VANC PHARMACEUTICALS INC.
NOTICE OF ANNUAL GENERAL MEETING
AND
MANAGEMENT INFORMATION CIRCULAR
September 13, 2018
VANC Pharmaceuticals Inc.
Suite 810 – 789 West Pender Street
Vancouver, British Columbia V6C 1H2
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 12, 2018.
NOTICE IS HEREBY GIVEN that the annual general meeting (the "Meeting") of VANC Pharmaceuticals Inc. (the "Company" or "VANC") will be held at 1000 – 925 West Georgia Street, Vancouver, British Columbia, on Friday, October 12, 2018 at 10:00 a.m. (Vancouver time) for the following purposes:
1.to receive the audited financial statements of the Company for the financial year ended December 31, 2017, together with the auditor’s report thereon;
2.to elect directors of the Company for the ensuing year;
3.to re-appoint Davidson & Company LLP, Chartered Professional Accountants, as the Company’s auditors for the ensuing year, and to authorize the directors to fix the remuneration to be paid to the auditors for the ensuing year;
4.to consider and, if deemed advisable, to pass, an ordinary resolution to re-approve the Company's stock option plan (the "Stock Option Plan"), as more fully described in the accompanying management information circular dated September 13, 2018 (the "Information Circular"); and
5.to transact such other business as may properly come before the Meeting or any adjournment(s) or postponement(s) thereof.
The accompanying Information Circular provides additional information relating to the matters to be dealt with at the Meeting. A copy of the Stock Option Plan is available upon request to any shareholder of the Company at no charge, or may be inspected at the Company's registered office during normal business hours prior to the Meeting. Also accompanying this Notice are (i) a form of proxy or voting instruction form, and (ii) a financial statement request form.
Shareholders of the Company of record at the close of business on September 7, 2018, will be entitled to receive notice of and vote at the Meeting. Shareholders of the Company who are unable to attend the Meeting are requested to complete, sign, date and return the enclosed form of proxy indicating your voting instructions. A proxy will not be valid unless it is deposited at the office of Computershare Investor Services Inc., Attention: Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1, not less than 48 hours (excluding Saturdays, Sundays and holidays) before the time fixed for the Meeting or any adjournment(s) or postponement(s) thereof. Alternatively, a proxy may be voted over the internet at www.investorvote.com, by facsimile within North America toll-free at 1-866-249-7775, or outside North America at 1-416-263-9524, or by telephone within North America toll-free at 1-866-732-8683, or outside North America at 1-312-588-4290.If you are not a registered shareholder of the Company, please refer to the accompanying Information Circular for information on how to vote your shares.
DATED at Vancouver, British Columbia, this 13th day of September, 2018.
BY ORDER OF THE BOARD OF DIRECTORS:
/s/ Bob Sukhwinder S. Rai
Bob Sukhwinder S. Rai, CEO and Director
Registered shareholders of the Company unable to attend the Meeting are requested to date, sign and return their form of proxy in the enclosed envelope or to vote by telephone or facsimile or using the internet in accordance with the instructions on the form of proxy. If you are a non-registered shareholder of the Company and receive these materials through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by your broker or by the other intermediary. Failure to do so may result in your shares not being eligible to be voted by proxy at the Meeting.
MANAGEMENT INFORMATION CIRCULAR
UNLESS OTHERWISE NOTED, INFORMATION IS PROVIDED AS AT SEPTEMBER 13, 2018 FOR THE ANNUAL GENERAL MEETING OF SHAREHOLDERS OF THE COMPANY TO BE HELD ON OCTOBER 12, 2018.
This management information circular (the "Information Circular") is being mailed by management of VANC Pharmaceuticals Inc.(the"Company"or"VANC")to shareholders of the Company of record at the close of business on September 7, 2018 (the "Record Date"), which is the date that has been fixed by the directors of the Company as the record date to determine the shareholders of the Company who are entitled to receive notice of and to attend the Meeting (as defined herein). The Company is mailing this Information Circular in connection with the solicitation of proxies by and on behalf of the Company for use at its annual general meeting (the "Meeting") of shareholders of the Company that is to be held on Friday, October 12, 2018 at 10:00 a.m. (Vancouver time) at 1000 – 925 West Georgia Street, Vancouver, British Columbia.
The solicitation of proxies will be primarily by mail. Certain officers, directors and employees of the Company may also solicit proxies by telephone, in person or by electronic communications, as well as by newspaper or media advertising. In addition, VANC may request brokers and nominees who hold stock in their respective names to furnish this Information Circular and related proxy materials to their customers, and VANC will reimburse such brokers and nominees for their related out-of-pocket expenses. The cost of solicitation will be borne by the Company.
PART 1 – VOTING MATTERS
WHO CAN VOTE?
If you are a registered shareholder of the Company as at the close of business on the Record Date, you are entitled to notice of and to attend the Meeting and cast a vote for each share registered in your name on all resolutions put before the Meeting. If the shares are registered in the name of a corporation, a duly authorized officer of the corporation may attend on its behalf, but documentation indicating such officer’s authority should be presented at the Meeting. If you are a registered shareholder of the Company but do not wish to, or cannot, attend the Meeting in person, you can appoint someone who will attend the Meeting and act as your proxyholder to vote in accordance with your instructions (see "Voting By Proxy" below). If your shares are registered in the name of a "nominee" (usually a bank, trust company, securities dealer, financial institution or other intermediary) you should refer to the section entitled "Non-Registered Shareholders" set out below.
It is important that your shares be represented at the Meeting regardless of the number of shares you hold. If you will not be attending the Meeting in person, we invite you to complete, date, sign and return your form of proxy as soon as possible so that your shares will be represented.
Voting By Proxy
If you do not attend the Meeting, you can still make your vote count by appointing someone who will be there to act as your proxyholder. You can either tell your proxyholder how you want to vote or you can let your proxyholder decide for you. You can do this by completing a form of proxy.
In order to be valid, you must return the completed form of proxy to the Company’s transfer agent Computershare Investor Services Inc., Attention: Proxy Department, 8th Floor, 100 University Avenue, Toronto, Ontario M5J 2Y1, not later than 48 hours, excluding Saturdays, Sundays and holidays, prior to the time fixed for the Meeting or any adjournment(s) or postponement(s) thereof. Alternatively, a proxy may be voted over the internet at www.investorvote.com, by facsimile within North America toll-free at 1-866-249-7775, or outside North America at 1-416-263-9524, or by telephone within North America toll-free at 1-866-732-8683, or outside North America at 1-312-588-4290.
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What Is A Proxy?
A form of proxy is a document that authorizes someone to attend the Meeting and cast your votes for you. We have enclosed a form of proxy with this Information Circular. You can use it to appoint a proxyholder.
Appointing A Proxyholder
You can choose any person to be your proxyholder. It is not necessary for the person whom you choose as your proxyholder to be a shareholder of the Company. To make such an appointment, simply fill in the person’s name in the blank space provided in the enclosed form of proxy. To vote your shares, your proxyholder must attend the Meeting. If you do not fill a name in the blank space in the enclosed form of proxy, the persons named in the form of proxy are appointed to act as your proxyholder (the "Management Proxyholders"). Those persons are directors, officers or other authorized representatives of the Company.
Instructing Your Proxy
You may indicate on your form of proxy how you wish your proxyholder to vote your shares. To do this, simply mark the appropriate boxes on the form of proxy. If you do this, your proxyholder must vote your shares in accordance with the instructions you have given.
If you do not give any instructions as to how to vote on a particular issue to be decided at the Meeting, your proxyholder can vote your shares as your proxyholder thinks fit. If you have appointed the persons designated in the form of proxy as your proxyholder, they will, unless you give contrary instructions, vote your shares IN FAVOUR of each of the items of business set out in the Notice of Meeting.
For more information about these matters, see "Part 3 - The Business of the Meeting". The enclosed form of proxy gives the persons named on it the authority to use their discretion in voting on amendments or variations to matters identified in the Notice of Meeting. As of the date of this Information Circular, the Company's management is not aware of any other matter to be presented for action at the Meeting. If, however, other matters do properly come before the Meeting, the persons named in the enclosed form of proxy will vote on them in accordance with their best judgment, pursuant to the discretionary authority conferred by the form of proxy with respect to such matters.
Changing Your Mind
If you want to revoke your proxy after you have delivered it, you can do so at any time before it is used. You may do this by (a) attending the Meeting and voting in person; (b) signing a proxy bearing a later date; (c) signing a written statement which clearly indicates that you want to revoke your proxy and delivering the signed written statement to the Company's registered office at Suite 810 – 789 West Pender Street, Vancouver, British Columbia V6C 1H2; or (d) in any other manner permitted by applicable law.
Your proxy will only be revoked if a revocation is received by 4:00 p.m. (Vancouver time) on the last business day before the day of the Meeting, or any adjournment(s) or postponement(s) thereof, or delivered to the person presiding at the Meeting before it (or any adjournment or postponement) commences. If you revoke your proxy and do not replace it with another that is deposited with the Company before the deadline, you can still vote your shares but to do so you must attend the Meeting in person. Only registered shareholders of the Company may revoke a proxy. If your shares are not registered in your own name and you wish to change your vote, you must arrange for your nominee to revoke your proxy on your behalf (see below under "Non-Registered Shareholders").
Non-Registered Shareholders
Only registered holders of shares or the persons they appoint as their proxyholders are permitted to vote at the Meeting. In many cases, however, shares beneficially owned by a holder (a "Non-Registered Holder") are registered either:
(a)in the name of an intermediary (an "Intermediary") that the Non-Registered Holder deals with in respect of the shares. Intermediaries include banks, trust companies, securities dealers or brokers, and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans; or
(b)in the name of a clearing agency (such as The Canadian Depository for Securities Limited), of which the Intermediary is a participant.
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Non-Registered Holders who have not objected to their Intermediary disclosing certain ownership information about themselves to the Company are referred to as "NOBOs". Those Non-Registered Holders who have objected to their Intermediary disclosing ownership information about themselves to the Company are referred to as "OBOs".
Pursuant to National Instrument 54-101 –Communications with Beneficial Owners of Securities of a Reporting Issuer, the Company has distributed copies of proxy-related materials in connection with this Meeting (including this Information Circular) indirectly or directly to the NOBOs and to the Intermediaries for onward distribution to Non-Registered Holders.
Intermediaries that receive the proxy-related materials are required to forward the proxy-related materials to Non-Registered Holders unless a Non-Registered Holder has waived the right to receive them. Intermediaries often use service companies to forward the proxy-related materials to Non-Registered Holders.
The Company will not be paying for Intermediaries to deliver to OBOs (who have not otherwise waived their right to receive proxy-related materials) copies of the proxy-related materials and related documents. Accordingly, an OBO will not receive copies of the proxy-related materials and related documents unless the OBO’s Intermediary assumes the costs of delivery.
Generally, Non-Registered Holders who have not waived the right to receive proxy-related materials (including OBOs who have made the necessary arrangements with their Intermediary for the payment of delivery and receipt of such proxy-related materials) will be sent a voting instruction form which must be completed, signed and returned by the Non-Registered Holder in accordance with the Intermediary’s directions on the voting instruction form. In some cases, such Non-Registered Holders will instead be given a proxy which has already been signed by the Intermediary (typically by a facsimile, stamped signature) which is restricted as to the number of shares beneficially owned by the Non-Registered Holder but which is otherwise not completed. This form of proxy does not need to be signed by the Non-Registered Holder, but, to be used at the Meeting, needs to be properly completed and deposited with Computershare Investor Services Inc. as described under "Voting By Proxy" above.
The purpose of these procedures is to permit Non-Registered Holders to direct the voting of the shares that they beneficially own. Should a Non-Registered Holder wish to attend and vote at the Meeting in person (or have another person attend and vote on behalf of the Non-Registered Holder), the Non-Registered Holder should insert the Non-Registered Holder’s (or such other person’s) name in the blank space provided or, in the case of a voting instruction form, follow the corresponding instructions on the form.
Non-Registered Holders should carefully follow the instructions of their Intermediaries and their service companies, including instructions regarding when and where the voting instruction form or proxy form is to be delivered.
PART 2 – VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The authorized capital of the Company consists of an unlimited number of common shares without par value ("Common Shares"). At the close of business on the Record Date,39,065,998 Common Shares were issued and outstanding. Each shareholder of the Company is entitled to one vote for each Common Share registered in the shareholder's name at the close of business on the Record Date.
To the knowledge of the directors and officers of the Company, based on public information, there are no persons who beneficially owned, directly or indirectly, or exercised control or direction over 10% or more of the Common Shares.
PART 3 - THE BUSINESS OF THE MEETING
Financial Statements
The audited financial statements of the Company for the financial year ended December 31, 2017 will be presented to shareholders of the Company at the Meeting. They have been mailed to the shareholders of the Company who have requested to receive a copy. The Company’s audited financial statements and management’s discussion and analysis for the financial year ended December 31, 2017 may also be accessed through the internet on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, or copies may be
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obtained without charge upon request to the Company at Suite 810 – 789 West Pender Street, Vancouver, British Columbia V6C 1H2. You may also access the Company’s audited Financial Statements and Management’s Discussion and Analysis for the financial year ended December 31, 2017 through the Company’s website at www.vancpharm.com.
Election Of Directors
The board of directors of the Company (the "Board") is recommending five persons (the "Nominees") for election at the Meeting. Each of the five persons whose name appears below is proposed by the Board to be nominated for election as a director of VANC to serve until the next annual general meeting of shareholders of the Company or until the director sooner ceases to hold office. Each of the Nominees has agreed to stand for election, and the Company's management is not aware of any intention of any of them not to do so. If, however, one or more of the Nominees should become unable or unwilling to stand for election, proxies held by the persons designated as proxyholders on the form of proxy will vote (in the absence of specifications or instructions in the form of proxy that the shares represented by the proxy are to be withheld from voting on the election of directors) for the election of the remaining nominees.
The Company’s articles include an advance notice requirement for nominations by shareholders of the Company in certain circumstances. The advance notice requirement fixes a deadline by which holders of record of Common Shares must submit director nominations to the Secretary of the Company prior to any annual meeting of shareholders of the Company (or any special meeting of shareholders of the Company if one of the purposes for which the special meeting is called is the election of directors) and sets forth the specific information that a nominating shareholder must include in the written notice to the Secretary of the Company for a nomination to be valid, subject to the requirements of theBusiness Corporations Act, [SBC 2002] Chapter 57.
The following table (and notes thereto) states the name and province and country of residence of each Nominee, all offices of VANC now held by the Nominee, the period of time for which the Nominee has been a director of VANC and the number of Common Shares or convertible securities beneficially owned by the Nominee, directly or indirectly, or over which the Nominee exercises control or direction, as at the date hereof:
The Board recommends that you vote FOR all Nominees standing for election.
Name, province and country of residence | Current position(s) with VANC | Director | Number of Common Shares beneficially owned or controlled, directly or indirectly | Number of convertible securities |
Bob Sukhwinder S. Rai(2) | Chief Executive Officer and Director | June 5, 2015 | 333,334 | 850,000 |
David Hall(1)(2) | Director and Chairman of the Board | January 20, 2016 | 333,333 | 600,000 options
333,333 |
Alan Arnstein(1)(2) | Director | April 20, 2017 | Nil |
175,000 |
Sherif Guorgui Ontario, Canada | Director | August 15, 2017 | Nil | 175,000 options |
Robert Sindelar(1) Vancouver, British Columbia | Director | March 27, 2018 | Nil | 200,000 options |
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Notes:
(1) Member of the Audit Committee
(2) Member of the Compensation Committee.
Set out below are the profiles of the Nominees for election at the Meeting:
| Bob Sukhwinder S. Rai, Age 48, Chief Executive Officer and Director. Mr. Rai is a registered and practicing pharmacist and a professional member of the College of Pharmacists of British Columbia, with over 22 years of pharmaceuticals and pharmacy management experience. Mr. Rai has operated a chain of The Medicine Shoppe Pharmacies in Greater Vancouver for the past 16 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. 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"), and he is also Chairman of Canada Pacific Global Pharmaceuticals and its subsidiary PharmaCanada Inc. 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 over 18 years of community and volunteer work, which has included serving on the Alumni UBC Advisory Council representing the Faculty of Pharmaceutical Science. Mr. Rai is on the board of directors of St Paul's Hospital Foundation, and is a past board member of the Tapestry Foundation for Health Care and the Rotary Club of Vancouver-Fraserview. Mr. Rai is currently the Chair of "A Night of Miracles" for BC Children’s Hospital. |
| David Hall, Age 65, Chairman and Director.Mr. Hall is currently Chairman of RepliCel Life Sciences ("RepliCel"), a public company listed on the TSXV, Chairman of Providence Healthcare Research Institute and a consultant to the life sciences industry. Mr. Hall served as Chief Executive Officer and President of RepliCel from 2012-2015. Mr. Hall has been instrumental in diversifying RepliCel’s cell therapy programs from a single program to three clinical programs addressing chronic tendinosis, aging and sun damaged skin and pattern baldness, as well as focusing on an innovative dermal injector device for the delivery of cells, drugs, biologic and aesthetic dermal fillers. Prior to RepliCel, Mr. Hall consulted to the British Columbia government, companies in the pharmaceutical, biotech and e-Health industries and Non-Governmental-Organizations. Mr. Hall was a business founder, Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary of Angiotech Pharmaceuticals Inc., a company that was listed on the Toronto Stock Exchange. Mr. Hall is a past Chair and board member of Life Sciences BC, and is the author of Life Sciences BC’s position papers for the BC 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 Advantage BC. Mr. Hall holds an Honours degree in Economics and an Honours degree in Finance from the University of Manitoba. |
| Alan Arnstein, Age 50, Director. Mr. Arnstein previously worked for Katz Group Canada where he oversaw the growth of the Medicine Shoppe from 28 stores to 175 stores before its successful sale to McKesson Canada. Mr. Arnstein was also actively involved in expanding the Rexall pharmacy brand across Canada, which included responsibility for acquiring and consolidating independent pharmacies under the Rexall banner. Mr. Arnstein is also actively involved in various real estate projects, including the leasing of the Ice District next to Rogers Place in downtown Edmonton, an estimated $5.5 billion project. |
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| Sherif Guorgui, Age 42, Director. Mr. Guorgui has extensive experience in various pharmacy sectors, including retail, specialty, regulatory, industry, government and professional affairs. Mr. Guorgui has played a significant role in promoting the value of pharmacists and pharmacy technicians in healthcare, and is a strong advocate for the pharmacy profession at community, provincial and international levels. Mr. Guorgui has worked as a community pharmacist, managed and operated his own independent pharmacy, and has been a franchisee/associate owner with Shoppers Drug Mart. Mr. Guorgui moved into corporate roles at Shoppers Drug Mart and Rexall/PharmaPlus before joining the Ontario Pharmacists Association as Vice President of Pharmacy. In 2016, Mr. Guorgui joined United Pharma Group as CEO. United Pharma Group is the fastest growing network of independent pharmacy owners in Canada, now numbering over 90 members. Mr. Guorgui has also served as President of the Ontario College of Pharmacists from 2011-2012, where he focused on promoting and expanding the scope of practice for pharmacists. Mr. Guorgui has published numerous articles in pharmacy magazines, is a sought-after speaker for community and professional events, and is a guest lecturer at the University of Toronto’s Leslie Dan Faculty of Pharmacy and the University of Waterloo School of Pharmacy. In 2017, Mr. Guorgui was recognized with the Ontario Pharmacists Association’s Voice Of Pharmacy Award for his tireless advocacy work for the pharmacy profession. Mr. Guorgui is a board member of the Canadian Foundation for Pharmacy, the Ontario Pharmacists Association and the Neighbourhood Pharmacy Association of Canada. He is an advisory board member of the Humber College Pharmacy Technician Program, and is a mentor at the University of Toronto Career Centre Information Interview program. Mr. Guorgui holds a pharmacy degree from the University of Cairo and completed the University of Toronto's International Pharmacy Graduates program. |
| Robert Sindelar, Age 66, Director. Dr. Sindelar is currently a professor in the Faculty of Pharmaceutical Sciences at the University of British Columbia ("UBC") and the advisor of external relations to the Centre for Health Evaluation & Outcomes Sciences, jointly affiliated with Providence Health Care and UBC. Dr. Sindelar is also an elected fellow of the International Pharmaceutical Federation, Chair of the Global Pharmacy Observatory Advisory Board of the International Pharmaceutical Federation, part-time President of the Global Drug Commercialization Centre (GDCC) in Chengdu, China, part-time Vice President of GDCC Worldwide, and a Member of the External Advisory Board of Trinity College Dublin, School of Pharmacy and Pharmaceutical Sciences. Previously, Dr. Sindelar was Dean of the Faculty of Pharmaceutical Sciences at UBC, past President of the Providence Health Care Research Institute, and former Vice President of Research and Academic Affairs at Providence Health Care. |
The Company’s management recommends that shareholders vote in favour of the election of management's Nominees as directors of the Company for the ensuing year.Unless you give instructions otherwise, the Management Proxyholders intend to vote your proxy FOR the Nominees named in this Information Circular.
Appointment Of The Auditor
At the Meeting, shareholders of the Company will be asked to vote for the re-appointment of Davidson & Company LLP ("Davidson"), Chartered Professional Accountants, of Vancouver, British Columbia, as the Company's auditors for the ensuing year, and to authorize the directors to fix the auditors' remuneration. See "Part 5 – Audit Committee" below for a discussion of the past remuneration paid to the auditor. Davidson was first appointed as auditors of the Company on February 22, 2018.
The Company’s management recommends that shareholders vote in favour of the appointment of Davidson as the Company’s auditors for the ensuing year, and grant the Board the authority to determine the remuneration to be paid to the auditors. Unless you give instructions otherwise, the Management Proxyholders intend to vote
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your proxy FOR the appointment of Davidson to act as the Company’s auditors until the close of its next annual general meetingand to authorize the Board to fix the remuneration to be paid to the auditors.
Annual Approval of Stock Option Plan
Background
The Company's stock option plan (the "Stock Option Plan") was most recently approved by the shareholders of the Company at the meeting of shareholders of the Company on September 15, 2017, and subsequently accepted for filing by the TSXV. Under the Stock Option Plan, the maximum number of Common Shares issuable upon the exercise of all options granted under the Stock Option Plan shall not exceed ten percent (10%) of the issued and outstanding Common Shares, from time to time, provided that the number of Common Shares which may be reserved for issuance to any one individual may not exceed 5% of the issued Common Shares on a yearly basis or 2% if the optionee is engaged in investor relations activities or is a consultant. As at the date of this Information Circular, 2,760,000 options were outstanding.
During the year ended December 31, 2017, 2,420,000 options were granted and 50,000options were cancelled.
The following table summarizes the details of options granted during the year ended December 31, 2017.
Date of grant | Number of Options | Exercise price | Expiry date |
January 27, 2017 | 300,000 | $0.22 | January 27, 2022 |
July 20, 2017 | 150,000 | $0.15 | July 20, 2022 |
August 3, 2017 | 125,000 | $0.15 | August 3, 2019 |
August 15, 2017 | 150,000 | $0.15 | August 15, 2022 |
August 24, 2017 | 150,000 | $0.15 | August 24, 2019 |
November 20, 2017 | 150,000 | $0.15 | November 20, 2022 |
December 8, 2017 | 1,395,000 | $0.28 | December 8, 2022 |
Total | 2,420,000 |
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See also "Part 7 – Other Information – Securities Authorized for Issuance Under Equity Compensation Plans".
Summary of the Stock Option Plan
The purpose of the Stock Option Plan is to allow the Company to grant options to directors, officers, employees and consultants, as additional compensation, and as an opportunity to participate in the success of the Company. The granting of such options is intended to align the interests of such persons with those of the shareholders of the Company. Stock options will be exercisable over periods of up to 10 years as determined by the Board and are required to have an exercise price no less than the closing market price of the Common Shares prevailing on the day that the option is granted, less a discount of up to 25%, the amount of the discount varying with market price in accordance with the policies of the TSXV. Except for options granted to consultants performing investor relations activities, the Stock Option Plan contains no vesting requirements, but permits the Board to specify a vesting schedule in its discretion. The Stock Option Plan provides that if a Change of Control, as defined therein, occurs, all Common Shares subject to options shall immediately become vested and may thereupon be exercised in whole or in part by the option holder. For additional information on the Stock Option Plan, please see "Part 4 – Executive Compensation – Stock Option Plan and Other Incentive Plans".
A copy of the Stock Option Plan is available upon request to any shareholder of the Company at no charge, or may be inspected at the Company's registered office during normal business hours prior to the Meeting.
Annual Shareholder Approval for the Stock Option Plan
The Stock Option Plan is a "rolling" stock option plan which sets the number of stock options available for grant by the Company at an amount equal to 10% of the issued and outstanding Common Shares from time to time. Under TSXV policies, the Stock Option Plan must be approved and ratified by the shareholders of the Company on an annual basis.
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Shareholders will be asked at the Meeting to vote on the following ordinary resolution:
"BE IT RESOLVED AS AN ORDINARY RESOLUTION THAT:
1.the stock option plan (the "Plan") of Vanc Pharmaceuticals Inc. (the "Company"), be, and is hereby, affirmed, ratified and approved;
2.the form of the Plan may be amended in order to satisfy the requirements or requests of any regulatory authorities without requiring further approval of the shareholders of the Company and each director and officer of the Company be and is hereby authorized and directed, for and on behalf of the Company, to execute and deliver all such documents and to do all such other acts and things as such director or officer may determine to be necessary or advisable to give effect to this resolution, the execution and delivery of any such document or the doing of any such other act or thing being conclusive evidence of such determination; and
3.notwithstanding this resolution having been duly passed by the shareholders of the Company, the directors of the Company be, and are hereby, authorized and empowered to revoke this resolution at any time prior to it being acted upon without further approval of the shareholders of the Company."
The Company’s management and the Board recommend that shareholders vote FOR the resolution approving adoption of the Stock Option Plan. Unless you give instructions otherwise, the Management Proxyholders intend to vote your proxy FOR the resolution to approve the Stock Option Plan.
PART 4 – EXECUTIVE COMPENSATION
Statement of Executive Compensation
Pursuant to applicable securities legislation and in accordance with Form 51-102F6V – Statement of Executive Compensation – Venture Issuers, VANC is providing a summary of all annual and long-term compensation for services in all capacities to VANC and its subsidiaries in respect of any individual who served as: (a) the Company's chief executive officer (the "CEO"), including an individual performing functions similar to a chief executive officer, during any part of the financial year ended December 31, 2017; (b) the Company's chief financial officer (the "CFO"), including an individual performing functions similar to a chief financial officer, during any part of the financial year ended December 31, 2017; (c) VANC's three other most highly compensated executive officers, if any, whose individual total compensation for the financial year ended December 31, 2017 exceeded $150,000; and (d) any individual who would have satisfied these criteria but for the fact that the individual was not serving as an executive officer of VANC or its subsidiaries, nor acting in a similar capacity, at the end of the financial year ended December 31, 2017 (the "Named Executive Officers" or "NEOs").
During the financial year ended December 31, 2017, the following individuals were the NEOs of VANC:
Bob Sukhwinder S. Rai, CEO (appointed effective January 27, 2017);
Arun Nayyar, former CEO (resigned effective January 27, 2017);
Raj Padhiyar, former interim CFO (appointed effective June 26, 2017 and resigned effective February 2, 2018); and
Eugene Beukman, former CFO (resigned effective May 18, 2017).
Director and Named Executive Officer Compensation
Oversight and Description of Director and Named Executive Officer Compensation
NEO Compensation
The principal objective of the Company's compensation policy is to attract and retain key executive officers that are considered critical to the growth and success of VANC. The Company's compensation committee (the "Compensation Committee"), in consultation with VANC's executive officers, periodically reviews and makes recommendations to the Board in respect of compensation paid to VANC's directors and executive officers,
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including salary, incentive and other compensation levels. Presently, the Company relies on discussions of the Board and the Compensation Committee without any formal objectives, criteria and analysis in determining compensation, which generally consists of base salary and grants of stock option awards under the Stock Option Plan. The Company does not assess its compensation through benchmarks or peer groups at this time.
Elements of Compensation
Under the Company's compensation structure, compensation for executive officers may consist of:
Base Salary. Basesalary is currently the foundation of VANC's compensation policy and is intended to compensate competitively based on the past experience of the executive, while taking into consideration VANC's current level of development. The desire is for base salary to be high enough to secure exceptional executives that can further the annual and long-term objectives of the Company, while at the same time not being excessive with a view to VANC's available cash resources. The Compensation Committee reviews salary levels periodically and may recommend adjustments to the Board, if warranted, as a result of competitive positioning, the stage of development of the Company or an increase in responsibilities assumed by an executive.
Stock Options. The Board may also grant stock options under the Stock Option Plan as part of an executive's compensation package. The primary objective of making stock option grants is to encourage executive officers to acquire an ownership interest in the Company over a period of time, thus better aligning the interests of executive officers with the interests of shareholders of the Company, and thereby discouraging excessive risk taking. Additionally, awards may be granted to help enhance the overall competitiveness of an executive's compensation package, where necessary, while helping maintain VANC's available cash resources.
The Company considers various factors when determining the number of awards to be granted to specific individuals, including the level of responsibility and base salary level associated with the position held by such individual. The Compensation Committee periodically submits to the Board for approval its recommendations in respect of the number of stock options to be granted to specific individuals. When determining possible future stock option grants, the Board considers past grants. The Company uses the Black-Scholes model to determine the fair value of stock options on the date of grant.
Bonus. From time to time, the Board may grant bonus awards to members of the Company's management, in the form of cash or Common Shares, in light of the Company's accomplishments of certain milestones or achievements and the member's level of involvement in accomplishing such milestones or achievements.
Director Compensation
The Company has implemented a directors' compensation policy, pursuant to which directors are compensated by VANC for their services in their capacity as directors, for committee participation and involvement in special assignments and for services as consultants or experts. The directors are also reimbursed for reasonable expenses incurred in connection with their services as directors and are eligible for the grant of stock options under the Stock Option Plan.
Director and Named Executive Officer Compensation, Excluding Compensation Securities
The following table (and notes thereto) sets forth all compensation paid, payable, awarded, granted, given or otherwise provided, directly or indirectly, by VANC or its subsidiaries to each NEO and director of the Company, in any capacity, including, for greater certainty, all plan and non-plan compensation, direct and indirect pay, remuneration, economic or financial award, reward, benefit, gift or perquisite paid, payable, awarded, granted, given or otherwise provided to a NEO or a director of the Company for services provided and for services to be provided, directly or indirectly, to VANC or its subsidiaries for each of the Company's two most recently completed financial years.
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Name and position | Year | Salary, consulting fee, retainer or commission ($) | Bonus ($) | Committee or meeting fees ($) | Value of perquisites ($)
| Value of all other compensation ($)
| Total compensation ($) |
Bob Sukhwinder S. Rai(1) | 2017 | 132,613(2) | Nil | Nil | Nil | 148,125 | 280,738 |
2016 | 18,000(3) | Nil | Nil | Nil | Nil | 18,000 | |
Arun Nayyar(4) | 2017 | 24,000(5) | Nil | Nil | Nil | Nil | 24,000 |
2016 | 198,100(6) | Nil | Nil | Nil | Nil | 198,100 | |
Raj Padhiyar(7) Former Interim CFO | 2017 | Nil | Nil | Nil | Nil | Nil | Nil |
Eugene Beukman(8) | 2017 | 36,010(9) | Nil | Nil | Nil | Nil | 36,010 |
2016 | 50,085(10) | Nil | Nil | Nil | Nil | 50,085 | |
David Hall(11) | 2017 | N/A | N/A | Nil | Nil | 56,768 | 56,768 |
2016 | N/A | N/A | Nil | Nil | Nil | Nil | |
Alan Arnstein(12) Director | 2017 | N/A | N/A | Nil | Nil | 25,383 | 25,383 |
Sherif Guorgui(13) Director | 2017 | N/A | N/A | Nil | Nil | 29,587 | 29,587 |
John Papastergiou(14) Former Director | 2017 | N/A | N/A | Nil | Nil | 21,001 | 21,001 |
Notes:
(1)Mr. Rai was appointed CEO effective January 27, 2017.
(2)The amount reported includes $126,613 earned by Mr. Rai for his role as CEO in 2017 and $6,000 earned by Mr. Rai for his role as a consultant to the Company in 2017. Mr. Rai did not collect any fees for his role as a director of the Company in 2017.
(3)The amount reported represents fees earned by Mr. Rai for his role as a consultant to the Company in 2016. Mr. Rai did not collect any fees for his role as a director of the Company in 2016.
(4)Mr. Nayyar resigned as CEO effective January 27, 2017 and as a director of the Company effective May 31, 2017.
(5)The amount reported represents fees earned by Mr. Nayyar for his role as CEO in 2017. Mr. Nayyar did not collect any fees for his role as a director of the Company in 2017.
(6)The amount reported represents fees earned by Mr. Nayyar for his role as CEO in 2016. Mr. Nayyar did not collect any fees for his role as a director of the Company in 2016.
(7)Mr. Padhiyar was appointed interim CFO effective June 26, 2017 and resigned effective February 2, 2018.
(8)Mr. Beukman resigned as CFO effective May 18, 2017 and as a director of the Company effective May 31, 2017.
(9)The amount reported represents fees earned by Mr. Beukman pursuant to the Management Contract (as defined below) in connection with his role as CFO in 2017. See "External Management Companies" below. Mr. Beukman did not collect any fees for his role as a director of the Company in 2017.
(10)The amount reported represents fees earned by Mr. Beukman pursuant to the Management Contract (as defined below) in connection with his role as CFO in 2016. See "External Management Companies" below. Mr. Beukman did not collect any fees for his role as a director of the Company in 2016.
(11)Mr. Hall was appointed as a director of the Company effective January 20, 2016.
(12)Mr. Arnstein was appointed as a director of the Company effective April 20, 2017.
(13)Mr. Guorgui was appointed as a director of the Company effective August 15, 2017.
(14)Mr. Papastergiou was appointed as a director of the Company effective November 20, 2017 and resigned effective December 16, 2017.
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Stock Options
The following table (and notes thereto) sets out all compensation securities granted or issued to each NEO and director of the Company by VANC or any of its subsidiaries for the financial year ended December 31, 2017 for services provided or to be provided, directly or indirectly, to VANC or any if its subsidiaries:
Name and position
| Type of compensation security | Number of compensation securities, number of underlying securities, and percentage of class(1)(2) (#) / (%) | Date of issue or grant
| Issue, conversion or exercise price ($) | Closing price of security or underlying security on date of grant ($)
| Closing price of security or underlying security at December 29, 2017 ($) | Expiry date
|
Bob Sukhwinder S. Rai(3) | Stock Options | 300,000 / 12.4 | January 27, 2017 | 0.22 | 0.335 | 0.32 | January 27, 2022 |
Stock Options | 550,000 / 22.7 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 | |
Raj Padhiyar(4) Former Interim CFO | Stock Options | 50,000(5) / 2.1 | August 3, 2017 | 0.15 | 0.165 | 0.32 | August 3, 2019 |
Stock Options | 10,000 / 0.4 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 | |
Eugene Beukman(6) | Stock Options | 10,000(7) / 0.4 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 |
David Hall(8) | Stock Options | 600,000 / 24.8 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 |
Alan Arnstein(9) Director | Stock Options | 150,000 / 6.2 | July 20, 2017 | 0.15 | 0.165 | 0.32 | July 20, 2022 |
Stock Options | 25,000 / 1.0 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 | |
Sherif Guorgui(10) Director | Stock Options | 150,000 / 6.2 | September 27, 2017 | 0.15 | 0.195 | 0.32 | September 27, 2022 |
Stock Options | 25,000 / 1.0 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 | |
John Papastergiou(11) Former Director | Stock Options | 150,000 / 6.2 | November 20, 2017 | 0.28 | 0.14 | 0.32 | November 20, 2022 |
Stock Options | 25,000 / 1.0 | December 8, 2017 | 0.28 | 0.29 | 0.32 | December 8, 2022 |
Notes:
(1)Each stock option entitles the holder thereof to acquire, upon exercise, one Common Share.
(2)Percentage of class based on an aggregate of 2,420,000 stock options outstanding as at December 31, 2017.
(3)As of December 31, 2017, Mr. Rai held an aggregate of 850,000 stock options.
(4)As of December 31, 2017, Mr. Padhiyar held an aggregate of 60,000 stock options.
(5)The reported stock options shall vest and are exercisable as follows: (i) 16,500 stock options on December 4, 2017; (ii) 16,500 stock options on April 3, 2018; and (iii) 17,000 stock options on August 3, 2018.
(6)As of December 31, 2017, Mr. Beukman held 10,000 stock options.
(7)The reported stock options were issued to Mr. Beukman for his role as a consultant to the Company following his resignation as CFO and a director.
(8)As of December 31, 2017, Mr. Hall held 600,000 stock options.
(9)As of December 31, 2017, Mr. Arnstein held 175,000 stock options.
(10)As of December 31, 2017, Mr. Guorgui held 175,000 stock options.
(11)As of December 31, 2017, Mr. Papastergio held 175,000 stock options.
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Exercise of Compensation Securities by Directors and NEOs
During the financial year ended December 31, 2017, the NEOs and directors of the Company did not exercise any compensation securities of VANC.
Stock Option Plans and Other Incentive Plans
The Company has adopted the Stock Option Plan for VANC's directors, officers, employees and consultants. The purpose of the Stock Option Plan is to advance the interests of VANC by encouraging the directors, officers, employees and consultants of the Company to acquire Common Shares, thereby increasing their proprietary interest in the Company, encouraging them to remain associated with the Company and furnishing them with additional incentives in their efforts on behalf of the Company.
The Stock Option Plan is administered by the Board. The Stock Option Plan provides that options will be issued pursuant to option agreements which shall provide for the expiration of such options on a date not later than the maximum term permitted by the TSXV. Under the Stock Option Plan, a maximum number of Common Shares issuable upon the exercise of all options granted under the Stock Option Plan shall not exceed ten percent (10%) of the issued and outstanding Common Shares, from time to time, provided that options may not be granted to an individual director, officer or employee to purchase a number of Common Shares equalling more than five percent (5%) of the issued Common Shares in any twelve-month period unless VANC has obtained disinterested shareholder approval in respect of such grant and such grant meets TSXV requirements. Options may not be granted if the exercise thereof would result in the issuance to any one consultant or any one person employed to provide investor relations services in any twelve-month period of more than two percent (2%) of the issued Common Shares. Options issued pursuant to the Stock Option Plan will have an exercise price determined by the directors of the Company, provided that the exercise price shall not be less than the price permitted by the TSXV.
Options granted under the Stock Option Plan are non-transferable, non-assignable and expire on the earlier of the period set by the directors of the Company (not to exceed a maximum term of ten (10) years from the date of grant) or the date determined by the Board, on or after the date the optionee ceases to be an officer, director, employee or consultant of the Company. In the event of the death of an optionee, options held by such optionee will expire on the earlier of the period set by the directors of the Company (not to exceed the maximum term permitted by the TSXV) or one (1) year from the date of such optionee's ceasing to be an officer, director, employee or consultant of the Company due to death.
The Stock Option Plan was last approved by shareholders of the Company at VANC's annual general and special meeting held on September 15, 2017. In accordance with TSXV rules, VANC is required to obtain shareholder approval of the Stock Option Plan annually at the Company's annual general meeting.
Employment, Consulting and Management Agreements
Mr. Nayyar received a monthly salary for his services as CEO pursuant to a consulting agreement dated December 18, 2014, as amended March 1, 2015. Pursuant to the consulting agreement, Mr. Nayyar was entitled to receive benefits commensurate with those that VANC offered to its other executive officers and directors for his services as CEO and a director of the Company. Had Mr. Nayyar's consulting agreement been terminated on December 31, 2017 without just cause by the Company, Mr. Nayyar would have been entitled to a payment of $50,000 in lieu of notice from VANC under the consulting agreement. Mr. Nayyar resigned as CEO effective January 27, 2017, and no severance amount was paid to him with respect to his resignation.
Mr. Rai received a monthly salary for his services as CEO pursuant to a consulting agreement dated January 27, 2017. Pursuant to the consulting agreement, Mr. Rai was entitled to receive benefits commensurate with those that VANC offered to its other executive officers and directors for his services as CEO and a director of the Company. The Company may terminate the consulting agreement at any time by providing fifteen (15) days' written notice, or providing a lump sum payment in lieu of notice. Had Mr. Rai's consulting agreement been terminated on December 31, 2017 without just cause by the Company, Mr. Rai would have been entitled to a payment of $6,164 in lieu of notice from VANC under the consulting agreement.
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Prior to his appointment as CEO, Mr. Rai received a monthly salary for his services as a consultant to the Company pursuant to a consulting agreement dated October 1, 2016. The consulting agreement provided for Mr. Rai to be paid a monthly fee of $6,000 plus applicable taxes and reimbursement of out-of-pocket expenses incurred on behalf of VANC. The consulting agreement was terminated effective January 27, 2017 in connection with Mr. Rai's appointment as CEO.
External Management Companies
Pursuant to a management agreement (the "Management Contract") dated May 1, 2014, as amended, between the Company and Pender Street Corporate Consulting Ltd. ("PSCC"), PSCC agreed to provide management, accounting and administrative services to VANC in consideration for a monthly fee of $3,000, plus applicable taxes and reimbursement of all out-of-pocket expenses incurred on behalf of the Company. Pursuant to the Management Contract, PSCC is also entitled to charge a 10% administration fee on all disbursements actually paid by it, to a maximum of $200 per disbursement. During the most recently completed financial year ended December 31, 2017, VANC paid $36,000 to PSCC pursuant to the Management Contract.
PSCC is a private corporation wholly-owned by Eugene Beukman, the former CFO and a former director of the Company.
Pension Disclosure
The Company does not provide pension benefits to the NEOs or directors of the Company.
PART 5 - AUDIT COMMITTEE
AUDIT COMMITTEE CHARTER
The text of the Company’s Audit Committee Charter is attached as Schedule "A" to this Information Circular.
COMPOSITION OF AUDIT COMMITTEE
Messrs. Sindelar, Hall and Arnstein are members of the Company’s Audit Committee. At present, all of the Audit Committee members are considered "independent" as that term is defined in applicable securities legislation.
All of the Audit Committee members are considered by the Board to be financially literate within the meaning set forth in National Instrument 52-110 – Audit Committees ("NI 52-110"). In addition, Mr. Hall has knowledge of the role of an audit committee of reporting companies from his years of experience as a director of public companies other than the Company. See Part 6 – Corporate Governance – Directorships in Other Public Companies.
RELEVANT EDUCATION AND EXPERIENCE
The education and experience of each member of the Audit Committee which is relevant to the performance of his responsibilities as an Audit Committee member, including education or experience that would provide the member with an understanding of accounting principles used by the Company to prepare its financial statements, the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and provisions, experience preparing, auditing, analysing or evaluating financial statements and an understanding of internal controls and procedures for financial reporting is set forth below.
Robert Sindelar
Dr. Sindelar is currently a professor in the Faculty of Pharmaceutical Sciences at UBC and the advisor of external relations to the Centre for Health Evaluation & Outcomes Sciences, jointly affiliated with Providence Health Care and UBC. Dr. Sindelar is also an elected fellow of the International Pharmaceutical Federation, Chair of the Global Pharmacy Observatory Advisory Board of the International Pharmaceutical Federation, part-time President of the Global Drug Commercialization Centre (GDCC) in Chengdu, China, part-time Vice President of GDCC Worldwide, and a Member of the External Advisory Board of Trinity College Dublin, School of Pharmacy and Pharmaceutical Sciences. Previously, Dr. Sindelar was Dean of the Faculty of Pharmaceutical Sciences at UBC, past President of the Providence Health Care Research Institute, and former Vice President of Research and Academic Affairs at Providence Health Care.
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David Hall
Mr. Hall is currently Chairman of RepliCel, a public company listed on the TSXV, Chairman of Providence Healthcare Research Institute and a consultant to the life sciences industry. Mr. Hall served as Chief Executive Officer and President of RepliCel from 2012-2015. Prior to RepliCel, Mr. Hall consulted to the British Columbia government, companies in the pharmaceutical, biotech and e-Health industries and Non-Governmental-Organizations. Mr. Hall was a business founder, Chief Financial Officer, Chief Compliance Officer, Treasurer and Secretary of Angiotech Pharmaceuticals Inc., a company that was listed on the Toronto Stock Exchange. Mr. Hall is a past Chair and board member of Life Sciences BC. Mr. Hall was also a member of the BC Task Force on PharmaCare, and serves on the board of directors of Advantage BC. Mr. Hall holds an Honours degree in Economics and an Honours degree in Finance from the University of Manitoba.
Alan Arnstein
Mr. Arnstein previously worked for Katz Group Canada where he oversaw the growth of the Medicine Shoppe from 28 stores to 175 stores before its successful sale to McKesson Canada. Mr. Arnstein was also actively involved in expanding the Rexall pharmacy brand across Canada, which included responsibility for acquiring and consolidating independent pharmacies under the Rexall banner. Mr. Arnstein is also actively involved in various real estate projects, including the leasing of the Ice District next to Rogers Place in downtown Edmonton, an estimated $5.5 billion project.
AUDIT COMMITTEE OVERSIGHT
At no time since the commencement of the Company’s most recently completed financial year was a recommendation of the Audit Committee to nominate or compensate an external auditor not adopted by the Board.
RELIANCE ON CERTAIN EXEMPTIONS
At no time since the commencement of the Company’s most recently completed financial year ended December 31, 2017 has the Company relied on the exemption in Section 2.4 of NI 52-110 -Audit Committees, or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110.
As the Company is a "Venture Issuer" pursuant to relevant securities legislation, the Company is relying on the exemption in Section 6.1 of NI 52-110 from the requirement of Parts 5 (Reporting Obligations) of NI 52-110.
PRE-APPROVAL POLICIES AND PROCEDURES FOR NON-AUDIT SERVICES
The Audit Committee has adopted specific policies and procedures for the engagement of non-audit services as described in the Company’s Audit Committee Charter attached as Schedule "A" to this Information Circular.
EXTERNAL AUDITOR SERVICE FEES
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The fees paid by the Company to its auditors in each of the last two financial years, by category, are as follows:
Auditor | Financial Year Ending | Audit | Audit Related Fees(2) | Tax | All Other |
Davidson & Company LLP(5) | 2017 | $55,000 | Nil | Nil | $700 |
Adam Sung Kim Ltd.(6) | 2017 | Nil | Nil | Nil | $4,000 |
2016 | $24,000 | Nil | Nil | Nil | |
Smythe LLP(7) | 2016 | N/A | N/A | N/A | N/A |
Notes:
(1)"Audit Fees" include fees necessary to perform the annual audit and quarterly reviews of the Company's consolidated financial statements. Audit Fees include fees for review of tax provisions and for accounting consultations on matters reflected in the financial statements. Audit Fees also include audit or other attest services required by legislation or regulation, such as comfort letters, consents, reviews of securities filings and statutory audits.
(2)"Audit-Related Fees" include fees for services that are traditionally performed by the auditors. These audit-related services include employee benefit audits, due diligence assistance, accounting consultations on proposed transactions, internal control reviews and audit or attest services not required by legislation or regulation.
(3)"Tax Fees" include fees for all tax services other than those included in "Audit Fees" and "Audit-Related Fees". This category includes fees for tax compliance, tax planning and tax advice. Tax planning and tax advice includes assistance with tax audits and appeals, tax advice related to mergers and acquisitions, and requests for rulings or technical advice from tax authorities.
(4)"All Other Fees" include all other non-audit services.
(5)Davidson & Company LLP was appointed the Company's auditors effective February 22, 2018.
(6)Adam Sung Kim Ltd. was the Company's auditors from May 17, 2016 to February 22, 2018.
(7)Smythe LLP was the Company’s auditors from March 6, 2015 to May 17, 2016.
PART 6 - CORPORATE GOVERNANCE
Composition of the Board of Directors
The Company’s Board facilitates its exercise of independent supervision over the Company's management by ensuring that the Board is composed of at least one director that is independent of management. The Board, at present, is composed of five directors, four of whom are not executive officers of the Company and are considered to be "independent", as that term is defined in applicable securities legislation. In determining whether a director is independent, the Board chiefly considers whether the director has a relationship which could, or could be perceived to interfere with the director’s ability to objectively assess the performance of the Company's management. Messrs. Hall, who is the Chairman of the Board, Arnstein, Guorgui and Sindelar are considered to be "independent" as that term is defined in applicable securities legislation. Mr. Rai is not considered independent by virtue of his office as Chief Executive Officer of the Company.
The Board is responsible for approving long-term strategic plans and annual operating plans and budgets recommended by the Company's management. Board consideration and approval is also required for material contracts and business transactions, and all debt and equity financing transactions.
The Board delegates to the Company's management the 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 also looks to the Company's management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.
Directorships in Other Public Companies
Certain of the Nominees are also directors of other reporting issuers (or equivalent) in a jurisdiction or a foreign jurisdiction as follows:
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Name of Director | Other reporting issuer (or equivalent in a foreign jurisdiction) |
David Hall | RepliCel Life Sciences Inc. |
Bob Sukhwinder S. Rai | Emerald Health Therapeutics Inc. Venturi Ventures Inc. |
Orientation and Continuing Education
Given the relatively small composition of the Board since incorporation, the Company has not yet developed an official orientation or training program for new directors. As required, new directors will have the opportunity to become familiar with the Company and its business by meeting with the other directors and with officers and employees. Orientation activities will be tailored to the particular needs and experience of each director and the overall needs of the board.
Ethical Business Conduct
The Board monitors the ethical conduct of the Company 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 has found that the fiduciary duties placed on individual directors by our 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 in which the director has an interest, have been sufficient to ensure that the Board operates independently of the Company's management and in the best interests of the Company.
Nomination of Directors
The Company has not yet implemented a nominating committee. Accordingly, the Board, as a whole, is responsible for considering the Board’s size and the number of directors to recommend to the shareholders of the Company for election at annual meetings of shareholders, taking into account the number of directors required to carry out the Board’s duties effectively, and to maintain a majority of independent directors and a diversity of view and experience. The Board as a whole is also responsible for identifying new candidates to join the Board.
Compensation of Directors and Chief Executive Officer
The Board and the Compensation Committee have the responsibility for determining compensation for the directors and senior management of the Company.
To determine compensation payable, the Board and the Compensation Committee review compensation paid to directors and CEOs of companies of similar size and stage of development in the same industry and determines an appropriate compensation reflecting the need to provide incentive and compensation for the time and effort expended by the directors and senior management of the Company while taking into account the financial and other resources of the Company. In setting the compensation, the Board and the Compensation Committee annually review the performance of the CEO in light of the Company’s objectives and considers other factors that may have impacted the success of the Company in achieving its objectives. For further discussion on executive officer compensation please see "Part 4 – Executive Compensation – Oversight and Description of Director and Named Executive Officer Compensation".
The Company’s directors are not currently paid a fee for their services as directors (see "Part 4 – Executive Compensation – Compensation of Directors").
Committees of the Board of Directors
The Company currently only has the Audit Committee, which is comprised of Messrs. Sindelar, Arnstein and Hall, and the Compensation Committee, which is comprised of Messrs. Rai, Arnstein and Hall.
Assessments
The Board has not, as yet, established procedures to formally review the contributions of individual directors. At this point, the directors believe that the Board’s current size facilitates informal discussion and evaluation of members’ contributions within that framework.
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PART 7 - OTHER INFORMATION
Securities Authorized For Issuance Under Equity Compensation Plans
As of December 31, 2017, the Company’s Stock Option Plan was the only equity compensation plan under which securities were authorized for issuance. The following table (and note thereto) sets out securities authorized for issuance under the Stock Option Plan as of December 31, 2017.
Plan category | Number of securities(1) | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (2) |
Equity compensation plans | 2,420,000 | $0.24 | 346,337 |
Notes:
(1)Underlying securities are Common Shares in the capital of the Company.
(2)As of December 31, 2017.
Please see "Part 4 – Executive Compensation – Stock Option Plans and Other Incentive Plans" for details on the Stock Option Plan.
Indebtedness Of Directors and Executive Officers
Since the beginning of the most recently completed financial year ended December 31, 2017 and as at the date of this Information Circular, no director, executive officer or employee or former director, executive officer or employee of the Company, nor any nominee for election as a director of the Company, nor any associate of any such person, was indebted to the Company; nor was any indebtedness to another entity the subject of a guarantee, support agreement, letter of credit or other similar arrangement or understanding provided by the Company.
Interest Of Certain Persons Or Companies In Matters To Be Acted Upon
None of the directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been directors or executive officers of the Company since the commencement of the Company's last completed financial year, none of the other insiders of the Company and no associate or affiliate of any of the foregoing persons has any substantial interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting other than the election of the directors.
Interest Of Informed Persons In Material Transactions
An informed person is one who, generally speaking, is a director or executive officer or a 10% shareholder of the Company. To the knowledge of the Company's management, no informed person or nominee for election as a director of the Company or any associate or affiliate of any informed person or proposed director has any interest in any transaction which has materially affected or would materially affect the Company or its subsidiary during the financial year ended December 31, 2017, or has any interest in any material transactions in the current year other than as set out herein.
Management Contracts
Except as described below and as disclosed under "Part 4 – Executive Compensation – External Management Companies", the Company has no management agreements or arrangements under which the management functions of the Company are performed other than by the Company’s directors and executive officers.
The Company is currently party to the Management Contract with PSCC, a private company owned by Eugene Beukman of British Columbia. Mr. Beukman is the President of PSCC and was a director of the Company from
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November 14, 2012 to May 31, 2017 and Chief Financial Officer of the Company from December 23, 2015 to May 18, 2017. Please see "Part 4 – Executive Compensation – External Management Companies" for details of the Management Contract. PSCC was not indebted to the Company during the Company's last completed financial year, and the Management Contract remains in effect as of the date of this Information Circular.
Penalties and Sanctions
As at the date of this Information Circular no proposed nominee for election as a director of the Company (nor any of his or her personal holding companies) has been subject to:
(a)any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or
(b)any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable shareholder in deciding whether to vote for a proposed director.
Corporate Cease Trade Orders and Bankruptcies
As at the date of this Information Circular no proposed nominee for election as a director of the Company is, or has been, within 10 years before the date of this Information Circular:
1.a director, chief executive officer or chief financial officer of any company (including the Company and any personal holding company of the proposed director) that, while that person was acting in that capacity:
(a)was subject to a cease trade order (including any management cease trade order which applied to directors or executive officers of a company, whether or not the person is named in the order) or an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (an "Order"); or
(b)was subject to an Order that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or
2.a director or executive officer of any company (including the Company and any personal holding company of the proposed director) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No proposed nominee for election as a director of the Company has, within the ten years before the date of this Information Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.
Other Matters
The Company's management is not aware of any other matters to come before the Meeting other than as set forth in the Notice of Meeting that accompanies this Information Circular. If any other matter properly comes before the Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares represented thereby in accordance with their best judgment on such matter.
Additional Information
No person has been authorized to give any information or to make any representation other than as contained in this Information Circular in connection with the solicitation of proxies. If given or made, such information or representations must not be relied upon as having been authorized by VANC. The delivery of this Information Circular shall not create, under any circumstances, any implication that there has been no change in the
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information set forth herein since the date of this Information Circular. This Information Circular does not constitute the solicitation of a proxy by anyone in any jurisdiction in which such solicitation is not authorized, or in which the person making such solicitation is not qualified to do so, or to anyone to whom it is unlawful to make such an offer of solicitation.
Financial information about the Company is included in the Company’s financial statements and management’s discussion and analysis for the financial year ended December 31, 2017, which have been electronically filed with regulators and are available through the Internet on SEDAR at www.sedar.com. Copies may be obtained without charge upon request to the Company at Suite 810 - 789 West Pender Street, Vancouver, British Columbia V6C 1H2; or by telephone at (604) 687-2038; or fax at (604) 687-3141. You may also access the Company’s public disclosure documents through the Internet on SEDAR at www.sedar.com.
The Board has approved the contents and the delivery of this Information Circular to the shareholders of the Company.
DATED at Vancouver, British Columbia, this 13th day of September, 2018.
BY ORDER OF THE BOARD OF DIRECTORS OF
VANC PHARMACEUTICALS INC.
/S/ Bob Sukhwinder S. Rai"
Bob Sukhwinder S. Rai
Chief Executive Officer and Director
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SCHEDULE "A"
AUDIT COMMITTEE CHARTER
The Audit Committee (the "Committee") is a committee of the Board of Directors (the "Board") ofVANC Pharmaceuticals Inc., (the "Company"), designed to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the adequacy of the Company’s internal controls, (3) the independence and performance of the Company’s external auditor, and (4) conflict of interest transactions.
I.ROLES AND RESPONSIBILITIES
A.Maintenance of Charter. The Committee shall review and reassess the adequacy of this formal written Charter on at least an annual basis.
B.Financial Reporting. The Committee shall review and make recommendations to the Board regarding the adequacy of the Company’s financial statements and compliance of such statements with financial standards. In particular, and without limiting such responsibilities, the Committee shall:
With respect to the Annual Audited Financial Statements:
Review and discuss with management and with the Company’s external auditor the Company’s audited financial statements, management discussion and analysis ("MD&A") and news releases regarding annual financial results before the Company publicly discloses this information.
Review an analysis prepared by management and the external auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company’s audited financial statements.
Discuss with the external auditor the matters required to be discussed by National Instrument 52-107Acceptable Accounting Principles, Auditing Standards and Reporting Currencies (as may be modified or supplemented) relating to the conduct of the audit.
Based on the foregoing, indicate to the Board whether the Committee recommends that the audited financial statements be included in the Company’s Annual Report.
With respect to Interim Unaudited Financial Statements:
Review and discuss with management the Company’s interim unaudited financial statements, MD&A and news releases regarding interim financial results before the Company publicly discloses this information. The review may be conducted through a designated representative member of the Committee.
Approve interim unaudited financial statements and interim MD&A on behalf of the Board.
Generally
Be satisfied that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements, and annually assess the adequacy of those procedures.
C.Internal Controls. The Committee shall evaluate and report to the Board regarding the adequacy of the Company’s financial controls. In particular, the Committee shall:
Ensure that the external auditor is aware that the Committee is to be informed of all control problems identified.
Review with the Company’s counsel legal matters that may have a material impact on the financial statements.
Review the effectiveness of systems for monitoring compliance with laws, regulations and instruments relating to financial reporting.
Receive periodic updates from management, legal counsel, and the external auditor concerning financial compliance.
Establish procedures for:
(i)the receipt, retention and treatment of complaints received by the Company from officers, employees and others regarding accounting, internal accounting controls, or auditing matters and questionable practices relating thereto; and
(ii)the confidential, anonymous submission by officers or employees of the Company or others or concerns regarding questionable accounting or auditing matters.
D.Relationship withExternal Auditor. The Committee shall:
Interview, evaluate, and make recommendations to the Board with respect to the nomination and retention of, or replacement of, the external auditor.
Ensure receipt from external auditor of a formal written statement delineating all relationships between the external auditor and the Company.
Ensure that the external auditor is in good standing with the Canadian Public Accountability Board ("CPAB") and enquire if there are any sanctions imposed by the CPAB on the external auditor.
Ensure that the external auditor meets the rotation requirements for partners and staff on the Company’s audits.
Actively engage in a dialogue with the external auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditor.
Take, or recommend that the Board take, appropriate action to oversee the independence of the external auditor.
Review and approve the compensation to be paid to the external auditor.
Oversee the work of the external auditor engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Company.
Review and resolve disagreements between management and the external auditor regarding financial reporting.
Pre-approve all non-audit services to be provided to the Company or any subsidiary by the external auditor in accordance with subsection 2.3(4) and sections 2.4 and 2.6 of Multilateral Instrument 51-110Audit Committees.
Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company
Notwithstanding the foregoing, the external auditor shall be ultimately accountable to the Board and the Committee, as representatives of shareholders. The Board, upon recommendation from the Committee, shall have ultimate authority and responsibility to select, evaluate, and, where appropriate, replace the external auditor (or to nominate the external auditor to be proposed for shareholder approval in any information circular).
E.Conflict of Interest Transactions. The Committee shall:
Review potential conflict of interest situations, including transactions between the Company and its officers, directors and significant shareholders not in their capacities as such.
Make recommendations to the Board regarding the disposition of conflict of interest transactions in accordance with applicable law.
II. MEMBERSHIP REQUIREMENTS
The Committee shall consist of at leastthree (3) directors chosen by the Board, the majority of whom are neither officers nor employees of the Company or any of its affiliates.
The members of the Committee will be appointed annually by and will serve at the discretion of the Board.
At leastone (1) member of the Committee shall be able to read and understand a set of financial statements, including the Company’s balance sheet, income statement, and cash flow statement, or will become able to do so within a reasonable period of time after his or her appointment to the Committee.
At least one member of the Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or comparable experience or background (such as a position as a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities), which results in financial sophistication, recognized financial or accounting expertise.
III. STRUCTURE AND POWERS
The Committee shall appoint one of its members to act as a Chairperson, either generally or with respect to each meeting.
The Committee Chairperson shall review and approve an agenda in advance of each meeting.
The Committee shall meet as circumstances dictate.
The Committee shall have the authority to engage independent legal counsel and other advisors as it determines necessary to carry out its duties, and to set and pay the compensation for any advisors employed by the Committee.
The Committee shall have the authority to communicate directly with the internal and external auditors.
The Committee may request any officer or employee of the Company or the Company’s outside counsel or external auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
The Committee shall possess the power to conduct any investigation appropriate to fulfilling its responsibilities.
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the external auditor. Nor is it the duty of the Committee to conduct investigations or to assure compliance with laws and regulations and the Company’s Corporate Governance Policies and Practices.
IV. MEETINGS
The quorum for a meeting of the Committee is a majority of the members of the Committee who are not officers or employees of the Company or of an affiliate of the Company.
The members of the Committee must elect a chair from among their number and may determine their own procedures.
The Committee may establish its own schedule that it will provide to the Board in advance.
The external auditor is entitled to receive reasonable notice of every meeting of the Committee and to attend and be heard thereat.
A member of the Committee or the external auditor may call a meeting of the Committee.
The Committee may hold meetings by telephone conference call where each member can hear the other members, or pass matters that would otherwise be approved at a meeting by all members signing consent resolutions in lieu of holding a meeting.
The Committee will meet with the President and with the Chief Financial Officer of the Company at least annually to review the financial affairs of the Company.
The Committee will meet with the external auditor of the Company at least once each year, at such time(s) as it deems appropriate, to review the external auditor’s examination and report.
The chair of the Committee must convene a meeting of the Committee at the request of the external auditor, to consider any matter that the auditor believes should be brought to the attention of the Board or the shareholders.
The Committee will record its recommendations to the Board in written form which will be incorporated as a part of the minutes of the Board’s meeting at which those recommendations are presented.
The Committee will maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board.
SCHEDULE "B
CHANGE OF AUDITOR REPORTING PACKAGE AND NEWS RELEASE
