Exhibit 99.1
Avricore Health Inc.
Condensed Interim Consolidated Financial Statements
(Unaudited)
For the three months ended March 31, 2020
Notice to Reader
Management has prepared the unaudited condensed interim consolidated financial statements for Avricore Health Inc. (the Company) in accordance with National Instrument 51-102 released by the Canadian Securities Administration. The Company discloses that its auditors have not reviewed the unaudited consolidated financial statements for the period ended March 31, 2020.
Avricore Health Inc.
Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at,
| Note | Unaudited March 31, 2020 | Audited December 31, 2019 |
|
| $ | $ |
ASSETS |
|
|
|
|
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
| 438,622 | 13,799 |
Accounts receivable | 4 | 15,316 | 15,474 |
Prepaid expenses | 5 | 153,120 | 179,123 |
|
| 607,058 | 208,396 |
|
|
|
|
Intangible assets | 8 | 3 | 3 |
Total Assets |
| 607,061 | 208,399 |
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
Accounts payable and accrued liabilities | 9 | 426,584 | 652,460 |
Lease liabilities | 10 | - | 21,390 |
Loans payable | 11 | 824,289 | - |
|
| 1,250,873 | 673,850 |
|
|
|
|
SHAREHOLDERS’ DEFICIENCY |
|
|
|
Share capital | 12 | 21,552,306 | 21,400,106 |
Subscription |
| 10,000 | 10,000 |
Shares to be issued | 3 | - | 100,000 |
Reserves | 12 | 5,358,462 | 5,358,462 |
Deficit |
| (27,564,580) | (27,334,019) |
|
| (643,812) | (465,451) |
Total Liabilities and Shareholders’ Deficiency | 607,061 | 208,399 | |
Nature of operations and going concern (Note 1)
Subsequent events (Note 21)
Approved and authorized on behalf of the Board of Directors on May 29, 2020.
“Hector Bremner” “David Hall”
Hector Bremner, DirectorDavid Hall, Chairman
The accompanying notes are an integral part of these consolidated financial statements
Page 2
Avricore Health Inc.
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(Expressed in Canadian Dollars)
Three months ended March 31,
| Note | 2020 | 2019 |
|
| $ | $ |
|
|
|
|
Revenue |
| 8,384 | 6,103 |
|
|
|
|
Cost of sales |
| 2,792 | 3,220 |
Gross profit (loss) |
| 5,592 | 2,883 |
|
|
|
|
Expenses |
|
|
|
Amortization |
| - | 61,892 |
Consulting | 16 | 48,750 | 155,510 |
General and administrative | 14 | 36,244 | 77,731 |
Management Fees | 16 | 67,500 | 37,500 |
Professional fees | 16 | 37,892 | 27,673 |
Marketing and communications | 13 | 24,213 | 116,154 |
Share-based compensation | 16 | - | 28,904 |
|
| 214,599 | 505,364 |
Other income (expense) |
|
|
|
Finance costs |
| (21,554) | - |
Other income |
| - | 1,905 |
Net loss from continuing operations |
| (230,561) | (500,576) |
|
|
|
|
Loss from discontinued operations | 15 | - | (84,561) |
|
|
|
|
Net loss and comprehensive |
| (230,561) | (585,137) |
|
|
|
|
Basic and Diluted Loss Per Share |
|
|
|
Continuing operations |
| (0.00) | (0.01) |
Discontinued operations |
| - | (0.00) |
|
| (0.00) | (0.01) |
Weighted Average Number of Common Shares Outstanding | 54,238,773 | 41,665,161 | |
Segmented information (Note 18)
The accompanying notes are an integral part of these consolidated financial statements
Page 3
Avricore Health Inc.
Condensed Interim Consolidated Statements of Changes in Equity (Deficiency)
(Unaudited)
(Expressed in Canadian Dollars)
| 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 | 4,206,435 | 294,450 | - | - | - | - | - | 294,450 |
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-based compensation | - | - | - | - | - | 28,904 | - | 28,904 |
Net loss | - | - | - | - | - | - | (585,137) | (585,137) |
Balance, March 31, 2019 | 45,620,219 | 21,228,796 | 100,000 | - | 733,388 | 4,396,248 | (25,813,548) | 644,884 |
Balance, December 31, 2019 | 52,472,619 | 21,400,106 | 100,000 | 10,000 | 904,698 | 4,453,764 | (27,334,019) | (465,451) |
Bonus shares | 3,480,000 | 52,200 | - | - | - | - | - | 52,200 |
Acquisition of HealthTab Inc. | 2,000,000 | 100,000 | (100,000) |
| - | - | - | - |
Net loss | - | - | - | - | - | - | (230,561) | (230,561) |
Balance, March 31, 2020 | 57,952,619 | 21,552,306 | - | 10,000 | 904,698 | 4,453,764 | (27,564,580) | (643,812) |
The accompanying notes are an integral part of these consolidated financial statements
Page 4
Avricore Health Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in Canadian Dollars)
| Three months ended March 31, | |
| 2020 | 2019 |
| $ | $ |
Operating Activities |
|
|
Net loss from continuing operations | (230,561) | (500,576) |
Adjustment for the non-cash items: |
|
|
Amortization | - | 61,892 |
Finance cost | 7,215 | - |
Share-based payments | - | 28,904 |
|
|
|
Change in working capital items: |
|
|
Accounts receivable | 158 | - |
Prepaid expenses | 17,583 | 58,630 |
Accounts payable and accrued liabilities | (225,876) | 4,212 |
Net cash used in operating activities | (431,481) | (346,938) |
Net cash provided by operating activities of discontinued operations | - | 69,432 |
| (431,481) | (277,506) |
Investing Activities |
|
|
Net cash used in investing activities | - | - |
Net cash used in investing activities of discontinued operations | - | - |
| - | - |
Financing Activities |
|
|
Proceeds from issuance of shares, net | - | 294,450 |
Proceeds from exercise of options | - | 20,701 |
Loan proceeds | 900,000 | - |
Finance cost | (30,000) | - |
Lease payments | (13,696) | - |
Net cash provided by financing activities | 856,304 | 315,151 |
Net cash provided by financing activities of discontinued operations | - | - |
| 856,304 | 315,151 |
|
|
|
Increase (decrease) in Cash | 424,823 | 37,645 |
Cash and Cash Equivalents, Beginning of Period | 13,799 | 84,442 |
Cash and Cash Equivalents, End of Period | 438,622 | 122,086 |
|
|
|
Cash and Cash Equivalents Consist of: |
|
|
Cash | 438,622 | 122,086 |
Guaranteed investment certificates | - | - |
Cash and cash equivalents | 438,622 | 122,086 |
Supplemental cash flow information (Note 19)
The accompanying notes are an integral part of these consolidated financial statements
Page 5
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(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”).
The condensed interim 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 may 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 condensed interim 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.
| March 31, 2020 | December 31, 2019 |
| $ | $ |
Deficit | (27,564,580) | (27,334,019) |
Working capital (deficit) | (643,815) | (465,454) |
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
The condensed interim consolidated financial statements for the period months ended March 31, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), IAS 34 Interim Financial Reporting. The condensed interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2019. The accounting policies followed in these interim financial statements are consistent with those applied in the Company’s most recent annual financial statements for the year ended December 31, 2019.
Page 6
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
2. BASIS OF PRESENTATION (continued)
b)Basis of preparation (continued)
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 of the annual consolidated financial statements for the year ended December 31, 2019 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.
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 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) of the annual consolidated financial statements for the year ended December 31, 2019. 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 consolidated financial statements. Where control of an entity is obtained during a financial year, its results are included in the consolidated statements of 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 HealthTab Inc.
3.ACQUISITION OF HEALTHTAB INC.
On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTab Inc. (“HealthTab”). HealthTab’s primary asset is intellectual property and certain trademarks and web domains related to the design of the HealthTab system, being a lab-accurate, point of care testing platform. Under the share purchase agreement, the consideration paid by the Company is as follows:
·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)
This acquisition has been accounted for as an acquisition of assets and liabilities as HealthTab did not meet the definition of a business under IFRS 3, Business Combinations.
Page 7
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
4.ACCOUNTS RECEIVABLE
The Company’s accounts receivable consists of the following:
| March 31, 2020 | December 31, 2019 |
| $ | $ |
Trade receivables | 12,127 | 12,375 |
GST receivable | 3,189 | 3,099 |
| 15,316 | 15,474 |
5.PREPAID EXPENSES AND DEPOSITS
The balance consists of prepaid expense to vendors of $107,300 (December 31, 2019 - $152,704), security deposit for office of $nil (December 31, 2019 - $8,420), prepaid business insurance of $33,820 (December 31, 2019 - $5,999) and security deposits of $12,000 (December 31, 2019 - $12,000).
6.RIGHT-OF-USE ASSET
| Office Lease |
| $ |
Cost |
|
Balance, December 31, 2018 | - |
Recognized on adoption of IFRS 16 | 68,253 |
Additions | - |
Balance, December 31, 2019 | 68,253 |
|
|
Accumulated Amortization |
|
Balance, December 31, 2018 | - |
Amortization | 68,253 |
Balance, December 31, 2019 | 68,253 |
|
|
Carrying value December 31, 2019 | - |
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 amortized 100% of the right-of-use asset to $Nil.
During the period ended March 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 agreed to pay the outstanding rent for the months of January to March, 2020.
Page 8
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
7.EQUIPMENT
| Office Furniture and Equipment | Computer equipment and Systems | Laboratory Equipment | Leasehold Improvements | Total |
| $ | $ | $ | $ | $ |
Cost |
|
|
|
|
|
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, 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, 2019 | - | - | - | - | - |
The write-off of equipment of $14,704 during the year ended December 31, 2019 is included in discontinued operations.
8.INTANGIBLE ASSETS
| HealthTab | Corozon | Emerald | Total |
| $ | $ | $ | $ |
Cost |
|
|
|
|
1 | 1 | 510,878 | 510,880 | |
Write down | - | - | (510,877) | (510,877) |
Balance, December 31, 2019 and March 31, 2020 | 1 | 1 | 1 | 3 |
|
|
|
|
|
Accumulated Amortization |
|
|
|
|
Balance, December 31, 2018 | - | - | 85,147 | 85,147 |
Amortization | - | - | 112,216 | 112,216 |
Write down | - | - | (197,363) | (197,363) |
Balance, December 31, 2019 and March 31, 2020 | - | - | - | - |
|
|
|
|
|
Carrying value |
|
|
|
|
As at December 31, 2019 | 1 | 1 | 1 | 3 |
As at March 31, 2020 | 1 | 1 | 1 | 3 |
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.
Page 9
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
9.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The Company’s accounts payable and accrued costs consist of the following:
| March 31, 2020 | December 31, 2019 |
| $ | $ |
Trade accounts payable | 426,584 | 625,460 |
Accrued liabilities | - | 27,000 |
| 426,584 | 652,460 |
10.LEASE LIABILITIES
|
|
| $ |
Balance, December 31, 2018 | - |
Recognized on adoption of IFRS 16 | 68,253 |
Finance cost | 5,144 |
Lease payments | (52,007) |
Balance, December 31, 2019 | 21,390 |
Finance cost | 726 |
Lease payments | (22,116) |
Balance, March 31, 2020 | - |
(See Note 6)
11.LOANS PAYABLE
During the period ended March 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 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 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.
During the three months ended March 31, 2020, the Company recorded interest expense of $6,489 on the loan.
12.SHAREHOLDERS’ EQUITY
Authorized share capital
Authorized: Unlimited number of common shares without par value.
Issued share capital
During the period ended March 31, 2020:
The Company issued 2,000,000 common shares valued at $100,000 related to the acquisition of HealthTab (see Note 3).
Page 10
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
12.SHAREHOLDERS’ EQUITY (continued)
Issued share capital (continued)
The Company issued 3,480,000 common shares valued at $52,200 as bonus shares pursuant to the loan agreement (see Note 11).
During the year ended December 31, 2019:
The Company issued 1,111,110 common shares valued at $100,000 related to the acquisition of HealthTab (see Note 3).
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 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.
The Company closed a private placement 4,206,435 common shares at a price of $0.07 per share for gross proceeds of $294,450.
The Company closed a private placement and issued 6,852,400 units at a price of $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 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.
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 ten years and generally vest either immediately or in specified increments of up to 25% in any three-month period.
The changes in share options including those granted to directors, officers, employees and consultants are summarized as follows:
| Period ended March 31, 2020 | Year ended December 31, 2019 | ||
| Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price |
Beginning Balance | 5,241,072 | $0.13 | 2,539,000 | $0.23 |
Options granted | - | - | 3,095,000 | $0.06 |
Expired/Cancelled | - | - | (319,000) | $0.22 |
Exercised | - | - | (73,928) | $0.28 |
Ending Balance | 5,241,072 | $0.13 | 5,241,072 | $0.13 |
Exercisable | 5,241,072 | $0.13 | 5,241,072 | $0.13 |
Page 11
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
12.SHAREHOLDERS’ EQUITY (continued)
Stock options (continued)
The following table summarizes information about share options outstanding and exercisable as at March 31, 2020:
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 | |
The weighted average remaining life of the stock options outstanding at March 31, 2020 is 3.69 years.
Share-based compensation
Share-based compensation of $86,420 was recognized during the year ended December 31, 2019 for stock options granted and vested during the current period. 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.
Share-based payments for options granted was measured using the Black-Scholes option pricing model with the following assumptions:
| 2020 | 2019 |
Expected life | - | 5.0 years |
Volatility | - | 110% - 143% |
Dividend yield | - | 0% |
Risk-free interest rate | - | 1.58% - 1.86% |
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.
Page 12
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
12.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.
| Period ended March 31, 2020 | Year ended December 31, 2019 | ||
| Number of Warrants | Weighted Average Exercise Price | Number of Warrants | Weighted Average Exercise Price |
Beginning Balance | 20,704,664 | $0.24 | 13,852,264 | $0.28 |
Warrants issued | - | - | 6,852,400 | $0.15 |
Outstanding | 20,704,664 | $0.24 | 20,704,664 | $0.24 |
The following table summarizes information about warrants outstanding and exercisable as at March 31, 2020:
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 |
The weighted average remaining life of the warrants outstanding at March 31, 2020 is 1.19 years.
13.MARKETING AND COMMUNICATION EXPENSES
| Three months ended March 31, | |
| 2020 | 2019 |
| $ | $ |
Marketing | 741 | 22,154 |
Shareholder communications | 23,472 | 94,000 |
| 24,213 | 116,154 |
14.GENERAL AND ADMINISTRATIVE EXPENSES
| Three months ended March 31, | |
| 2020 | 2019 |
| $ | $ |
Bank service charges | 1,061 | 1,467 |
Filing and registration fees | 17,497 | 27,695 |
Foreign exchange | 2,200 | - |
Insurance | 6,049 | 1,110 |
Office maintenance | 4,610 | 15,776 |
Rent | 10 | 12,740 |
Investor relations | 1,265 | - |
Travel | 3,552 | 18,943 |
| 36,244 | 77,731 |
Page 13
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
15.DISCONTINUED OPERATIONS
During the year ended December 31, 2019, the Company discontinued operations of its OTC pharmaceuticals products business division business segment. During the period ended March 31, 2020 and 2019, the loss attributable to the discontinued operations are as follows:
| Three months ended March 31, | |||
|
| 2020 | 2019 | |
|
| $ | $ | |
Sales |
| - | 44,199 | |
Net Revenue |
| - | 44,199 | |
|
|
|
| |
Cost of Sales |
| - | 34,652 | |
Gross profit (loss) |
| - | 9,547 | |
|
|
|
| |
Expenses |
|
|
| |
Amortization |
| - | 1,574 | |
Product registration and development |
| - | 4,901 | |
Selling and marketing |
| - | 87,270 | |
|
| - | 93,745 | |
Other income (expense) |
|
|
| |
Write-down of inventories |
| - | (363) | |
|
|
|
| |
Net loss from discontinued operations |
| - | (84,561) | |
The net cash flows attributable to the discontinued operations are as follows:
|
| ||
| Three months ended March 31, | ||
| 2020 | 2019 | |
| $ | $ | |
Operating Activities |
|
| |
Net loss from discontinued operations | - | (84,561) | |
Adjustment for the non-cash items: |
|
| |
Amortization | - | 1,574 | |
Write-down of inventories | - | 363 | |
|
|
| |
Change in working capital items: |
|
| |
Accounts receivable | - | 151,856 | |
Inventories | - | (6,654) | |
Accounts payable and accrued liabilities | - | 6,854 | |
| - | 69,432 | |
|
|
| |
Increase (Decrease) in Cash | - | 69,432 | |
|
|
| |
16.RELATED PARTY TRANSACTIONS
a)$37,500 in management fees to the Chief Executive Officer of the Company (2019 - $nil).
Page 14
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
16.RELATED PARTY TRANSACTIONS (continued)
b)$30,000 in management fees to the President and former Chief Executive Officer of the Company (2019 - $37,500).
c)$30,000 in professional fees to a company controlled by the Chief Financial Officer of the Company (2019 - $nil)
d)$30,000 in consulting fees to an officer of the Company’s subsidiary, HealthTab Inc. (2019 - $30,000).
e)$nil in professional fees to a Company controlled by a former Chief Financial Officer (2019 - $10,500).
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:
Three months ended March 31, | ||
| 2020 | 2019 |
| $ | $ |
Professional fees | 30,000 | 10,500 |
Management fees | 67,500 | 37,500 |
Consulting fees | 30,000 | 30,000 |
Share-based compensation | - | 8,347 |
| 127,500 | 86,347 |
The following amounts due to related parties were included in accounts payable and accrued liabilities as at:
March 31, 2020 | December 31, 2019 | |
| $ | $ |
President and former Chief Executive Officer | 36,284 | 134,339 |
Chief Executive Officer | 14,824 | 59,304 |
Company controlled by the CFO | - | 5,513 |
Officer of HealthTab Inc. | 10,500 | 122,500 |
Total | 61,608 | 321,656 |
17.CAPITAL DISCLOSURES
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 period ended March 31, 2020.
Page 15
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
18.SEGMENTED INFORMATION
At March 31, 2020, the Company has only one segment, being the HealthTab - 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 15).
19.SUPPLEMENTAL CASH FLOW INFORMATION
During the three months ended March 31, 2020, the Company issued in total 2,000,000 common shares valued at $100,000 related to the acquisition of HealthTab (2019 - 1,111,110 common shares valued at $100,000) (see Notes 3 and 12).
20.FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company’s financial instruments include cash, accounts receivable, accounts payable, and lease liabilities. 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% of trade receivables are due from one customer at March 31, 2020 (December 31, 2019 – 45% from one customer).
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.
Page 16
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
20.FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
b)Liquidity risk (continued)
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 March 31, 2020, the Company’s liabilities were comprised of accounts payable and accrued liabilities and loans payable of $1,250,873 (December 31, 2019 - $673,850).
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 and accounts 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.
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.
Page 17
Avricore Health Inc.
Notes to the Condensed Interim Consolidated Financial Statements
For the three months ended March 31, 2020
(Unaudited)
(Expressed in Canadian Dollars)
20.FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)
d)Fair value of financials instruments (continued)
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’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.
21.SUBSEQUENT EVENTS
Subsequent to the period ended March 31, 2020:
a)3,030,303 warrants exercisable at $0.33 each expired unexercised.
Page 18