) | - | - |
Net cash provided by financing activities | 615,764 | 1,404,756 | 2,032,099 |
Net cash provided by financing activities of discontinued operations | - | - | - |
| 615,764 | 1,404,756 | 2,032,099 |
|
|
|
|
Increase (Decrease) in Cash | (70,643) | (475,291) | 132,251 |
Cash and Cash Equivalents, Beginning of year | 84,442 | 559,733 | 427,482 |
Cash and Cash Equivalents, End of year | 13,799 | 84,442 | 559,733 |
|
|
|
|
Cash and Cash Equivalents Consist of: |
|
|
|
Cash | 13,799 | 67,494 | 549,678 |
Guaranteed Investment Certificates | - | 16,948 | 10,055 |
Cash and cash equivalents | 13,799 | 84,442 | 559,733 |
Number of Shares | Share Capital | Shares to be Issued | Shares Subscribed | Warrant Reserve | Option Reserve |
Deficit |
Total | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Balance, December 31, 2020 | 69,795,584 | 22,286,852 | - | 10,000 | 914,531 | 4,582,561 | (28,507,985 | ) | (714,041 | ) | ||||||||||||||||||||||
Shares issued for cash | 15,740,000 | 2,414,000 | - | (10,000 | ) | - | - | - | 2,404,000 | |||||||||||||||||||||||
Exercise of warrants | 10,058,660 | 1,805,132 | - | - | (151,395 | ) | - | - | 1,653,737 | |||||||||||||||||||||||
Exercise of stock options | 1,666,020 | 312,052 | - | - | - | (186,395 | ) | - | 125,657 | |||||||||||||||||||||||
Share issued for services | 275,000 | 38,500 | - | - | - | - | - | 38,500 | ||||||||||||||||||||||||
Share issuance costs | - | (238,221 | ) | - | - | 139,625 | - | - | (98,596 | ) | ||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | 495,791 | - | 495,791 | ||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | - | (1,708,132 | ) | (1,708,132 | ) | ||||||||||||||||||||||
Balance, December 31, 2021 | 97,535,264 | 26,618,315 | - | - | 902,761 | 4,891,957 | (30,216,117 | ) | 2,196,916 |
Supplemental cash flow information (Note 20)
The accompanying notes are an integral part of these consolidated financial statements
F-7 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements of Cash Flows
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
2021 | 2020 | 2019 | ||||||||||
$ | $ | |||||||||||
Operating Activities | ||||||||||||
Net loss | (1,708,132 | ) | (1,173,966 | ) | (1,916,252 | ) | ||||||
Adjustment for non-cash items: | ||||||||||||
Amortization | 17,984 | - | 180,469 | |||||||||
Finance cost | 38,438 | 144,488 | 5,144 | |||||||||
Gain on settlement of liabilities | - | (33,899 | ) | (3,058 | ) | |||||||
Write-down of inventories | - | 180,432 | - | |||||||||
Write down of intangible assets | - | - | 313,514 | |||||||||
Share-based payments | 495,791 | 130,219 | 86,420 | |||||||||
Change in working capital items: | ||||||||||||
Accounts receivable | (79,620 | ) | 3,546 | - | ||||||||
Prepaid expenses and deposits | 70,977 | 45,259 | 107,123 | |||||||||
Inventories | - | (180,432 | ) | - | ||||||||
Accounts payable and accrued liabilities | (69,592 | ) | (339,043 | ) | 364,306 | |||||||
Net cash used in operating activities | (1,234,154 | ) | (1,223,396 | ) | (862,334 | ) | ||||||
Net cash provided by operating activities of discontinued operations | - | - | 175,927 | |||||||||
Net cash used in operating activities | (1,234,154 | ) | (1,223,396 | ) | (686,407 | ) | ||||||
Investing Activities | ||||||||||||
Intangible assets | (35,006 | ) | - | - | ||||||||
Purchase of equipment | (105,358 | ) | - | - | ||||||||
Net cash used in investing activities | (140,364 | ) | - | - | ||||||||
Financing Activities | ||||||||||||
Proceeds from issuance of shares | 2,404,000 | 626,000 | 637,070 | |||||||||
Proceeds from exercise of warrants | 1,653,737 | - | - | |||||||||
Proceeds from exercise of stock options | 125,657 | 5,250 | 20,701 | |||||||||
Share issuance costs | (98,596 | ) | (25,242 | ) | - | |||||||
Share subscription received | - | 10,000 | 10,000 | |||||||||
Loan repaid | (1,000,000 | ) | - | - | ||||||||
Loan proceeds | - | 940,000 | - | |||||||||
Finance cost | - | (30,000 | ) | - | ||||||||
Lease payments | - | (13,696 | ) | (52,007 | ) | |||||||
Net cash provided by financing activities | 3,084,798 | 1,512,312 | 615,764 | |||||||||
Increase (decrease) in Cash and Cash Equivalents | 1,710,280 | 288,916 | (70,643 | ) | ||||||||
Cash and Cash Equivalents, Beginning of Year | 302,715 | 13,799 | 84,442 | |||||||||
Cash and Cash Equivalents, End of Year | 2,012,995 | 302,715 | 13,799 | |||||||||
Cash and Cash Equivalents Consist of: | ||||||||||||
Cash | 1,702,995 | 292,715 | 13,799 | |||||||||
Guaranteed investment certificates | 310,000 | 10,000 | - | |||||||||
Cash and Cash Equivalents | 2,012,995 | 302,715 | 13,799 |
Supplemental cash flow information (Note 21)
The accompanying notes are an integral part of these consolidated financial statements
F-8 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
1.NATURE OF OPERATIONS AND GOING CONCERN
Avricore Health Inc. (the “Company”) was incorporated under the Company Act of British Columbia on May 30, 2000. The Company’s common shares trade on the TSX Venture Exchange (the “Exchange”) under the symbol “AVCR” and are quoted on the OTCIQ Market as “NUVPF”. The Company’s registered office is at 700 – 1199 West Hastings Street, Vancouver, British Columbia, V6E 3T5.
The Company is involved in the business of health data and point-of-care technologies (“POC”POCT”).
The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. The Company has always experienced operating losses and negative operating cash flows. Operations have been funded by the issuance of share capital. These conditions raisemay cast substantial doubt on the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon its ability to generate revenue from its operations, or raise additional financing to cover ongoing cash requirements. The consolidated financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.
SCHEDULE OF DEFICIT
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 |
| $ | $ | $ |
Deficit | (27,334,019) | (25,228,411) | (21,091,609) |
Working capital | (465,454) | 439,228 | 1,272,259 |
December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
$ | $ | $ | ||||||||||
Deficit | (30,216,117 | ) | (28,507,985 | ) | (27,334,019 | ) |
In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) a global pandemic. Since then, several measures have been implemented in Canada and the rest of the world in response to the increased impact from COVID-19. The Company continues to operate the business forward at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on the Company’s operations, including the duration and impact on the Company’s future plans, cannot be reasonably estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in 2020.
2.BASIS OF PRESENTATION
a)Statement of Compliance and basis of presentation
The consolidated financial statements for the year ended December 31, 20192021 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).
b)Basis of presentation preparation
The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The significant accounting policies are presented in Note 3 and have been consistently applied in each of the periods presented. The consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency, unless other indicated.
F-9 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
2.BASIS OF PRESENTATION (continued)
b) Basis of preparation (continued)
The preparation of consolidated financial statements in accordance with IFRS requires the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements.notes. The areas involving a higher degree of judgment and complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3(n).below. Actual results might differ from these estimates. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised.
c)Basis of consolidation
Consolidated financial statements include the assets, liabilities and results of operations of all entities controlled by the Company. Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the Company’s the consolidated financial statements. Where control of an entity is obtained during a financial year, its results are included in the consolidated statements of operations and comprehensive loss from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control exists.
These consolidated financial statements include the accounts of the Company and its controlled wholly owned subsidiaries, Vanc Marine Pharmaceuticals Inc. and HealthTabHealthTab™ Inc.
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a)Revenue recognition
The Company’s revenues are generated from operating leases of the POC system and sale of testing panels. Revenue comprises the fair value of the consideration received or receivable and it is shown net of tax and discounts. The Company also earned revenue from the sale of over-the-counter pharmaceuticals (“OTC”), however, the Company discontinued this segment during the year ended December 31, 2019 (see Note 16).
The Company recognizes revenue to depict the transfer of goods and services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services by applying the following steps:
•Identify the contract with a client;
● | Identify the contract with a client; |
● | Identify the performance obligations in the contract; |
● | Determine the transaction price; |
● | Allocate the transaction price to the performance obligations; and |
● | Recognize revenue when, or as, the Company satisfies a performance obligation. |
•Identify the performance obligations in the contract;
•Determine the transaction price;
•Allocate the transaction price to the performance obligations; and
•Recognize revenue when, or as, the Company satisfies a performance obligation.
Revenue may be earned over time as the performance obligations are satisfied or at a point in time which is when the entity has earned a right to payment, the customer has possession of the asset and the related significant risks and rewards of ownership, and the customer has accepted the asset.
The Company'sCompany’s arrangements with clients can include multiple performance obligations. When contracts involve various performance obligations, the Company evaluates whether each performance obligation is distinct and should be accounted for as a separate unit of accounting under IFRS 15, Revenue from Contracts with Customers.
F-10 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a)Revenue recognition (continued)
The Company determines the standalone selling price by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include discounting practices, the size and volume of our transactions, our marketing strategy, historical sales and contract prices. The determination of standalone selling prices is made through consultation with and approval by management, taking into consideration our go-to-market strategy. As the Company'sCompany’s go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in relative standalone selling prices.
The Company generally receives payment from its clients after invoicing within the normal 28-day commercial terms. If a client is specifically identified as a credit risk, recognition of revenue is stopped except to the extent of fees that have already been collected.
b)LeasesLeases
Effective January 1, 2019, the Company adopted IFRS 16 Leases using the modified retrospective approach. The modified retrospective approach does not require restatement of prior period financial information as it recognizes the cumulative effect as an adjustment to opening retained earnings and applies the standard prospectively.
A contract is, or contains, a lease if the contract conveys a lessee the right to control the use of lessor’s identified asset for a period of time in exchange for consideration.
Upon the adoption of IFRS 16, the Company adopted the following significant accounting policy effective January 1, 2019:
The Company as a lessee
A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Depreciation is recognized on the right-of-use asset over the lease term. Interest expense is recognized on the lease liabilities using the effective interest rate method and payments are applied against the lease liability.
On adoption of IFRS 16, the Company recognized lease liabilities of $68,253 in relation to lease arrangements measured at the present value of the remaining lease payments, adjusted by commitments in relation to arrangements not containing leases, short-term and low-value leases, and discounted using the Company’s incremental borrowing rate as of January 1, 2019. The incremental borrowing rate used to determine the lease liabilities at adoption was 12%. The associated right-of-use assets were measured at the amount equal to the lease liabilities on January 1, 2019, with no impact on deficit. See Note 8 – "Right-of-Use Assets" and Note 12 – "Lease Liabilities" for additional information regarding the Company's leases.
Key areas where management has made judgments, estimates, and assumptions related to the application of IFRS 16 include:
-The incremental borrowing rates are based on judgments including economic environment, term, currency, and the underlying risk inherent to the asset. The carrying balance of the right-of-use assets, lease liabilities, and the resulting interest expense and depreciation expense, may differ due to changes in the market conditions and lease term.
- | The incremental borrowing rates are based on judgments including economic environment, term, currency, and the underlying risk inherent to the asset. The carrying balance of the right-of-use assets, lease liabilities, and the resulting interest expense and depreciation expense, may differ due to changes in the market conditions and lease term. | |
- | Lease terms are based on assumptions regarding extension terms that allow for operational flexibility and future market conditions. |
-Lease terms are based on assumptions regarding extension terms that allow for operational flexibility and future market conditions.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b)Leases
The Company as a lessor
A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. All other leases are classified as finance leases.
Leases of the Company’s POC systems to customers are classified are operating leases. Lease payments from operating leases are recognized as income on a straight-line basis. All costs, including depreciation, incurred in earning the operating lease income are recognized as an expense. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as an expense over the lease term on the same basis as the lease income. The depreciation for depreciable underlying assets subject to operating leases is in accordance with depreciation policy for the Company’s equipment.
F-11 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c)Foreign currency
These consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the Company and its subsidiaries.
Foreign currency transactions are translated into the functional currency of the respective entity, using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognized in profit or loss.
Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction and are not retranslated. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.
d)Cash equivalents
Cash equivalents include short-term guaranteed investment certificates readily convertible into a known amount of cash, which is subject to insignificant change in value.
e)Inventory
Inventories consist of raw materials comprising the ingredients used to manufacture OTC pharmaceuticals, as well as the packaging for these products, and finished goods comprising Canadian generic pharmaceuticals. All inventories are recorded at the lower of cost on a weighted average basis and net realizable value. The stated value of all inventories includes purchase, shipping and freight, and quality control testing. A regular review is undertaken to determine the extent of any provision for obsolescence.
f)Equipment
Equipment is stated at historical cost less accumulated amortization and accumulated impairment losses. Amortization is calculated on a declining balance method over their estimated useful lives. The Company’s equipment, which consists of computer, furniture, equipment and computer systems are amortized at 30%, and the straight-line method for leasehold improvements over the term of the lease.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
g)Intangible assets
All intangible assets acquired separately by the Company are recorded at cost on the date of acquisition. Intangible assets that have indefinite lives are measured at cost less accumulated impairment losses. Intangible assets that have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Intangible assets comprise of intellectual property, trademarks and web domains and distribution rights, which are amortized on a straight-line basis over 3 years. Amortization rates are reviewed annually to ensure they are aligned with estimates of remaining economic useful lives of the associated intangible assets.
h)f) Equipment
Equipment is stated at historical cost less accumulated amortization and accumulated impairment losses. Amortization is calculated on a declining balance method over their estimated useful lives. The Company’s
computer systems are amortized at 55% and POC systems at 8%.
The Company operates an incentive share purchase option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share- based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes option pricing model, which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.
F-12 |
i)
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Proceeds from the exercise of stock options and warrants are recorded as share capital in the amount for which the option or warrant enabled the holder to purchase a share in the Company. Any previously recorded share-based payment included in the reserves account is transferred to share capital on exercise of options. Share capital issued for non-monetary consideration is valued at the closing market price at the date of issuance. The proceeds from issuance of units are allocated between common shares and warrants based on the residual method. Under this method, the proceeds are allocated first to share capital based on the fair value of the common shares at the time the units are priced and any residual value is allocated to the warrants reserve. Consideration received for the exercise of warrants is recorded in share capital, and any related amount recorded in warrants reserve is transferred to share capital.
Basic loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, potentially dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive. Basic and diluted loss per share are the same for the periods presented.
k)j) Income taxes
Income tax expense, consisting of current and deferred tax expense, is recognized in the statements of operations. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard to previous years.
Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that substantive enactment occurs.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k)Income taxes (continued)
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
F-13 |
l)
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
k) Financial Instruments
Classification
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.
The Company has classified its cash and cash equivalents as FVTPL and accounts receivable, accounts payable and lease liabilitiesloans payable as amortized cost.
Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the profit or loss in the period in which they arise.
Financial assets at FVTOCI
Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income (loss) as they arise.
Impairment of financial assets at amortized cost
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period. In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
F-14 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l)k) Financial Instruments(continued)
Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in profit or loss.
The Company provides information about its financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair value:
Level 1 –
Level 1 | – | quoted prices (unadjusted) in active markets for identical assets or liabilities; |
Level 2 | – | inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and |
Level 3 | – | inputs for the asset or liability that are not based on observable market data (unobservable inputs) |
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.,as prices) or indirectly (i.e., derived from prices); and
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
m)l) Impairment of equipment and intangible assets
At the end of each reporting period, if there are indicators of impairment, the Company reviews the carrying amounts of its equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Individual assets are grouped together as a cash generating unit for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are independent from other group assets.
If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. Where the carrying amount of a cash generating unit exceeds its recoverable amount, the cash generating unit is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are adjusted for the risks specific to the cash generating unit and are discounted to their present value with a discount rate that reflects the current market indicators. The recoverable amount of intangible assets with an indefinite useful life, intangible assets not available for use, or goodwill acquired in a business combination are measured annually whether or not there are any indications that impairment exists.
Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the cash generating unit in prior years. A reversal of an impairment loss is recognized as income immediately.
F-15 |
n)
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m) Significant accounting estimates and judgments
Estimates
Significant estimates used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:
Inventory valuation
The Company estimates the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by regulatory changes or other market-driven changes that may reduce future selling prices. In determining net realizable value, the Company considers such factors as turnover, historical experience, expiry dates and shelf life of the products. A change to these assumptions could impact the Company’s inventory valuation and gross margin. The Company attempts to sell products with short shelf life with significant rebates. Any unsold products with short shelf life and expired products are written-off.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n)Significant accounting estimates and judgments (continued)
Useful lives of depreciable assets
The Company reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utilization of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utilization of certain equipment.
Intangible assets
The recoverability of the carrying value of the intangible assets is dependent on successful development and commercial stage to the point where revenue is possible. The carrying value of these assets is reviewed by management when events or circumstances indicate that its carrying value may not be recovered. If impairment is determined to exist, an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount.
Share-based payments
The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.
The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield. Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.
Judgements
Significant judgments used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:
Revenue recognition
Revenue is recognized when the revenue recognition criteria expressed in the accounting policy stated above for Revenue Recognition have been met. Judgment may be required when allocating revenue or discounts on sales amongst the various elements in a sale involving multiple deliverables.
Deferred tax assetsincome taxes
Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n)Significant accounting estimates and judgments (continued)
Going concern
The Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future. The factors considered by management are disclosed in Note 1.
F-16 |
o)Reclassifications
Certain reclassifications have been madeAvricore Health Inc.
Notes to the prior period’sConsolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
n) Accounting standards issued but not yet effective
There are no accounting pronouncements with future effective dates that are applicable or are expected to have a material impact on the Company’s consolidated financial statements to confirm to the current period’s presentation on the consolidated statements of financial position, comprehensive loss and changes in equity.statements.
4. ACQUISITION OF HEALTHTAB ™ACQUISITION INC.
ACQUISITION OF HEALTHTAB INC.
On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTabHealthTab™ Inc. (“HealthTab”HealthTab™”). HealthTab’sHealthTab™’s primary asset is intellectual property and certain trademarks and web domains related to the design of the HealthTabHealthTab™ system, being a lab-accurate, point of care testing platform. Under the share purchase agreement, the consideration to be paid by the Company is as follows:
● | Cash payment of $ upon signing of the share purchase agreement (paid); |
● | Cash payment of $100,000 in six equal monthly instalments after the closing date (paid); |
● | Issue common shares no later than 125 days after the closing date (issued); |
● | Issue common shares no later than 245 days after the closing date (issued); |
● | Issue common shares no later than 365 days after the closing date (issued); |
● | Issue common shares equal to the higher of $100,000 or % of net sales related to HealthTab™ for the year ended December 2018 by January 31, 2019 (issued); and |
● | Issue common shares equal to the higher of $100,000 or % of net sales related to HealthTab™ for the year ended December 2019 by January 31, 2020 (issued) |
·Cash payment of $100,000 upon signing of the share purchase agreement (paid);
·Cash payment of $100,000 in six equal monthly instalments after the closing date (paid);
·Issue 880,000 common shares no later than 125 days after the closing date (issued);
·Issue 880,000 common shares no later than 245 days after the closing date (issued);
·Issue 906,667 common shares no later than 365 days after the closing date (issued);
·Issue common shares equal to the higher of $100,000 or 5% of net sales related to HealthTab for the year ended December 2018 by January 31, 2019 (issued); and
·Issue common shares equal to the higher of $100,000 or 5% of net sales related to HealthTab for the year ended December 2019 by January 31, 2020 (issued subsequent to the year end)
This acquisition has beenwas accounted for as an acquisition of assets and liabilities as HealthTabHealthTab™ did not meet the definition of a business under IFRS 3, Business Combinations. The shares to be issued have been valued based on the Company’s share price on the acquisition. Due to the uncertainty associated with future revenue derived from HealthTab, the Company has estimated the 2020 share issuances to be $100,000 (See note 23).
5.ACCOUNTS RECEIVABLE
The Company’s accounts receivable consists of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
| December 31, 2019 | December 31, 2018 | December 31, 2021 | December 31, 2020 | ||||||
| $ | $ | $ | $ | ||||||
Trade receivables | 12,375 | 193,465 | 83,847 | 9,800 | ||||||
GST receivable | 3,099 | 86,815 | 7,701 | 2,128 | ||||||
| 15,474 | 280,280 | ||||||||
Total trade receivables | 91,548 | 11,928 |
6.PREPAID EXPENSES AND DEPOSITS
The balance consists of prepaid expenseexpenses to vendors of $152,704 (2018$35,949 (2020 - $252,751), security deposit for office of $8,420 (2018 - $8,420)$49,433), prepaid business insurance of $5,999 (2018$6,518 (2020 - $13,075)$16,513) and security deposits of $12,000 (2018$12,000 (2020 - $12,000)$12,000).
7. INVENTORIES
During the year ended December 31, 2020, the Company recorded an inventory write-down of $180,432 related to hand sanitizers purchased during the year.
F-17 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
7.INVENTORIES
At December 31, 2019 and December 31, 2018, the Company’s inventory consists of the following:8. RIGHT-OF-USE ASSET
SCHEDULE OF RIGHT OF USE ASSETS
|
| |||
| $ | |||
|
|
| ||
|
|
Inventories expensed to cost of sales which are included in discontinued operations during the year ended December 31, 2019 are $33,185 (2018 - $153,509; 2017 - $198,588). During the year ended December 31, 2019, the Company recorded a write-down of inventory of $109,941 (2018 - $227,025; 2017 - $745,977) in relation to of discontinued operations.
8.RIGHT-OF-USE ASSET
| ||||
| ||||
| ||||
Balance, December 31, 2018 | - | |||
Recognized on adoption of IFRS 16 | 68,253 | |||
Additions | - | |||
Balance, December 31, 2019, 2020 and 2021 | 68,253 | |||
Accumulated Amortization | ||||
Balance, December 31, 2018 | - | |||
Amortization | 68,253 | |||
Balance, December 31, 2019, 2020 and 2021 | 68,253 | |||
Carrying value | ||||
December 31, 2019, 2020 and | - |
Right-of-use asset comprised of the Company’s leased office space. During the year ended December 31, 2019, the Company determined it would terminate the remaining lease, and accordingly fully amortized 100%100% of the right-of-use assetasset.
During the year ended December 31, 2020, the Company terminated its lease agreement for its office premise. Pursuant to $Nil. Referthe cancelation, the Company forfeited its deposit of $8,420 and paid the outstanding rent for the months of January to Note 23 for further information.March, 2020.
9. EQUIPMENT
SCHEDULE OF EQUIPMENT
Equipment | ||||
$ | ||||
Cost | ||||
Balance, December 31, 2019 and 2020 | - | |||
Additions | 105,358 | |||
Balance, December 31, 2021 | 105,358 | |||
Accumulated Amortization | ||||
Balance, December 31, 2019 and 2020 | - | |||
Amortization | 14,483 | |||
Balance, December 31, 2021 | 14,483 | |||
Carrying value | ||||
As at December 31, 2020 | - | |||
As at December 31, 2021 | 90,875 |
F-18 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
9.EQUIPMENT
| Office Furniture and Equipment | Computer equipment and Systems | Laboratory Equipment | Leasehold Improvements | Total |
| $ | $ | $ | $ | $ |
Cost |
|
|
|
|
|
Balance, December 31, 2017 | 7,491 | 66,870 | 38,896 | 24,182 | 137,439 |
Additions | 5,000 | - | - | - | 5,000 |
Write down | (1,637) | (62,972) | - | - | (64,609) |
Balance, December 31, 2018 | 10,854 | 3,898 | 38,896 | 24,182 | 77,830 |
Write down | (10,854) | (3,898) | (38,896) | (24,182) | (77,830) |
Balance, December 31, 2019 | - | - | - | - | - |
|
|
|
|
|
|
Accumulated Amortization |
|
|
|
|
|
Balance, December 31, 2017 | 1,612 | 2,130 | 25,342 | 18,634 | 47,718 |
Amortization | 3,264 | 19,422 | 4,067 | 1,849 | 28,602 |
Write down | (495) | (19,000) | - | - | (19,495) |
Balance, December 31, 2018 | 4,381 | 2,552 | 29,409 | 20,483 | 56,825 |
Amortization | 1,942 | 404 | 2,845 | 1,110 | 6,301 |
Write down | (6,323) | (2,956) | (32,254) | (21,593) | (63,126) |
Balance, December 31, 2019 | - | - | - | - | - |
|
|
|
|
|
|
Carrying value |
|
|
|
|
|
As at December 31, 2018 | 6,473 | 1,346 | 9,487 | 3,699 | 21,005 |
As at December 31, 2019 | - | - | - | - | - |
The write-off of equipment of $14,704 during the year ended December 31, 2019 is included in discontinued operations.
10.INTANGIBLE ASSETS
| HealthTab | Corozon | Emerald | Total |
| $ | $ | $ | $ |
Cost |
|
|
|
|
Balance, December 31, 2017 | 1,140,283 | - | - | 1,140,283 |
Acquired assets | - | 231,818 | 510,878 | 742,696 |
Write down | (1,140,282) | (231,817) | - | (1,372,099) |
Balance, December 31, 2018 | 1 | 1 | 510,878 | 510,880 |
Write down | - | - | (510,877) | (510,877) |
Balance, December 31, 2019 | 1 | 1 | 1 | 3 |
|
|
|
|
|
Accumulated Amortization |
|
|
|
|
Balance, December 31, 2017 | 4,166 | - | - | 4,166 |
Amortization | 380,093 | 41,667 | 85,147 | 506,907 |
Write down | (384,259) | (41,667) | - | (425,926) |
Balance, December 31, 2018 | - | - | 85,147 | 85,147 |
Amortization | - | - | 112,216 | 112,216 |
Write down | - | - | (197,363) | (197,363) |
Balance, December 31, 2019 | - | - | - | - |
|
|
|
|
|
Carrying value |
|
|
|
|
As at December 31, 2018 | 1 | 1 | 425,731 | 425,733 |
As at December 31, 2019 | 1 | 1 | 1 | 3 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
10.SCHEDULE OF INTANGIBLE ASSETS (continued)
Software | HealthTab™ | Corozon | Emerald | Total | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
Cost | ||||||||||||||||||||
Balance, December 31, 2019 and 2020 | - | 1 | 1 | 1 | 3 | |||||||||||||||
Additions | 35,006 | - | - | - | 35,006 | |||||||||||||||
Balance, December 31, 2021 | 35,006 | 1 | 1 | 1 | 35,009 | |||||||||||||||
Accumulated Amortization | ||||||||||||||||||||
Balance, December 31, 2019 and 2020 | - | - | - | - | - | |||||||||||||||
Amortization | 3,501 | - | - | - | 3,501 | |||||||||||||||
Balance, December 31, 2021 | 3,501 | - | - | - | 3,501 | |||||||||||||||
Carrying value | ||||||||||||||||||||
As at December 31, 2020 | - | 1 | 1 | 1 | 3 | |||||||||||||||
As at December 31, 2021 | 31,505 | 1 | 1 | 1 | 31,508 |
On April 11, 2018, the Company entered into an asset purchase agreement with Corozon Consulting Corporation for the acquisition of the Corozon Platform. The Corozon Platform consists of two complementary modules: Corozon Academy which offers practical professional education to community pharmacists and Corozon Hardware which is an e-commerce portal that allows pharmacists to order point-of-care diagnostic devices and supplies. In consideration, the Company paid twelve monthly instalments totaling $50,000 and issued 909,090 common shares valued at $181,818.
On April 15, 2018, the Company entered into a supply and distribution agreement with Emerald Health Therapeutics, Inc. (“Emerald”) to sell and distribute certain proprietary endocannabinoid-supporting products in Canada to licensed pharmacies. In consideration, the Company issued 3,030,303 warrants to Emerald valued at $510,878 to acquire 3,030,303 common shares of the Company at a price of $0.33 per share until April 15, 2020.
During the year ended December 31, 2018, the Company performed an assessment and determined that the carrying value of the intangible assets exceeded the recoverable amount and accordingly recognized impairment of the intangible assets related to HealthTab acquisition and Corozon Platform acquisition in the amount of $964,173.
During the year ended December 31, 2019 the Company performed an assessment and determined that the carrying value of the intangible asset exceeded the recoverable amount and accordingly recognized impairment of the intangible asset related to Emerald acquisition in the amount of $313,514. The impairment can be reversed in future periods when there is a change in circumstances and the estimates used to determine the asset's recoverable amount.
11.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at December 31, 2019 and 2018, theThe Company’s accounts payable and accrued costs consist of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED COSTS
| December 31, 2019 | December 31, 2018 | December 31, 2021 | December 31, 2020 | ||||||
| $ | $ | $ | $ | ||||||
Trade accounts payable | 625,460 | 226,575 | 44,477 | 126,569 | ||||||
Accrued liabilities | 27,000 | 87,664 | - | 26,000 | ||||||
| 652,460 | 314,239 | ||||||||
Accounts payable and accrued liabilities | 44,477 | 152,569 |
12.LEASE LIABILITIES
SCHEDULE OF LEASE LIABILITIES
$ | ||||
| ||||
|
| |||
|
| |||
|
| |||
|
| |||
Balance, December 31, 2019 | 21,390 | |||
|
| 726 | ||
| (22,116 | ) | ||
Balance, December 31, 2020 and 2021 | - |
During the year ended December 31, 2020, the Company terminated its lease agreement for its office premise. Pursuant to the cancelation, the Company forfeited its deposit of $8,420 and paid the outstanding rent for the months of January to March, 2020.
13.SHAREHOLDERS’ EQUITY
F-19 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
13. LOANS PAYABLE
During the year ended December 31, 2020, the Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000 (the “Loan”). The Loan was for a term of one year from the date of receipt of the funds, bore interest at a rate of 10% per annum and was secured with all of the present and after-acquired property of the Company. The loan was subject to an interest reserve of $100,000 held back from the loan advance. The Company paid a loan application fee in the amount of $30,000 and issued bonus shares with a fair value of $52,500, which was recorded against the carrying value of the Loan. During the year ended December 31, 2021, the Company recorded $21,096 (2020 - $78,904) as interest expense and recorded $17,342 (2020 - $64,158) as accretion expense on the loan which was been included in finance cost in the consolidated statements of operations and comprehensive loss. During the year ended December 31, 2021, the Company repaid the outstanding loan balance of $1,000,000 at the end of the term.
During the year ended December 31, 2020, the Company received a Canada Emergency Business Account loan of $40,000 to be repaid on or before December 31, 2025. The loan is interest-free until December 31, 2022. Thereafter, the outstanding loan balance will bear interest at the rate of 5% per annum.
14. SHARE CAPITAL
Authorized share capital
Authorized: Unlimited number of common shares without par value.
Issued share capital
During the year ended December 31, 2021:
The Company issued common shares upon exercise of warrants for gross proceeds of $ .
The Company issued common shares upon exercise of stock options for gross proceeds of $ .
The Company issued common shares valued at $ to a consultant in exchange for services received.
On February 12, 2021, the Company completed a non-brokered private placement and issued units at a price of $ per unit for gross proceeds of $ . Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $ per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company’s directors and officers participated in the private placement. The Company paid finder’s fee totaling $ and issued finder’s warrants valued at $ .
On January 28, 2021, the Company closed the final tranche of a non-brokered private placement and issued units at a price of $ per unit for gross proceeds of $ . Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $ per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company’s directors and officers participated in the private placement. The Company paid finder’s fee totaling $ and issued finder’s warrants valued at $ .
F-20 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
13.SHAREHOLDERS’ EQUITY (continued)
14. SHARE CAPITAL (continued)
Issued share capital(continued)
During the year ended December 31, 2019:2020:
The Company closed a tranche of a non-brokered private placement and issued units at a price of $ per unit for gross proceeds of $ . Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $ per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company paid finder’s fee totaling $ and issued finder’s warrants valued at $ . The Company’s directors and officers participated in the private placement.
The Company issued 1,111,110 common shares valued at $100,000 relatedin exchange for services received and to settle accounts payables of $ . An aggregate of shares were issued in settlement of $ in amounts owing to certain directors and officers of the Company. The common shares issued to the acquisition of HealthTab (see Note 4).related parties are subject to a four month plus one day hold period.
The Company issued 73,928 common shares pursuant to the exercise of 73,928 stock options for gross proceeds of $20,701. $19,108$ . $ was reclassified from reserves to share capital on exercise of the options.
The Company issued common shares valued at $ related to the acquisition of HealthTab™ (see Note 4).
The Company issued common shares valued at $ as bonus shares pursuant to a loan agreement (see Note 14).
During the year ended December 31, 2019:
The Company issued common shares valued at $ related to the acquisition of HealthTab (see Note 4).
The Company issued common shares pursuant to the exercise of stock options for gross proceeds of $ . $ was reclassified from reserves to share capital on exercise of the options.
The Company issued $11,167$ in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018. common shares to a vendor valued at
The Company closed a private placement $0.07$ per share for gross proceeds of $294,450.$ . common shares at a price of
The Company closed a private placement and issued $0.05$ per unit for gross proceeds of $342,620.$ . Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $0.15$ per share until August 13, 2021. The fair value of common shares was $171,310$ based on share price and, the residual value of $171,310$ was allocated to the warrants. units at a price of
F-21 |
During the year ended December 31, 2018:
The Company issued 2,666,667 common shares valued at $773,733 related to the acquisition of HealthTab (Note 4).
The Company issued 909,090 common shares valued at $181,818 related to the acquisition of the Corozon Platform.
The Company issued 233,450 common shares to Lampyon valued at $43,915 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018.
The Company closed a private placement and issued 5,327,335 units at a price of $0.15 per unit for gross proceeds of $799,100. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.33 per share until July 27, 2020. The Company paid finder’s fees of $18,264 in cash and issued 88,800 finder’s warrants valued at $9,332. The finder’s warrants are exercisable to purchase one common share of the Company at $0.33 per share until July 31, 2020.
The Company issued 131,000 common shares for exercise of 131,000 stock options for gross proceeds of $28,820. $40,181 was reclassified from reserves to share capital on exercise of options.
The Company issued 2,975,500 common shares for exercise of 2,975,500 warrants for gross proceeds of $595,100. $8,210 was reclassified from reserves to share capital on exercise of warrants.
The Company granted 3,030,330 warrants valued at $510,878 to Emerald as consideration for a supply and distribution agreement.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
13.SHAREHOLDERS’ EQUITY (continued)
During the year ended December 21, 2017:14. SHARE CAPITAL (continued)
The Company closed a private placement and issued 4,408,659 units at a price of $0.15 per unit for gross proceeds of $661,299. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until June 26, 2022. The Company paid finder’s fees of $7,200 in cash and issued 48,000 finder’s warrants valued at $8,210. The finder’s warrants are exercisable to purchase one common share of the Company at $0.20 per share until June 26, 2022.
The Company closed a private placement and issued 1,326,667 units at a price of $0.15 per unit for gross proceeds of $199,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until August 3, 2022.
The Company closed a private placement and issued 4,850,000 units at a price of $0.15 per unit for gross proceeds of $727,500. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until November 27, 2022. The Company paid finder’s fees of $3,300 in cash and issued 22,000 finder’s warrants valued at $3,404. The finder’s warrants are exercisable to purchase one common share of the Company at $0.20 per share until November 27, 2022.
The Company issued 2,274,000 common shares related to 2,274,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $454,800.
Stock options
The Company has adopted an incentive share purchase option plan under the rules of the Exchange pursuant to which it is authorized to grant options to executive officers, directors, employees and consultants, enabling them to acquire up to 10% % of the issued and outstanding common shares of the Company. The options can be granted for a maximum term of and generally vest either immediately or in specified increments of up to 25% % in any three-month period.
The changes in sharestock options including those granted to directors, officers, employees and consultants during years ended December 31, 2019, 2018 and 2017 are summarized as follows:
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 | |||
| Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price |
Beginning Balance | 2,539,000 | $0.24 | 2,420,000 | $0.24 | 1,460,938 | $1.38 |
Options granted | 3,095,000 | $0.06 | 665,000 | $0.23 | 2,420,000 | $0.24 |
Expired/Cancelled | (319,000) | $0.22 | (415,000) | $0.24 | (1,460,938) | $1.38 |
Exercised | (73,928) | $0.28 | (131,000) | $0.22 | - | - |
Ending Balance | 5,241,072 | $0.13 | 2,539,000 | $0.24 | 2,420,000 | $0.24 |
Exercisable | 5,241,072 | $0.13 | 2,536,500 | $0.24 | 1,188,750 | $0.22 |
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||||||||||||||
Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | |||||||||||||||||||
Beginning Balance | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 | 2,539,000 | $ | 0.24 | |||||||||||||||
Options granted | 2,840,000 | $ | 0.22 | 1,730,000 | $ | 0.08 | 3,095,000 | $ | 0.06 | |||||||||||||||
Expired/Cancelled | - | - | (160,000 | ) | $ | 0.07 | (319,000 | ) | $ | 0.22 | ||||||||||||||
Exercised | (1,666,020 | ) | $ | 0.08 | (105,000 | ) | $ | 0.05 | (73,928 | ) | $ | 0.28 | ||||||||||||
Ending Balance | 7,880,052 | $ | 0.13 | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 | |||||||||||||||
Exercisable | 7,692,552 | $ | 0.13 | 6,706,072 | $ | 0.08 | 5,241,072 | $ | 0.13 |
Avricore Health Inc.
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
13.SHAREHOLDERS’ EQUITY (continued)
Stock options (continued)
The following table summarizes information about sharestock options outstanding and exercisable as at December 31, 2019:2021:
SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE
Exercise Price | Expiry date | Options | ||||||||||
Outstanding | Exercisable | |||||||||||
$ | 0.15 | June 21, 2022 | 140,000 | 140,000 | ||||||||
$ | 0.17 | July 2, 2022 | 500,000 | 500,000 | ||||||||
$ | 0.10 | (1) | July 20, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (1) | September 27, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (1) | November 20, 2022 | 150,000 | 150,000 | |||||||
$ | 0.10 | (2) | December 8, 2022 | 675,052 | 675,052 | |||||||
$ | 0.10 | (3) | March 27, 2023 | 200,000 | 200,000 | |||||||
$ | 0.17 | March 31, 2023 | 250,000 | 62,500 | ||||||||
$ | 0.10 | (4) | April 11, 2023 | 150,000 | 150,000 | |||||||
$ | 0.075 | January 24, 2024 | 280,000 | 280,000 | ||||||||
$ | 0.08 | February 28, 2024 | 140,000 | 140,000 | ||||||||
$ | 0.06 | April 1, 2024 | 175,000 | 175,000 | ||||||||
$ | 0.05 | October 1, 2024 | 1,480,000 | 1,480,000 | ||||||||
$ | 0.08 | November 18, 2025 | 780,000 | 780,000 | ||||||||
$ | 0.08 | December 8, 2025 | 710,000 | 710,000 | ||||||||
$ | 0.19 | January 28, 2026 | 150,000 | 150,000 | ||||||||
$ | 0.25 | March 22, 2026 | 1,800,000 | 1,800,000 | ||||||||
7,880,052 | 7,692,552 |
(1) | Options repriced from $ | to $ during the year ended December 31, 2020
(2) | Options repriced from $ | to $ during the year ended December 31, 2020
(3) | Options repriced from $ | to $ during the year ended December 31, 2020
(4) | Options repriced from $ to $ during the year ended December 31, 2020 |
F-22 |
Exercise Price | Expiry date | Options | ||
|
| Outstanding | Exercisable | |
$0.15 | July 20, 2022 | 150,000 | 150,000 | |
$0.15 | September 27, 2022 | 150,000 | 150,000 | |
$0.15 | November 20, 2022 | 150,000 | 150,000 | |
$0.28 | December 8, 2022 | 1,181,072 | 1,181,072 | |
$0.24 | March 27, 2023 | 200,000 | 200,000 | |
$0.21 | April 11, 2023 | 175,000 | 175,000 | |
$0.125 | September 12, 2023 | 140,000 | 140,000 | |
$0.075 | January 24, 2024 | 280,000 | 280,000 | |
$0.08 | February 28, 2024 | 140,000 | 140,000 | |
$0.06 | April 1, 2024 | 615,000 | 615,000 | |
$0.05 | October 1, 2024 | 2,060,000 | 2,060,000 | |
|
| 5,241,072 | 5,241,072 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
14. SHARE CAPITAL (continued)
Stock options (continued)
The weighted average remaining life of the stock options outstanding at December 31, 20192021 is 3.94 years.
Share-based compensation
Share-based compensation of $86,420$ was recognized during the year ended December 31, 2019 (20182021 (2020 - $372,137; 2017 - $311,389)$ ) for stock options granted, vested, and vestedrepriced during the current period.year. Options issued to directors and officers of the Company vested immediately, while those issued to consultants vest over one year, however, the Board may change such provisions at its discretion or as required on a grant-by-grant basis.
SCHEDULE OF SHARE BASED COMPENSATION FOR OPTIONS GRANTED
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 | 2021 | 2020 | 2019 | |||||||||
Expected life | 5.0 years | 5.0 years | 2.0 – 5.0 years | – years | – years | years | |||||||||
Volatility | 110% - 143% | 142% - 157% | 148% - 164% | % - | % | % - | % | % - | % | ||||||
Dividend yield | 0% | 0% | % | % | % | ||||||||||
Risk-free interest rate | 1.58% - 1.86% | 2.03% - 2.24% | 1.23% - 1.69% | % - | % | % - | % | % - | % |
Option pricing models require the use of highly subjective estimates and assumptions, including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018Warrants
(Expressed in Canadian Dollars)
13.SHAREHOLDERS’ EQUITY (continued)
Warrants
The Company has issued warrants entitling the holders to acquire common shares of the Company. The summary of changes in warrants is presented below.
SUMMARY OF CHANGES IN WARRANTS
Year ended December 31, 2021 | Year ended December 31, 2020 | Year ended December 31, 2019 | ||||||||||||||||||||||
Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | |||||||||||||||||||
Beginning Balance | 18,743,226 | $ | 0.16 | 20,704,664 | $ | 0.24 | 13,852,264 | $ | 0.28 | |||||||||||||||
Warrants issued | 16,274,000 | $ | 0.22 | 6,485,000 | $ | 0.15 | 6,852,400 | $ | 0.15 | |||||||||||||||
Warrants exercised | (10,058,660 | ) | $ | 0.16 | - | - | - | - | ||||||||||||||||
Warrants expired | (6,177,500 | ) | $ | 0.15 | (8,446,438 | ) | $ | 0.33 | - | - | ||||||||||||||
Outstanding | 18,781,066 | $ | 0.21 | 18,743,226 | $ | 0.16 | 20,704,664 | $ | 0.24 |
F-23 |
| Year ended December 31, 2019 | Year ended December 31, 2018 | Year ended December 31, 2017 | |||
| Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price |
Beginning Balance | 13,852,264 | $0.28 | 8,381,326 | $0.20 | - | - |
Warrants issued | 6,852,400 | $0.15 | 8,446,438 | $0.33 | 10,655,326 | $0.20 |
Expired/Cancelled | - | - | - | - | - | - |
Exercised | - | - | (2,975,500) | $0.20 | (2,274,000) | $0.20 |
Outstanding | 20,704,664 | $0.24 | 13,852,264 | $0.28 | 8,381,326 | $0.20 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
14. SHARE CAPITAL (continued)
Warrants (continued)
The following table summarizes information about warrants outstanding and exercisable as at December 31, 2019:2021:
SUMMARY OF WARRANTS OUTSTANDING AND EXERCISABLE
Exercise Price | Expiry date | Warrants Outstanding |
$0.20 | June 26, 2022 | 1,791,159 |
$0.20 | August 3, 2022 | 742,667 |
$0.20 | November 27, 2022 | 2,872,000 |
$0.15 | August 13, 2021 | 6,852,400 |
$0.33 | April 15, 2020 | 3,030,303 |
$0.33 | July 31, 2020 | 5,416,135 |
|
| 20,704,664 |
Exercise Price | Expiry date | Warrants Outstanding | ||||||
$ | 0.20 | June 26, 2022 | 993,666 | |||||
$ | 0.20 | August 3, 2022 | 742,667 | |||||
$ | 0.20 | November 27, 2022 | 770,733 | |||||
$ | 0.15 | January 28, 2022 | 9,018,000 | |||||
$ | 0.30 | February 12, 2022 | 7,256,000 | |||||
18,781,066 |
The weighted average remaining life of the warrants outstanding at December 31, 20192021 is 1.440.17 years.
The fairFair value of the finders’finder’s warrants granted was calculatedmeasured using the Black-Scholes Option Pricing Model usingpricing model with the following assumptions:
SUMMARY OF FAIR VALUE OF WARRANTS GRANTED
2021 | 2020 | |||||||
Expected life | 1 year | 1 year | ||||||
Volatility | 195% - 200 | % | 190 | % | ||||
Dividend yield | 0 | % | 0 | % | ||||
Risk-free interest rate | 0.15% - 0.17 | % | 0.26 | % |
Black-Scholes pricing models require the use of highly subjective estimates and assumptions, including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates.
15. MARKETING AND COMMUNICATIONS EXPENSES
SCHEDULE OF MARKETING AND COMMUNICATIONS EXPENSES
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
$ | $ | $ | ||||||||||
Marketing | - | 2,279 | 44,693 | |||||||||
Shareholder communications | 329,342 | 28,972 | 202,550 | |||||||||
329,342 | 31,251 | 247,243 |
F-24 |
| Year ended December 31, | ||
| 2019 | 2018 | 2017 |
Expected life | - | 2.0 years | 5.0 years |
Volatility | - | 154% - 169% | 154% - 159% |
Dividend yield | - | 0% | 0% |
Risk-free interest rate | - | 2.05% - 2.10% | 1.15% - 1.62% |
14.SELLING AND MARKETING EXPENSES
| Year ended December 31, | ||
| 2019 | 2018 | 2017 |
| $ | $ | $ |
Marketing and advertising | 44,693 | 164,420 | 10,890 |
Shareholder communications | 202,550 | 119,167 | 62,500 |
| 247,243 | 283,587 | 73,390 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
15.
16. GENERAL AND ADMINISTRATIVE EXPENSES
SUMMARY OF GENERAL AND ADMINISTRATIVE EXPENSES
| Year ended December 31, | ||||||||||||||
| 2019 | 2018 | 2017 | Year ended December 31, | |||||||||||
| $ | $ | $ | 2021 | 2020 | 2019 | |||||||||
$ | $ | $ | |||||||||||||
Bad debt | - | 2,977 | - | ||||||||||||
Bank service charges | 5,916 | 3,969 | 6 | 6,806 | 5,910 | 5,916 | |||||||||
Filing and registration fees | 72,076 | 94,029 | 74,898 | 59,635 | 37,715 | 72,076 | |||||||||
Foreign exchange | 150 | 692 | 3,630 | 153 | 6,350 | 150 | |||||||||
Insurance | 33,557 | 18,147 | 34,573 | 44,784 | 38,283 | 33,557 | |||||||||
Investor relations | 5,312 | 1,265 | 1,990 | ||||||||||||
Office maintenance | 49,713 | 86,700 | 180,984 | 30,738 | 17,550 | 49,713 | |||||||||
Payroll | - | 68,417 | 120,080 | ||||||||||||
Regulatory | 8,380 | - | - | ||||||||||||
Rent | 15 | 50,336 | 49,229 | 12,810 | 5,268 | 15 | |||||||||
Investor relations | 1,990 | 9,974 | 7,174 | ||||||||||||
Travel | 35,420 | 45,426 | 41,246 | 14,382 | 5,259 | 35,420 | |||||||||
| 198,837 | 377,690 | 511,820 | ||||||||||||
General and administrative expenses | 183,000 | 120,577 | 198,837 |
16.17. DISCONTINUED OPERATIONS
During the year ended December 31, 2019, the Company discontinued operations of its OTC pharmaceuticals products business division business segment. During the year ended December 31, 2019, 20182021, 2020 and 2017,2019, the loss attributable to the discontinued operations are as follows:
SCHEDULE OF LOSS ATTRIBUTABLE TO DISCONTINUED OPERATIONS
Year ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
$ | $ | $ | ||||||||||
Sales | - | - | 129,776 | |||||||||
Marketing, promotional activities | - | - | (27,842 | ) | ||||||||
Net Revenue | - | - | 101,934 | |||||||||
Cost of Sales | - | - | 33,481 | |||||||||
Gross profit (loss) | - | - | 68,453 | |||||||||
Expenses | ||||||||||||
Amortization | - | - | 6,301 | |||||||||
Product registration and development | - | - | 5,458 | |||||||||
Selling and marketing | - | - | 121,405 | |||||||||
Total expenses | - | - | 133,164 | |||||||||
Other income (expense) | ||||||||||||
Write-down of inventories | - | - | (109,941 | ) | ||||||||
Write-down of equipment | - | - | (14,704 | ) | ||||||||
Net loss from discontinued operations | - | - | (189,356 | ) |
F-25 |
| Year ended December 31, | ||||
|
| 2019 | 2018 | 2017 | |
|
| $ | $ | $ | |
Sales |
| 129,776 | 812,666 | 1,617,083 | |
Marketing, promotional activities |
| (27,842) | (317,929) | (1,079,369) | |
Net Revenue |
| 101,934 | 494,737 | 537,714 | |
|
|
|
|
| |
Cost of Sales |
| 33,481 | 172,136 | 290,871 | |
Gross profit (loss) |
| 68,453 | 322,601 | 246,843 | |
|
|
|
|
| |
Expenses |
|
|
|
| |
Amortization |
| 6,301 | 9,266 | 9,529 | |
Product registration and development |
| 5,458 | 251,508 | 242,303 | |
General and administrative |
| - | 40,967 | 65,404 | |
Selling and marketing |
| 121,405 | 472,496 | 622,771 | |
|
| 133,164 | 774,237 | 940,007 | |
Other income (expense) |
|
|
|
| |
Write-down of inventories |
| (109,941) | (227,025) | (745,977) | |
Write-down of equipment |
| (14,704) | - | - | |
|
|
|
|
| |
Net loss from discontinued operations |
| (189,356) | (678,661) | (1,439,141) |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
16.
17. DISCONTINUED OPERATIONS (continued)
The net cash flows attributable to the discontinued operations are as follows:
SCHEDULE OF NET CASH FLOWS ATTRIBUTABLE TO DISCONTINUED OPERATIONS
|
|
|
| |||||||||||||
| Year ended December 31, | Year ended December 31, | ||||||||||||||
|
| 2019 | 2018 | 2017 | 2021 | 2020 | 2019 | |||||||||
|
| $ | $ | $ | $ | $ | $ | |||||||||
Operating Activities | Operating Activities |
|
|
| ||||||||||||
Net loss from discontinued operations | Net loss from discontinued operations | (189,356) | (678,661) | (1,439,141) | - | - | (189,356 | ) | ||||||||
Adjustment for the non-cash items: | Adjustment for the non-cash items: |
|
|
| ||||||||||||
Amortization | Amortization | 6,301 | 9,266 | 9,529 | - | - | 6,301 | |||||||||
Write-down of inventories | Write-down of inventories | 109,941 | 227,025 | 745,977 | - | - | 109,941 | |||||||||
Write-down of equipment | Write-down of equipment | 14,704 | - | - | - | - | 14,704 | |||||||||
|
|
|
|
| ||||||||||||
Change in working capital items: | Change in working capital items: |
|
|
| ||||||||||||
Accounts receivable | Accounts receivable | 264,806 | 170,157 | 268,968 | - | - | 264,806 | |||||||||
Prepaid expenses and deposits | Prepaid expenses and deposits | - | 5,438 | (410,939) | - | - | - | |||||||||
Inventories | Inventories | (7,442) | (118,299) | 99,085 | - | - | (7,442 | ) | ||||||||
Accounts payable and accrued liabilities | Accounts payable and accrued liabilities | (23,027) | 70,917 | - | - | - | (23,027 | ) | ||||||||
| 175,927 | (314,157) | (726,521) | |||||||||||||
|
|
|
| |||||||||||||
Investing Activities |
|
|
| |||||||||||||
Purchase of equipment | - | (5,000) | (3,784) | |||||||||||||
Total operating activities | - | - | 175,927 | |||||||||||||
|
|
|
|
| ||||||||||||
Increase (Decrease) in Cash | Increase (Decrease) in Cash | 175,927 | (319,157) | (730,305) | - | - | 175,927 | |||||||||
|
|
|
|
17.18. RELATED PARTY TRANSACTIONS
a) | $150,000 in management fees (2020 - $150,000; 2019 - $31,250) to the Chief Executive Officer of the Company along with a bonus award of $35,000 (2020 and 2019 - $nil). |
b) | $20,000 in management fees to the former President and Chief Executive Officer of the Company (2020 - $120,000; 2019 - $143,750). |
c) | $nil in consulting fees to the Chief Executive Officer and former Executive Vice President of the Company (2020 - $nil; 2019 - $45,000). |
d) | $120,000 in professional fees (2020 - $120,000; 2019 - $75,000) to a company controlled by the Chief Financial Officer of the Company along with a bonus award of $30,000 (2020 and 2019 - $nil). |
e) | $127,500 in consulting fees (2020 - $120,000; 2019 - $126,667) to the Chief Technology Officer of the Company along with a bonus award $35,000 (2020 and 2019 - $nil). |
f) | $nil in consulting fees to a Company of which a former Chief Financial Officer and former Corporate Secretary of the Company are employees (2020 - $nil; 2019 - $47,270). |
g) | $nil in professional fees to a Company controlled by a former Chief Financial Officer (2020 - $nil; 2019 - $14,000). |
h) | In 2020 the Company issued an aggregate of shares in settlement of $ in amounts owing to certain directors and officers of the Company for services received in 2019. The shares issued to the related parties are subject to a four month plus one day hold period. There was no gain or loss on settlement. |
F-26 |
a)$45,000 in consulting fees and $31,250 in management fees to the Chief Executive Officer of the Company (2018 - $nil; 2017 - $nil).
b)$143,750 in management fees to the President and former Chief Executive Officer of the Company (2018 - $150,000; 2017 - $132,613 in salaries and benefit).
c)$75,000 in professional fees to a company controlled by the Chief Financial Officer of the Company (2018 - $nil; 2017 - $nil)
d)$47,270 in consulting fees to a Company of which a former Chief Financial Officer and former Corporate Secretary of the Company are employees (2018 - $nil; 2017 - $nil).
e)$14,000 in professional fees to a Company controlled by a former Chief Financial Officer (2018 - $37,440; 2017 - $nil).
f)$nil in management fees to a Company controlled by a former Chief Executive Officer (2018 - $nil; 2017 - $24,000).
g)$nil in management fees to a Company controlled by a former Chief Financial Officer (2018 - $nil; 2017 - $36,010).
h)$126,667 in consulting fees to an officer of the Company’s subsidiary, HealthTab Inc. (2018 - $Nil; 2017 - $nil).
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 20192021, 2020 and December 31, 20182019
(Expressed in Canadian Dollars)
17.
18. RELATED PARTY TRANSACTIONS(continued)
Related party transactions not otherwise described in the consolidated financial statements are shown below. The remuneration of the Company’s directors and other members of key management, who have the authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, consist of the following:
SCHEDULE OF RELATED PARTY TRANSACTIONS
| Year ended December 31, | Year ended December 31, | |||||||||||||
| 2019 | 2018 | 2017 | 2021 | 2020 | 2019 | |||||||||
| $ | $ | $ | $ | $ | $ | |||||||||
Consulting fees | 218,936 | - | - | 162,500 | 120,000 | 218,936 | |||||||||
Management fees | 205,000 | 270,000 | 175,000 | ||||||||||||
Professional fees | 89,000 | 37,440 | - | 150,000 | 120,000 | 89,000 | |||||||||
Management fees | 175,000 | 150,000 | 60,010 | ||||||||||||
Salaries and benefits | - | - | 132,613 | ||||||||||||
Share-based compensation | 41,383 | 289,008 | 280,864 | 264,393 | 58,159 | 41,383 | |||||||||
| 524,319 | 476,448 | 473,487 | ||||||||||||
Related party transactions | 781,893 | 568,159 | 524,319 |
As at December 31, 20192021, 2020 and 2018,2019, the following amounts due to related parties were included in accounts payable and accrued liabilities:
2019 | 2018 | |
| $ | $ |
President and former Chief Executive Officer | 134,339 | - |
Chief Executive Officer | 59,304 | - |
Company controlled by the CFO | 5,513 | - |
Officer of HealthTab Inc. | 122,500 |
|
Total | 321,656 | - |
SCHEDULE OF AMOUNTS DUE TO RELATED PARTIES
Due to | 2021 | 2020 | 2019 | |||||||||
$ | $ | $ | ||||||||||
President and former Chief Executive Officer | - | - | 134,339 | |||||||||
Chief Executive Officer | - | - | 59,304 | |||||||||
Company controlled by the CFO | - | - | 5,513 | |||||||||
Officer of HealthTab Inc. | - | - | 122,500 | |||||||||
Total | - | - | 321,656 | |||||||||
Due to related parties | - | - | 321,656 |
The Company includes shareholders’ equity in the definition of capital. The Company’s objective when managing capital is to maintain sufficient cash resources to support its day-to-day operations. The availability of capital is solely through the issuance of the Company’s common shares. The Company will not issue additional equity until such time when funds are needed and the market conditions become favorable to the Company. There are no assurances that funds will be made available to the Company when required. The Company makes every effort to safeguard its capital and minimize its dilution to its shareholders.
The Company is not subject to any externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the year ended December 31, 2019.2021.
19.20. SEGMENTED INFORMATION
At December 31, 2019, 2021 and 2020, the Company has only one segment, being the HealthTabHealthTab™ - Point of Care Business in Canada.
During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business (see Note 16)17).
F-27 |
20.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
21. SUPPLEMENTAL CASH FLOW INFORMATION
During the year ended December 31, 2021, the Company:
- | Issued common shares against subscriptions of $ received in prior year. |
- | Issued common shares valued at $ for services received. |
During the year ended December 31, 2020, the Company:
- | Issued in total 100,000 related to the acquisition of HealthTab™ (see Notes 4 and 14). common shares valued at $ |
- | Issued in total 52,200 as bonus shares under a loan agreement (see Notes 13). common shares valued at $ |
- | Issued 136,949. common shares at a price of $ per share to settle an outstanding debt of $ |
During the year ended December 31, 2019 the Company:
- | issued in total 100,000 related to the acquisition of HealthTab (Notes 4 and 14). common shares valued at $ |
- | issued common shares to a vendor valued at $ . |
-issued in total 1,111,110 common shares valued at $100,000 related to the acquisition of HealthTab (Notes 4 and 13).
-issued 125,081 common shares to a vendor valued at $11,167.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
20.SUPPLEMENTAL CASH FLOW INFORMATION (continued)
During the year ended December 31, 2018, the Company:
-granted 3,030,303 warrants valued at $51,878 to Emerald for certain intangibles (Notes 10 and 13);
-issued in total 2,666,667 common shares valued at $773,333 related to the acquisition of HealthTab (Notes 4 and 13);
-issued 909,090 common shares valued at $181,818 related to the acquisition of the Corozon Platform (Notes 10 and 13);
-issued 233,450 common shares to a vendor valued at $43,915.
-issued a total of 88,800 finder’s warrants with a fair value of $9,332 (Note 11).
During the year ended December 31, 2017 the Company:
-issued a total of 70,000 finder’s warrants with a fair value of $11,614 (Note 11);
-completed the acquisition of all the common shares of HealthTab through shares to be issued of $973,333 and an asset acquisition liability of $100,000 (Note 4)
21.22. INCOME TAXES
The following table reconciles the expected income tax expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2019, 20182021, 2020 and 2017:2019:
| 2019 | 2018 | 2017 |
|
|
|
|
Loss for the year | $ (2,105,608) | $ (4,136,802) | $ (2,736,717) |
|
|
|
|
Expected income tax (recovery) | $ (569,000) | $ (1,117,000) | $ (712,000) |
Change in statutory, foreign tax, foreign exchange rates and other | 25,000 | (133,000) | (155,000) |
Permanent differences | 24,000 | 103,000 | 85,000 |
Share issue cost | (5,000) | (5,000) | (3,000) |
Adjustment to prior years provision versus statutory tax returns & expiry of non-capital losses | 572,000 | (9,000) | - |
Change in unrecognized deductible temporary differences | (47,000) | 1,161,000 | 785,000 |
Total income tax expense (recovery) | $ - | $ - | $ - |
SCHEDULE OF RECONCILIATION OF EXPECTED INCOME TAX EXPENSES (RECOVERY)
2021 | 2020 | 2019 | ||||||||||
$ | $ | $ | ||||||||||
Loss for the year | $ | (1,708,132 | ) | $ | (1,173,966 | ) | $ | (2,105,608 | ) | |||
Expected income tax recovery (27%) | (461,000 | ) | (317,000 | ) | (569,000 | ) | ||||||
Change in statutory, foreign tax, foreign exchange rates and other | (24,000 | ) | (3,000 | ) | 25,000 | |||||||
Permanent differences and other | 134,000 | 35,000 | 24,000 | |||||||||
Share issue cost | (5,000 | ) | (5,000 | ) | (5,000 | ) | ||||||
Adjustment to prior years provision versus statutory tax returns and expiry of non-capital losses | - | 1,000 | 572,000 | |||||||||
Change in unrecognized deductible temporary differences | 356,000 | 289,000 | (47,000 | ) | ||||||||
Total income tax expense (recovery) | - | - | $ | - |
F-28 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
22. INCOME TAXES
The significant components of the Company’s deferred tax assets and liabilities are as follows:
| 2019 | 2018 |
| $ | $ |
Deferred tax assets (liabilities) |
|
|
Share issue costs | 4,000 | 22,000 |
Property and equipment | 164,000 | 159,000 |
Intangible asset | 157,000 | 180,000 |
Non-capital losses | 5,016,000 | 5,027,000 |
Total | 5,341,000 | 5,388,000 |
Unrecognized deferred tax assets | (5,341,000) | (5,388,000) |
Total income tax expense (recovery) | - | - |
SCHEDULE OF SIGNIFICANT COMPONENTS OF DEFERRED TAX ASSET AND LIABILITIES
2021 | 2020 | |||||||
$ | $ | |||||||
Share issue costs | 29,000 | 8,000 | ||||||
Property and equipment | 164,000 | 164,000 | ||||||
Intangible asset | 157,000 | 157,000 | ||||||
Non-capital losses | 5,636,000 | 5,301,000 | ||||||
Total | 5,986,000 | 5,630,000 | ||||||
Unrecognized deferred tax assets | (5,986,000 | ) | (5,630,000 | ) | ||||
Deferred income tax asset (liability) | - | - |
The Company has approximately $18,580,000$20,876,000 in non-capital losses for Canadian tax purposes which begin expiring in 2026.
Avricore Health Inc. 2026.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
22.23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable and lease liabilities.loans payable. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of financial instruments.
This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and processes for measuring and managing these risks. Further quantitative disclosures are included throughout the consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies.
a)Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are held through a large Canadian financial institution. The cash equivalent is composed of a guaranteed investment certificate and is issued by a Canadian bank with high investment-grade ratings. The Company does not have financial assets that are invested in asset-backed commercial paper.
The Company performs ongoing credit evaluations of its accounts receivable but does not require collateral. The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers and historical data.
Approximately 45%76% of trade receivables are due from one customer at December 31, 2019 (20182021 (2020 – 51%45% from one customer).
F-29 |
Pursuant
Avricore Health Inc.
Notes to their collective terms, accounts receivable from customers were aged as follows:the Consolidated Financial Statements
| December 31, 2019 | December 31, 2018 |
| $ | $ |
Not past due | - | 223,249 |
Under 30 days past due | - | 25,165 |
31 – 90 days past due | 3,099 | 1,945 |
Over 90 days past due | 12,375 | 29,921 |
| 15,474 | 280,280 |
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
b)Liquidity risk
Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. Due to the ongoing COVID-19 pandemic, liquidity risk has been assessed as high.
The Company monitors its spending plans, repayment obligations and cash resources, and takes actions with the objective of ensuring that there is sufficient capital in order to meet short-term business requirements. To facilitate its expenditure program, the Company raises funds primarily through public equity financing. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions, however, there can be no guarantees that sufficient funds will be raised.
As at December 31, 2019,2021, the Company’s liabilities were comprised of accounts payable and accrued liabilities, and lease liabilitiesloans payable of $673,850 (2018$84,477 (2020 - $314,239)$1,154,131).
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
22. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
c)Market risk
Market risk for the Company consists of currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposure within acceptable limits, while maximizing returns.
Currency risk
Foreign currency risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Company’s purchases and sales are denominated in Canadian dollars, and it has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency risk at this time.
Interest rate risk
Interest rate risk is the risk that fair values or future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Company’s policy is to invest cash at floating interest rates and cash reserves are to be maintained in cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders.
The Company is not exposed to significant interest rate risk. The Company’s loans payable bear fixed interest rate.
d)Fair value of financials instruments
The fair values of financial assets and financial liabilities are determined as follows:
Cash and cash equivalents are measured at fair value. For accounts receivable, accounts payable, and accountsloans payable carrying amounts approximate fair value due to their short-term maturity;
The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:
Level 1:
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities and amounts resulting from direct arm’s length transactions.
F-30 |
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2021, 2020 and 2019
(Expressed in Canadian Dollars)
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
Cash and cash equivalents are valued using quoted market prices or from amounts resulting from direct arm’s length transactions. As a result, these financial assets have been included in Level 1 of the fair value hierarchy.
Level 2:
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full contractual term. Derivatives are included in Level 2 of the fair value hierarchy as they are valued using price models. These models require a variety of inputs, including, but not limited to, contractual terms, market prices, forward price curves, yield curves and credit spreads. The Company has no financial instrumentsCompany’s lease liabilities are at this level.
Level 3:
Inputs for the asset or liability are not based on observable market data. Currently, the Company has no financial instruments at this level.
Avricore Health Inc.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and December 31, 2018
(Expressed in Canadian Dollars)
23. 24. SUBSEQUENT EVENTS
a) | The Company issued 24,000 common shares upon exercise of warrants for gross proceeds of $ |
b) | warrants with exercise price of $ expired unexercised. |
c) | warrants with exercise price of $ expired unexercised. |
d) | 1,280,000 stock options held by former consultants of the Company were cancelled. |
F-31 |
Subsequent to December 31, 2019, the Company:
SIGNATURES
a)The Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000. The Loan is for a term of one year from the date of receipt of the funds, bears interest at a rate of 10% per annum and is secured with all of the present and after-acquired property of the Company. The loan is subject to an interest reserve of $100,000 held back from the loan advance. The Company has the right to repay all or any portion of the loan at any time without penalty. The Company has paid a loan application fee in the amount of $30,000 and issued 3,480,000 bonus shares to the lender representing 20% of the aggregate sum of the loan.
b)The Company issued 2,000,000 common shares related to acquisition of HealthTab Inc.
c)3,030,303 warrants exercisable at $0.33 each expired unexercised.
d)The Company terminated its lease agreement for its office premise. Pursuant to the cancelation, the Company forfeited its deposit of $8,420 and agreed to pay the outstanding rent for the months of January to March, 2020.
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration report on its behalf.
Dated: December | AVRICORE HEALTH INC. |
By: | |
Kiki Smith, | |
Chief Financial Officer |
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